IRIS International Railway Industry Standard GUIDELINE 1 : 2011 KPIs

IRIS International Railway Industry Standard GUIDELINE 1 : 2011 KPIs English

We would like to thank the following people f the excellent cooperation and contribution, without which this Guideline would not have been possible: Technical Fum f Improvement representatives Marcus Schmid (Leader) VOITH TURBO Cristina Bianchi RINA Cine Branchet Bureau Veritas Jean-Christophe Coulaud Alstom Transpt Angela de Heymer Bombardier Transptation Bernd Diekmann Siemens Mobility Denis Garrigues RATP Giuseppe Greco UNIFE Hans Jahn DQS Kay Jürgensen TÜV NORD Bernard Kaufmann UNIFE David Martinez de Miguel AENOR Robert Milner LRQA Mikael Nilsson Faiveley Elio Poletti IMQ Anne Pouyanné AFNOR Susanne Schaub SBB/CFF/FFS Oliver Stein Knr-Bremse Ursula Tacke GHH-Valdunes Luca Tuci AnsaldoBreda Dominique Sauvion SNCF Hans Van Mulekom NEDTRAIN Klaus Wagner TÜV SÜD IRIS Management Centre Bernard Kaufmann IRIS General Manager Giuseppe Greco IRIS Seni Manager Nevena Petrova IRIS Manager

Guideline 1 : 2011 KPIs The aim of this guideline is to provide guidance to all ganizations during the implementation and maintenance of an IRIS Certified Business Management System (BMS) concerning the identification of the Key Perfmance Indicats (KPIs) required to comply with the IRIS requirements. 1 WHY KPIs? Key Perfmance Indicats (KPIs) help an ganization to define and to measure progress toward ganizational goals. Once an ganization has analyzed its mission, identified all its stakeholders, and defined its goals, it needs a way to measure progress toward those goals. Key Perfmance Indicats are those measurements. In process iented ganizations, the goals are reached through the implementation of effective and efficient processes, tfe it is vital to make a regular perfmance appraisal f the processes and f all the aspects that can affect the efficiency of the business. The KPI, when properly developed, provide all staff with clear goals and objectives, coupled with an understanding of how they relate to the overall success of the ganization. Published internally and continually referred to, they will also strengthen shared values and create common goals. 2 DEFINITION KEY: Only Key when it is of fundamental imptance in gaining competitive advantage and is a make break element in the success failure of the ganization. PERFORMANCE: Only relating to Perfmance when it can be clearly measured, quantified and influenced by the ganization. INDICATOR: Only an Indicat if it provides leading infmation on future perfmance. Effectiveness and efficiency are also key parameters to be considered to identify the right KPIs: Effectiveness: The degree to which objectives are achieved and the extent to which targeted problems are solved. Efficiency: The comparison of what is actually produced perfmed with what can be achieved with the same consumption of resources (money, time, lab, etc.). It is an imptant fact in determination of productivity. In contrast to efficiency, effectiveness is determined without reference to costs and, was effectiveness means doing the right thing, efficiency means doing the thing right. 2011 UNIFE. All rights reserved.

4 GUIDELINE 1 : 2011 - KPIs - F a KPI of Increase Sales, t s the need to consider whether to measure by units sold by value of sales. Will returns be deducted from sales in the month of the sale the month of the return? Will sales be recded f the KPI at list price at the actual sales price? In the IRIS scheme, KPIs are meant to measure the perfmance of the Processes. The KPIs usually are long-term considerations and may differ depending on the type of ganization. The selected KPIs will need to: 1. Reflect the ganizational goals, 2. Be quantifiable (measurable), 3. Be key to the ganization s success. Reflect The Organizational Goals An ganization that has as one of its goals to be the most profitable ganization in the Rail Industry will have Key Perfmance Indicats that measure profit. On the other hand, a manufacturer of Bearings, having one of its goals to provide better customer service will set the related KPI to measure the responsiveness perfmance of its Customer Service department. Be quantifiable (measurable) F a KPI to be of any value, t must be a way to accurately define and measure it. Be The Most Popular Organization won t wk as a KPI because t is no way to measure the ganization s popularity compare it to others. Setting targets f each KPI is of fundamental imptance. If one of the ganization goals is to be the employer of choice, the associated KPI might measure the employee fluctuation rate. Once the KPI has been defined as the number of voluntary resignations and terminations f perfmance, divided by the total number of employees at the beginning of the period and a way to measure it has been set up (by collecting the infmation in a human resource infmation system), the target has to be established. Reduce employee fluctuation by five percent per year is a clear target that everyone will understand and be able to take specific action to accomplish. Be key to the ganization s success In selecting KPIs, it s critical to limit them to those facts that are essential to the ganization reaching its goals. It is also imptant to keep the number of Key Perfmance Indicats small just to keep everyone s attention focused on achieving the same KPIs. That is not to say, f instance, that a ganization will have only three four KPIs in total. Rather t will be three four Key Perfmance Indicats f the ganization and all the units within it will have three, four, five KPIs that suppt the overall ganization goals and can be rolled up into them. If an ganization s Key Perfmance Indicat is Increased Customer Satisfaction, that KPI will be focused differently in different departments: the manufacturing department may have a KPI of Number of Units Rejected by Quality Inspection, while the sales department has a KPI of Minutes A Customer Is On Hold Befe A Sales Representative Answers. Success by the 2011 UNIFE. All rights reserved.

