GA 471 | Setting and Measuring KPIs with Vince Sassano

People forget that even the person on the back of the line is a skilled laborer. It's a skill in order to do that. And when it has an effect on productivity and efficiency, it resonates all the way up the chain. All the way up the chain.

Today I'm excited to welcome Vince Sassano to the show. Now Vince has got a really interesting background. He's got a sort of a data analysis and software background, but he's also deeply involved in the manufacturing space. And so we had a wide ranging conversation out of the gate. We had a nice chat about our friend Herbie. If you've read the Goal, Eli Goldratt's book, the Goal, you know who Herbie is. And even if you don't, we explain who Herbie is and sort of what, what was going on with the Herbie and what that has to do with continuous improvement. After that we then sort of transitioned into the whole topic of KPIs and key performance indicators and what they are and why they're important and how we can set good KPIs. I then worked in sort of the conversation of Billy Taylor and the whole idea of key performance actions or leading indicators and key performance indicators or lagging indicators as we had a nice chat about that. Then towards the end we get into the whole idea of data collection and spent quite a bit of time talking about how we collect data is very important. I had a good conversation on the importance of being able to trust our data, is our data reliable? And even I even geeked out a little bit on Gage R and R and making sure our data is repeatable and reproducible, that sort of thing. And, and then Vince talked about, okay, so now we've got data. What do you do with it like and how do you, how do you use that to, to make your business better? So I think this is going to be a conversation that's going to benefit anybody. Even if you're not in manufacturing, you're going to be a. Because all of us have data, all of us have some sort of constraint in the work that we do. So show notes can be found over@gemba podcast.com just look for episode 4. 71. Also just a quick plug. We are starting to do workshops here at Gemba Academy. So if you go to gemba events.com you're going to be able to see what workshops we got coming up and we'd love to see you here in Kellogg, Texas and you can even come in and, and see where we record this podcast. So Again, that's Gemba events dot com. All right, enough from me. Let's get to the show. Vince, welcome to the show. How are you?

I'm good. Thanks for having me on.

All right, man. I'm excited. So I know you've listened to the show before, and we do like to get things going with our guests in a quote right out of the gate. So what do you got?

Okay, so my favorite quote is Find Herbie, and it's from the book the Goal by Elihu Goldratt, and I use it all of the time. The book is written for manufacturers, but interestingly enough, there's a lot of uses outside of manufacturing and productivity that, you know, that book. That book has.

So funny story about the goal. You know, if you're a continuous improvement practitioner and you have not read the book, you need to read it. It's a classic.

Exactly, Exactly.

Funniest story about the goal. You know, I think I've. I first read it, oh, my gosh, 10, 15 years ago. I don't know when it was, but I was working at Nokia at the time, the cell phone company, you know, and my wife was working at Nokia in the human resources department. And so I had been reading it, and I was like, oh, my gosh, this is. It's a great book. I mean, I was geeking out on all the sort of lean stuff or continuous improvement TOC stuff, you know, and. But, you know, it Gold Rides was a great storyteller, you know, and. And so I was telling my wife about it. When she read it, you know, she was like, oh, Alex Rogo, what are you doing? You know? Yeah, it was more in the husband wife song.

Right, exactly. That's what I like about the book, is that it completely distracts you.

Right.

And makes it a quick and easy read. Because you're reading about this guy's relationship and you're like, when's he going to get to the productivity part? Right. It's great the way he winds it in there.

Yeah. But it's all related in a way, right?

Oh, yeah.

Oh, yeah.

It's completely related. It's not a side deal. It's.

Right. Exactly. Good stuff. All right, well, hey, Vince, tell us a little about yourself. Tell us about your background and what you're up to these days.

Wow, that's a big question. So I'll give you the reader's digest version. I'm a graduate of Iowa State University with a degree in computer engineering and went the technology route for a while, you know, being, you know, IT manager IT director, being involved in technology. My career took me into manufacturing, and I was involved in that for a while and then decided to start a company, gosh, going on 30 years ago, that focused primarily on technology. And then I ended up getting involved in accounting systems and ended up starting another company that sold ERP systems. And so got involved in a lot of different areas of manufacturing from there and have just over the years now just kind of specialized, moved to the shop floor and really helping customers focus on how technology can help them become more productive. You know, mixing and matching and really coming up with hybrid versions of the human resource and the technological resource so that you get the technology to work for you, not you working for the technology.

Yeah. Good. All right. Well, hey, so you mentioned Herbie early on. And just in case folks, you know, haven't read the book or they. They don't, you know, haven't studied TOC or anything like that, theory of constraints. Tell us what. What is Herbie? And first of all, maybe the backstory of the book and young Herbie, you know, and then. But then what does it really mean in context of continuous improvement?

Okay, well, you know, this is not a. This is not a suspense novel, so I'm not going to feel like I'm giving anything away for people who haven't read the book. But Herbie is a kid, and there is a story in the book where the gentleman who is the main character, the protagonist of the story, is trying to find a way to get his Boy Scout troop through the forest in the fastest way. And there's this kid named Herbie who is kind of the slowest walker in the group. And so he tries different ways to get the group through the forest. You know, do we put him in the middle? Do we put him at the end? We put him in the beginning, but before he can even go through that, he had to find out, okay, so who's going to be, you know, kind of my slowest walker? And so he runs through a little bit of a, you know, some games with the kids and said, oh, okay, so Herbie's going to be my slowest walker. So now I know that the group can't go any faster than Herbie. And so now I need to figure out how I can organize this in order to get the whole group through the trail, keeping in mind that Herbie is going to be kind of the bottleneck. And so really, Herbie is an acronym for bottleneck. And the fact that bottlenecks move, I think, is something that is a little bit of A learning. And for people like us, a teaching concept for manufacturers is that it's. It's just. It's not static. It's a continuously flowing, fluid environment where you're looking for Herbies and then solving them and then finding the next Herbie. And the latter half of the book really does an excellent job of helping people understand that it's not just finding Herbie and then solving it. It's getting good at learning how to find Herbie and then solving it, because he's going to move and he's never going away. I mean, I don't know that we're ever going to reach a point where you never have any downtime ever. And downtime, I think we all agree, is the number one thing that happens in manufacturing that affects the entire organization. The machines aren't running, nobody's making any money, and it affects the schedule, it affects the people on the floor, it affects manager, it affects everything. So.

Yeah. Yep. No, exactly. And you know what I appreciated about. About the book and just really about theory constraints in general, just the. The quick story, if I remember it correctly, it's been a long time since I read the book, but I remember in the beginning, Herbie was falling behind. Right. And that was the original problem, was that they were worried they were going to lose a kid, Right. Namely Herbie. And so I think they moved them to the front initially. Right? They moved them to the front of the line. So then. Well, you can't lose them, first of all. So let's solve one problem. We got safety, right. And keep all these kids.

Exactly, exactly.

So we're not going to lose them. But now the whole. The whole troop is now basically ground to a halt almost because this kid's so slow. And so they then. What did he do? They looked in his backpack and, you know, crap in his backpack, you know. Right. And so elevating the constraint, as they say, right. In toc. And so. And then, you know, eventually, you know, we're moving as efficiently as we can.

Right.

And, you know, if they were going to be, I guess, continuingly to. To. To. To hike week after week after week, I. If I remember right, Herbie may have been a little overweight even. Right. So, you know, maybe like, hey, let's. Let's work on our conditioning and our fitness, and then you can continue to elevate that constraint. Right. And.

And, yeah, well, whether you're carrying the load or you're carrying a backpack or whatever it is, it's really looking at. And that's an excellent point that you bring up there is because it's not always about you can raise the constraint as best you can, but really you have to understand what your constraints are.

Yeah.

So if the constraint is Herbie's lugging the heaviest backpack and he's the heaviest person, well, then you could shift one of the back of the backpack to somebody else.

Right. But if Kirby, he's not going to lose weight on the hike, right? No, no, he's not.

He's not going to lose weight on the hike. But if, if you, if he's not carrying a backpack.

Exactly.

Then you have no constraint that you can lift.