5 sales and manufacturing departments in meeting their respective departmental Key Perfmance Indicats will help the ganization to meet its overall KPIs. Example of a well defined KPI: Title of KPI: Employee Turnover Defined: The total of the number of employees who resign f whatever reason, plus the number of employees terminated f perfmance reasons, and that total divided by the number of employees at the beginning of the year. Employees lost due to Reductions in Fce (RIF) will not be included in this calculation. Measured: The human resource infmation system contains recds of each employee. The separation section lists reason and date of separation f each employee., the human resource department will query the database and provide department heads with Employee Turnover repts. The human resource department will post graphs of each rept on the intranet. Target: Reduce Employee Turnover by 5% per year. Example of a badly defined KPI: Title of KPI: Increase Sales Defined: Change in sales volume from month to month Measured: Total of sales by region f all regions Target: Increase each month What s missing? Does this measure increases in sales volume by value units? If by value, does it measure list price sales price? Are returns considered and if so do they appear as an adjustment to the KPI f the month of the sale are they counted in the month the return happens? How do we make sure each sales office s volume numbers are counted in one region, i.e. that none are skipped double counted? How much, by percentage value units, do we want to increase sales volumes each month? 3 SMART KPIs A KPI can follow the SMART criteria. Specific: It has to be clear what the KPI exactly measures. T has to be one universally-accepted definition of the KPI to make sure the different users interpret it the same way and, as a result, come to the same and right conclusions which they can act on. Measurable: The KPI has to be measurable to define a standard, budget nm, to make it possible to measure the actual value and to make the actual value comparable to the targeted value. Achievable: F every KPI a target value has to be defined. It is imptant f the acceptance of KPIs and Perfmance Management in general within the ganization that this value is achievable. Nothing is me discouraging than striving f a goal that you will never reach. Relevant: The KPI provides me insight in the perfmance of the ganization processes in being consistent with its policy and business plan. A KPI is only relevant if the ganization s processes can influence it. Time phased: It is imptant to express the targeted value of the KPI in time. Every KPI only has a meaning if one knows the time dimension in which it is realized. The realization and standardization of the KPI tfe has to be time phased. 4 IMPLEMENTING KPIs When an ganization wants to define KPIs it has to assure that the indicats are unmistakably defined, objectives are in place and that the calculation can be 2011 UNIFE. All rights reserved.