Exactly. Yeah. Exactly. Yep. Good stuff, man. All right, well, so what I want to kind of maybe orient our conversation around a little bit is just the whole idea of continuous improvement and KPIs or key performance indicators. So tell. First of all, just again, just in case folks aren't familiar with what is a KPI, tell us about that. Let's just level set on what you mean by KPI.

Well, your KPI is really your highest level numbers that you're going to look at in order to evaluate whether your organization is going in one direction or the other. Very few organizations that I've worked with have only one. Usually they'll have four or five, you know, what they'll call key metrics or key performance indicators. And they will track them quarterly, monthly, sometimes weekly, depending on the particular KPI and what the level of detail is they want to track. A lot of the customers that we work with have seasonal businesses. And so they'll know that in this particular month certain KPIs will be down, but that's expected because of the seasonality of their business. But it really is the top, highest level. Look at how well the operation is performing.

So like just at a really high level for an organization that's trying to make money, which is most, you know, is it a KPI, things like your, your revenue just at a really high level or down in manufacturing, it's pieces and output, that sort of thing. Is that what you're. Is that what you're talking about?

It's a pretty wide range there really depends on the department. So yes, the financial department will have their KPIs, which will be more like not only gross sales, profit costs, they could be tracking inventory turns, things of that nature. The plant floor is really more about efficiency and quality and safety. Actually not in that order. It's actually safety, quality and efficiency, you know. So they are looking at from a safety perspective, lost time, incidents, From a quality perspective, they're looking at rejects and rework and that sort of thing. And from an efficiency perspective, you know, they're looking at their throughput. Yeah. So they'll have some metrics and calculations designed around those particular topics. It's a self policing system. You come up with your own formula.

Yeah.

As far as what you think is good and what, and what you think is bad. And I've got a pretty interesting story on that particular topic. Had a customer many years ago that their, one of their key performance indicators was pounds produced. And the only comparison that they had was how well they did last year. And so they would compel themselves year to year and say, okay, well we produced this amount of pounds last year with this product and now we're producing this and it's a 50% increase. We must be doing better. And then when we got involved and we started to say, well, we need to kind of take a look against, you know, what your capacity is and what can you do and introduce some additional metrics to their calculation. And when we did that, they found out that they really went from 35% efficiency to 45% efficiency. And they said, wow, that's terrible. I mean we can do a lot better than 45%. And I'm like, absolutely. But you didn't know that you were at 45%. As far as you knew you had beaten your metric from last year by 50%. So you're patting yourself on the back now that you're looking at things from, you know, a little bit more of a detailed metric. And this particular metric came out of, you know, the, the philosophy world class manufacturing oe. There was just some things that they were not accounting for in their KPI. So when we evaluated their KPI, we're like, well, why don't we just start a new KPI, we'll call it this and we'll compare it to your old KPI and that'll give you an idea of what's actually a little bigger picture. So really those KPIs are critical because that is your, your window that you're looking through.

Yeah. Well, it's kind of your scoreboard. Are we winning or are we losing? Right. And Right. So how do you balance in that example where you talk about the company is producing pounds of some substance. Right. How do you balance that KPI with well, what's that customer actually want? Because it doesn't matter. If you can make a ton of this stuff and you got thousands and tons of pounds, all this material is sitting There, but the customer don't want to buy it. Right. Then you just built up inventory. Now you know, well, the customers that.

We work with are really producing. They're, they're producing to orders. Okay, but you do bring up a good point because there is a difference between kind of a job shop man, a job shop manufacturer, which will have a higher turnover rate than more of a continuous manufacturer. It's like, listen, we're doing our, our planning for the year. We know that this customer is going to order, you know, a million pounds or 10 million pounds of this particular product. We know that they're going to want it shipped on these dates. And so we can kind of plan for that.

Yeah.

When you're in more of a job shop environment, changeover really becomes one of your primary metrics or KPIs, because it does make a difference when you change over from one product to another product. That's downtime that you're playing. It's basically planned. You have two types of downtime. You got planned downtime and unplanned downtime. So the planned downtime, you do the best you can with scheduling and customer demand and all that sort of thing. Unplanned downtime is what everybody wants to avoid because obviously he didn't plan for it.

Yeah.

So, yeah.

Are you familiar with a gentleman named Billy Taylor? We've had him on the podcast a few times. And he, he's, he used to work at Goodyear and he was a really high up, big, big shot guy in Goodyear's production system, helped form it and all the rest of it. And he has an interesting take on balancing what he calls KPIs, which we all have KPIs, but then also really putting a lot of emphasis on what he calls KPAs, key performance actions. Right. And so KPI might be. Well, I'm, I'm, I want to lose weight. So I step on a scale every day and, and that's my KPI is my weight, you know, and then KPA is. Okay, well, how many calories did you put in your body? How much exercise did you do? How many steps did you take? So, like, have you experimented or worked with your clients on sort of balancing things like KPIs? Like, okay, yeah, you want to ship this many pounds, what are the, the actions that we need to take in order to do that?

Oh, yeah, absolutely. We do an analysis of the KPIs and then we do a, pretty much a reanalysis on initially a quarterly basis. But then really it just comes down to annual and then beyond annual. I mean, gosh, we've got some customers that haven't changed their KPIs in. In, you know, three to five years. But they do review them.

Yeah.

Based on the change of the business and the type of business. So that's. That's one aspect, I believe, of your question. The other aspect has to do with what actions are you taking off of your KPIs, which means what are your KPIs telling you? You know, if your KPI is down because it's seasonal, you don't have to really worry about it. But if you're down and it's the height of your busy season, you know, you cannot really have this KPI fall below a certain level. So therefore, what actions are you taking now? Because we've. Let's say we've experienced a 15% drop in one of our KPIs that's not planned for. It's like, wow, it's a. It's an anomaly. What happened. So then, now you're getting together with your staff and through your organizational structure and saying, you know, well, what happened? Oh, well, you know, the city of Los Angeles had a power outage and we were out for a period of time. Okay. Now you have your explanation as to why it's down. So it's not necessarily an action that you have to take. It's a. It's an understanding of what actually happened.

Yeah.

Then you take your action once you figure out what actually happened.

Yeah, yeah, yeah, I get you. I think, like, kind of Billy's framework is perhaps more on. And even from like a TOC perspective, like, the. The difference between a lagging indicator, which is a KPI, is typically a lagging indicator. Right. It's done like you made the. And then leading in. So instead of, like, it's kind of like trying to manage your business, the analogy that they would use is, well, it's kind of like driving a car by looking in the rearview mirror, you know, whereas, you know, you got to look ahead, you know what's in front of you. And so managing. Trying to understand what those leading indicators are that allow us to hit that KPI. I feel like that's where sort of Billy and, you know, kind of a lean mindset is. Is going as well. But same thing.

I agree.

We did with Herbie. You know, we. We lightened his load, you know, and. And then he's able to hit that KPI, which is the time to complete the hike or whatever it is.

Yeah. And the analogy that I've heard is it's like trying to drive your car from the trunk.

Yeah.

So you know, you're the steering wheel is too far, your visibility is not the best. And so more often than not you're going to have multiple levels of KPIs. You're going to have KPIs that your senior management looks at. You're going to have KPIs that your middle management looks at. You're going to have KPIs that the shop floor looks at. And of course, you know, in an area of complete visibility everybody gets to see them but they don't really mean as much to you know, to everybody. And that's kind of the way we work is we help people understand, listen, all of your KPRs are important. It doesn't really hurt it the guy on the floor to know what the overall efficiency was for, for the plant for the month. But it doesn't necessarily help him as his only indicator because he's on the.

Line control it anyhow. Right. He only has one.

Well he can control it but he can only control it on a run. But yeah, his piece, his line on a run by run basis he can do the best that he can. And then in the roll up number it does in the end affect it. Yeah, but it is good for everybody to be able to see that. Now you mentioned kind of, you know, your leading indicators like having sensors on the line or, or doing some form of counts during the day to try to figure out where you're at. Yes. Those are equally as important because what you'll find is if all of your KPIs are lagging, you're never going to be able to kind of catch up until after the fact. So you do need to have some leading indicators but too many leading indicators and you're going to get, it's too much data. You know, there was a tremendous amount of talk nowadays about automated data collection and sensors and you know, OPC servers and all of that. And it's like if you wanted to, you know, you could get inundated and most people do get inundated with just this reams and reams and reams of data. But what does it all mean? Because in the end you need a human being to interpret it.