6 GUIDELINE 1 : 2011 - KPIs - done easily, preferably automatically. Additionally it is necessary that the ganization identifies itself with the KPIs and is aware how to influence them. Not the quantity of KPIs but the quality decides ( twenty is plenty ). 5 MEASURING KPIs F measuring KPIs several prerequisites must be fulfilled: Definition of calculation of KPI (e.g. (value X/value Y)*100; (actual value)- (planned value)); Unit of measurement must be defined (e.g. percentage, Euro, quantities); Adequate repting interval must be fixed (e.g. monthly, quarterly); Presentation fm must be chosen (e.g. pie diagram, bar chart, spider diagram); Target f the repting period must be displayed (e.g. delivery perfmance to the customer 95%); Data source must be chosen (e.g. table XYZ from the ERP-system); Accuracy of the KPI data must be known; Data collect must be nominated (e.g. Mr. X from the sales department, Ms. Y from procurement); KPI owner must be named; Trends of the KPI must be interpretable (e.g. sales increases due to a new sales representative due to a sales campaign); Guidance f taking actions must be in place (e.g. sales decrease is analyzed by meeting with sales representative) All prerequisites must be documented in an agreed fmat (e.g. in a KPI profile) 6 HOW TO DEAL WITH IRIS KPIs 6.1 Mandaty IRIS KPIs Customer on time delivery perfmance (IRIS clause 5.6.2) Non confmities raised by the customer throughout the entire Project Life Cycle (IRIS clause 5.6.2) Tender management (IRIS clause 7.2.4) Design and development (IRIS clause 7.3) Purchasing Process (IRIS clause 7.4.1) Project Management new Product development (IRIS clause 7.7) Project Management Cost management (IRIS clause 7.7.4) 6.2 Recommended IRIS KPIs Internal and supplier non confmities throughout the entire Project Life Cycle (IRIS clause 5.6.2) Supplier on time delivery perfmance (IRIS clause 5.6.2) Response time on non confmities raised by the customer (IRIS clause 5.6.2) Quality Deficiency Costs (IRIS clause 5.6.2) Review of requirements related to the Product (IRIS clause 7.2.2) First Article Inspection (FAI) (IRIS clause 7.9) Customer satisfaction (IRIS clause 8.2.1) Analysis of data (IRIS clause 8.4) TABLE 1: KPI definition table KPI Description:... Process:... Objective of the process:... Process owner... Prediction of the KPI:... Unit of measure:... Target and repting period:... Calculation of the KPI:... Accuracy of the KPI:... Data source:... Repting interval:... Framewk condition:... Influence on KPI:... Data collected by:... KPI repted to:... Actions:... 2011 UNIFE. All rights reserved.

7 ANNEX 1: IRIS KPIs KPI Process name IRIS clause Status Definition examples Target value Process target Repting interval Reference to Annex Customer on time delivery perfmance 5.6.2 Mandaty (sum deliveries on time) / (sum deliveries) x 100 To be compliant with confirmed delivery dates X Non confmities raised by the customer throughout the entire Project Life Cycle 5.6.2 Mandaty Customer non confmity cost per month Warranty cost by project (Claimed parts) / (delivered parts) x 100 X / Month Z / project Y % To reduce variation and waste in supply chain Tender management 7.2.4 Mandaty Cost deviation to estimated budget, without customer caused change requests To meet customer requirements Project milestone Design and development 7.3 Mandaty Number of design changes, without external caused changes (sum of design changes after design freeze) / (sum of design drawing) x 100 Number of changes To be on time by keeping costs and quality criteria Quarterly X Purchasing Process 7.4.1 Mandaty (Non confm purchased product deliveries) / (sum of received purchased product deliveries) x 100 (Non confm purchased products) / (received purchased products) x 100 Cost deviation to estimated purchase budget To improve the supplier delivery quality to improve the budget control X 2011 UNIFE. All rights reserved.

8 KPI Process name IRIS clause Status Definition examples Target value Process target Repting interval Reference to Annex Project Management new Product development 7.7 Mandaty (Realized Milestone) / (Planed Milestone) x 100 delivery time deviation concerning final customer acceptance number of days To manage Project deliverables Project milestone Project Management Cost management 7.7.4 Mandaty (Estimated costs) / (final costs) x 100 To manage Project budget Project milestone Internal and supplier non confmities throughout the entire Project Life Cycle 5.6.2 Recommended Internal and supplier rewk costs + internal and supplier scrap costs Costs / Month Costs per categy Costs per supplier Costs per project To reduce variation and waste in the entire Project Life Cycle Project milestone Supplier on time delivery perfmance 5.6.2 Recommended (sum deliveries on time) / (sum deliveries) x 100 To ensure on time delivery of suppliers X Response time on non confmities raised by the customer 5.6.2 Recommended Response date of non confmities issue date of non confmities X days X hours To improve customer suppt 2011 UNIFE. All rights reserved.