Right.

And whether it's data interpretation on the line or it's interpretation by management, you know, the data itself is not necessarily going to point you in the direction that you think AI is becoming really big. Now with regards to AI of all of that automated data because they realize it's too, too time consuming for a human being to crunch all these numbers, so they try to come up with algorithms in order to find out what's meaningful and what's not. And that's great for people who are in that situation. Most manufacturers, some of them that we deal with, you know, they could run their business on a napkin. And that's great until you grow to a point where that just becomes not feasible. So. Yeah, you've got people in that entire spectrum.

Yeah.

You know.

Yeah.

And that's, that's kind of where we fit in as a middle player, is to help people say, okay, what is not enough technology and what is too much technology?

Yeah.

And what is the balance there? Because in the end, our focus and our goal is throughput. Yeah. And. And that's what Herbie's all about. You know, you got to get the whole Boy Scout troop through the forest.

Yeah.

And Herbie has to come with. You can't lose Herbie. So how do you do that? And we. And that's a daily task. Every day. You have to meet your schedule. Well, you don't have to meet your schedule, but you. If you don't meet your schedule, what are the ramifications? Well, you either make it tomorrow or you just cancel the order and call the customer and say, yeah, sorry, you know, we tried, you know, we tried to make it, but downtime killed us. And so, you know, we're not going to do your order. That's. Yeah, no, that's not going to happen. It's usually going to then as it have the slinky effect where it's going to push the schedule to the next day and the next day and the next day, you know, so one of the key metrics that you may want to track at certain part in the seasons is late orders, you know, on time shipping. Because in the manufacturing business, if you don't ship it, you can't invoice it. It's not like, oh, we're going to send you this. Send us a check. No, usually it's like, we made it. It's on the truck, it's gone. Here's your bill.

Yep.

And so really, you balance that back, assuming you have no problems getting the truck or loading the truck, which, by the way, also is downtime. And we do have some customers that will track downtime out to that level, because until the truck leaves, they can't ship, they can't invoice.

How frustrating is that? You go through all the thing, you make it get it produced and then you ship it, you know, like.

Right, you can't ship it because the truck's late or, or whatever.

Yep, yep. So, Vince, you mentioned data collection. So I want to maybe pivot a little bit and go in that direction, maybe talk a little bit about how, you know, the way that you collect data is, is really just as important as, as how you analyze it. And then once you've got data, you know, what do we do?

Right, right, right. That's. That's a, that's an excellent question. There used to be a point in time, many, many years ago when, you know, when I first started out in this business where you had to go through a little bit of an education or a training or even a little bit of a sales job on explaining to people, you know, why they need to collect data. You need to have data in order to run your business. There used to be a fight there when back in the beginning of continuous improvements back in the 70s and 80s, there was a little bit of a sales job that had to be done to say, listen, you need to collect data and develop metrics. And you were coming generation, generationally from a bunch of people who weren't used to that. Okay. They were used to, you know, walking around the plant floor and making their presence known in order to run the business. Well, that's now changed. And so now, you know, you very rarely run into a manufacturer who's not collecting data. Somebody, you're collecting data. So now you're starting out with a spreadsheet, and then you're growing into all of the various options that, that are out there. And the big issue that we've come across is what we would call data trust. And that is you can collect the data, but do you trust the data? And then that's going to get back to the data source. Okay, are you collecting your data manually? Who are you collecting it from? Are you auditing that data? And then the same thing, interestingly enough, applies to the automated side. Okay, Are you, are you collecting automated, or you're collecting automated data, but where is that automated data coming from? And is it reliable and can you trust it? And so really, the. How you collect the data is really analyzed from that trust view. Because when you get into a meeting, if everybody can agree that the data is reliable, well, now the meeting becomes actionable. Okay, what are we going to do about it? But there are many, many meetings that have taken place where the meeting becomes a discussion about, well, whose data is it? Is it my data? Is it your data? Is IT department managers, you know, do we really trust that information that's being brought forth? And that opens up a whole other issue with regards to culture and various, you know, levels. Are we talking, is this a manager, an operations manager talking to his production supervisors, or is this the VP of operations talking to his middle management about the data? And so that's really, you know, kind of the gray area where we help people get some clarity on, is, okay, well you're collecting data.

Great.

And we've audited data and it's good data. Now what? So then we help them with our management consulting experience and our operations experience to have productive meetings. And you know, we've, We've, you know, got a little phrase that's been kicked around by some of my clients. They call them MOSS meetings, which stands for management operations supervision. And that's where you're really going to sit down and go through the, the nuts and bolts of what's, you know, what action should we take now that we know that we have good data. Yeah, but really getting to that data trust point is your, you know, your first step.

Man, I'm so, it makes me so happy to hear, hear you say that because kind of the six Sigma side of me, you know, one of my passions is, is Gage R and R. In fact, one of our black belts going through our certification program right now works for an organization where they, they do, they do some manual inspections. They're using equipment, but there's still a person involved. And what they've been finding is that the people are, they're rejecting a lot of good parts, which is very expensive, right?

Yes.

So just some basic gauge R and R, you know, analysis. And they had, they were able to identify, you know, training opportunities of, you know, hey, Vince, this, I noticed that you're seeing this thing a certain way and Ron, you're seeing this one a certain way and both of you are kind of off. And so let's, let's, let's get back together and man, you know, just that, that, that whole idea of repeatability and reproducibility is, I think it would move our GDP by, you know, 10% if, if organizations really fully adopted, you know, just the idea of are your measurement systems repeatable, reproducible? Can you trust them? Are they reliable? And because so much of the data that we see out there that I see that over the years is it's just noise. You can't even see the process about the noise in the measurement system.

Exactly, exactly. And one of the, you know, one of our key Philosophies, or if not our, our singular key philosophy in everything that we do relating to manufacturers and productivity is people matter and people want to matter. So the fact that you had people on the line that were rejecting good parts, well, there's a reason why they were rejecting the good parts parts. Are there internal constraints that there is a negative repercussion for letting a bad part go through? So then the people on the line were like, well, I'm never letting that happen because. Right. This is what happened to me. It was, it was a bad result. So they were just, they were over rejecting. And so that's, you know, it's a great story that you bring up there because I think that that gets lost in the whole data collection, data analysis, artificial intelligence, sensors. I think that whole discussion gets lost is that, you know, people matter and they want their jobs to matter. Yeah, I was listening. I was actually reading a post that a gentleman had about how the people on the line have so much knowledge with regards to how to do things more effectively. And you know, there was a manager who was coming down, or actually consultant that was coming in, helping them with stuff and he was watching the guy pack this stuff off and he, the packer had a nice little routine on he was doing. And then, you know, the gentleman said, well, let me try that. And he got in there and he couldn't do it. And so his whole point was people forget that even the person on the back of the line is a skilled laborer. Yeah, it's a skill in order to do that. And when it has an effect on productivity and efficiency, it's really, it resonates all the way up the chain. All the way up the chain.

So, yeah, people matter. I love that. Yeah, yeah, Good stuff, man. Hey, Vince, this has been fun, man. I appreciate you taking time to come on. If folks want to connect with you or maybe your website, social media, what's the best way?

Right, well, the best way is the website and I'll give it to you slow. It's www.3dspc.com and that's the number three. So again, www.the number 3D as in davidspc.com and then. Or you can find us on LinkedIn and it's LinkedIn.com in producer track. That's P R D O T R K. It's a small acronym for production tracking.

Got it, got it. And we're gonna link it all up. People, people, people have already clicked on it now that you've said it because we got it in the show notes below this. So, yeah, so we, we'll get you all linked up and, and let's all go connect with, with Vince and, and keep building this community of improvers. Yes.

Great. Thank you very much.

All right. Yeah. Well, take care and appreciate the time, Vince.

Absolutely. Have a good day.

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