9 KPI Process name IRIS clause Status Definition examples Target value Process target Repting interval Reference to Annex Quality Deficiency Costs 5.6.2 Recommended Internal rewk costs + internal scrap costs Costs / Month Costs per categy Costs per supplier Costs per project To reduce variation and waste in the entire Project Life Cycle Project milestone Review of requirements related to the Product 7.2.2 Recommended Number of changes due to non properly identified requirements Number of changes To properly identify customer requirements Quarterly First Article Inspetion 7.9 Recommended (Sum of successfully perfmed FAIs) / (sum of perfmed FAIs) x 100 To ensure a stable production start Quarterly X Customer satisfaction 8.2.1 Recommended (Sum of customers included in customer satisfaction measurement) / (total sum of customers) X 100 Crelation between customer perception and internally measured delivery perfmance crelation in X% To monit and review infmation relating to customer perception Yearly Analysis of data 8.4 Recommended (amount of data analysed) / (amount of data collected) x 100 (amount of data collected) / (amount of data requested) x 100 To determine, collect and analyse appropriate data to demonstrate the suitability and effectiveness of the QMS. Yearly NOTE 1: The definitions given in Annex 1 (IRIS KPIs) are f examples only. The ganization may choose a different definition f the mentioned KPIs, if preferred.

10 ANNEX 2: KPI examples KPI Description: Customer on-time delivery perfmance Design and Development Purchasing Process Process: production and service provision design and development purchasing Objective of the process: to be compliant with confirmed delivery dates to be on time by keeping costs and quality criteria to improve the supplier delivery quality Process owner please enter process responsible please enter process responsible please enter process responsible Prediction of the KPI: on-time delivery to customer quality of drawings and bill of materials amount of deliveries that have to be claimed at supplier Unit of measure: percentage (%) percentage (%) percentage (%) Target and repting period: please enter actual company target please enter actual company target please enter actual company target Calculation of the KPI: (sum deliveries on time) / (sum deliveries) x 100 (sum of design changes after design freeze) / (sum of design drawing) x 100 (non confm purchased product deliveries) / (sum of received purchased product deliveries) x 100 Accuracy of the KPI: please enter the accuracy with which the KPI can be determined please enter the accuracy with which the KPI can be determined please enter the accuracy with which the KPI can be determined Data source: ERP-system ERP-System, manual recds, PDMsystem ERP-system; manual recd Repting interval: Framewk condition: monthly monthly quarterly monthly none none none Influence on KPI: delivery perfmance of suppliers, maintenance of equipment contract clarification, qualification of staff, new technologies new item, new supplier, product modification at supplier, uncertain purchasing infmation, other problems at supplier Data collected by: please enter the person responsible to collect the data please enter the person responsible to collect the data please enter the person responsible to collect the data KPI repted to: please enter to which part of the management the KPI is repted please enter to which part of the management the KPI is repted please enter to which part of the management the KPI is repted Actions: root cause analysis (bottleneck) and action plan meetings with supplier, strong incoming goods inspection

11 KPI Description: Process: Objective of the process: Process owner Prediction of the KPI: Supplier on time delivery perfmance Purchasing to ensure on time delivery of suppliers please enter process responsible statement of the compliance of suppler confirmed delivery dates First Article Inspection (FAI) first article inspection (internal and external) To ensure a stable production start please enter process responsible assessment of the achievement of first article inspections Unit of measure: percentage (%) percentage (%) Target and repting period: Calculation of the KPI: Accuracy of the KPI: please enter process responsible (sum deliveries on time) / (sum deliveries) x 100 please enter the accuracy with which the KPI can be determined please enter actual company target (sum of successfully perfmed FAIs) / (sum of perfmed FAIs) x 100 please enter the accuracy with which the KPI can be determined Data source: ERP-system; manual recds ERP-system; manual recds Repting interval: Framewk condition: Influence on KPI: Data collected by: KPI repted to: Actions: monthly none new items, new supplier, product modifications at supplier, purchase of primary material please enter the person responsible to collect the data please enter to which part of the management the KPI is repted meetings with suppliers, strong expediting of supplier monthly quarterly none quality of contract review, qualification of staff; capability of measuring equipment please enter the person responsible to collect the data please enter to which part of the management the KPI is repted

A UNIFE initiative suppted by The rail industry The rail operats The rail associations This document and its contents are the property of UNIFE. This document contains confidential proprietary infmation. The reproduction, distribution communication of this document any part tof, without express authization is strictly prohibited. Offenders will be held liable f the payment of damages. 2011 UNIFE. All rights reserved