12 Manufacturing KPIs That Are Critical to Track

Manufacturing Key Performance Indicators (KPIs) are measurable indicators of production efficiency, providing manufacturers with insights into areas for improvement. These metrics are essential for enhancing customer satisfaction, boosting productivity, and reducing costs, making them critical to manufacturing operations.?

What is the difference between KPIs and metrics??

Key performance indicators monitor crucial measurements that guide businesses in making pivotal decisions. These indicators should align with business objectives and provide insights into achieving those objectives.?

While KPIs and metrics gauge business performance in various aspects, not all metrics qualify as key performance indicators. Metrics assess the business's performance in a particular process, whereas KPIs track progress towards a specific goal.?

Commonly tracked KPIs in companies include Revenue Growth and Profit Margins. However, key performance indicators specific to production are vital in optimizing operations in that domain. What defines a good manufacturing KPI??

It's in sync with the company’s objectives.??

Every organization pursues specific goals. KPIs must align with your company’s objectives to gauge your progress.?

It's precise and quantifiable.??

Every KPI should define and measure a tangible aspect, enabling you to monitor your progress toward your goals. For KPIs to be valid, they should be as specific as possible.?

It delivers attainable benefits.??

A KPI must represent something achievable to offer real value. It should be actionable, meaning the data it presents is utilized to implement necessary enhancements.?

What are the benefits of utilizing manufacturing KPIs???

Using KPIs in production allows manufacturers to identify opportunities to enhance customer satisfaction, increase competitiveness, and reduce costs. Reviewing KPIs enables manufacturers to assess their performance against key metrics and make necessary adjustments.?

Exploring the top 12 manufacturing KPIs and their calculations?

Manufacturing offers many metrics that can serve as KPIs. Which KPIs are crucial in manufacturing, and how do you gauge them? Below are the most commonly utilized KPIs based on our customer feedback. Determining which KPIs are essential for your company will depend on its specific business strategy.?

1. Timely Deliveries?

Timely deliveries are imperative for manufacturers to maintain customer satisfaction. Ideally, a 100% success rate is targeted. Delivering delays can stem from various factors, such as delayed supplies, impractical production schedules, or frequent equipment malfunctions. Maintaining a high delivery success rate is crucial for retaining and attracting new customers.?

Calculation:?On Time Units Delivered ÷ Total Units Delivered?

2. Production Schedule Attainment?

This enables manufacturers to assess the effectiveness of production planning and whether workers are meeting performance standards. It also aids in identifying any performance issues that might be affecting deliveries. Simply knowing whether deliveries are on schedule is insufficient; it's crucial to identify the factors influencing production to make necessary adjustments and enhance delivery performance.?

Calculation:?(Actual Output ÷ Planned Output) x 100?

3. Overall Production Cycle Time?

This key performance indicator evaluates the duration required to fulfill a customer order, from production initiation to shipment. It excludes breaks and waiting periods, focusing solely on the duration of the manufacturing process. Total cycle time encompasses all production elements, from raw materials to the final products. It calculates the average cycle time across all orders, incorporating machine cycle time to assess machine efficiency, which should be compared to the machine’s ideal cycle time.?

Calculation:?Net Production Time (NPT) ÷ Number of Units Produced?

4. Production Efficiency?

This metric provides insights into your machinery's performance. It is monitored in real-time to address potential issues proactively. Production efficiency is optimized when skilled workers are assigned to operate machines with which they are proficient. Moreover, optimizing machines and streamlining production processes to minimize manual interventions results in peak throughput levels.?

Calculation:?Number of Units Produced ÷ Total Time of Production?

5. Machine Capacity Utilization?

This indicator assesses whether a machine operates at its full capacity potential. Ideally, machines should consistently function without downtime or interruptions. Given the substantial investment in production equipment, idle time should be minimized. Maximizing machine capacity utilization is essential for improving efficiency and reducing operational costs.?

Calculation:?(Actual Output ÷ Potential Output) x 100?

6. Setup Time?

Setup time refers to the duration required to complete all tasks associated with a production run, encompassing activities like unloading/loading, retooling, calibrating, and programming for the subsequent job. This data aids manufacturers in identifying areas for enhancement, such as optimizing setup organization or providing additional staff training on machinery operations. Decreasing setup time leads to reduced production costs, making processes more efficient.?

Calculation:?Time to Produce First Quality Item in a Product Set – Time to Produce Last Quality Item in a Product Set?

7. Product Yield?

The product yield KPI, also known as First Time Through (FTT), quantifies the number of error-free products manufactured compared to the total production volume. For instance, if ten products were produced but one was defective, the yield calculation would be (10 – 1) = 9 ÷ 10 = .90 or 90% product yield without defects.?

Calculation:?(Total Items Produced – Defective Items) ÷ Items Produced?

8. Scrap?

Scrap material is usually defined as material that fails to meet quality standards. However, certain manufacturers classify any unused raw material as waste or scrap. Monitoring waste material is crucial for cost control and ensuring the production of higher-quality products.?

Calculation:?Total Scrap ÷ Total Product Run?

9. Scheduled Maintenance?

When evaluating the scheduled maintenance KPI, including all emergency maintenance within the overall maintenance calculations is essential. Ideally, less than 15% of expected maintenance should involve emergency work orders. Emergency maintenance is significantly costlier than scheduled maintenance due to overtime, rushed parts, and production wastage. Minimizing emergency maintenance is crucial to avoid profit loss and mitigate downtime and employee dissatisfaction.?

Calculation:?(Planned Maintenance Time ÷ Total Maintenance Time) x 100?

10. Equipment Availability?

Equipment availability assesses machine uptime and downtime. Understanding the extent of downtime in your company is crucial, as it incurs significant costs and is a primary concern for most manufacturers. When calculating equipment availability, both planned and unplanned downtime should be considered. Additionally, keeping detailed records of downtime reasons enables analysis to pinpoint areas for enhancement.?

Calculation:?Uptime ÷ (Uptime + Downtime)?

11. Product Return Rate?

The product return rate KPI is straightforward yet crucial. It quantifies the number of goods that customers reject. Monitoring this KPI closely is essential because returns not only result in financial losses due to reworking goods but can also negatively impact reputation and customer retention. When goods are returned, it's imperative to investigate the reasons promptly and implement corrective measures.?

Calculation:?Rejected Goods ÷ Total Number of Goods Delivered?

12. Total Equipment Efficiency?

This KPI evaluates how efficiently equipment generates a combined availability, performance, and quality metric. However, it doesn't account for downtime or maintenance activities. Therefore, it's essential to recognize that this KPI provides an incomplete view. While a high efficiency rate may be observed, it's crucial to consider any underlying factors that could influence the results.?

Calculation:?Availability x Performance x Quality?

How can manufacturers ensure their KPIs drive action??

Measuring KPIs is only meaningful if the information is utilized. It is crucial to identify the KPIs most pertinent to enhancing your business's success and leverage them for improvement.?

Distribute KPI measurement data to key stakeholders and incorporate their feedback to refine your KPIs. These metrics should provide insights into areas of strength and areas needing improvement, allowing you to implement necessary changes. Aligning your KPIs with your business strategy enables them to prompt actions that steer your business in a positive direction. ?

These are not the only manufacturing KPIs but some of the most used in the industry. Each business needs to use KPIs that work with its strategy. And remember to use the information gained to improve profitability, competitiveness, and customer satisfaction.?

What are the different KPIs in lean manufacturing??

KPIs essential for?lean manufacturing focus on reducing waste or increasing productivity. Some examples are production schedule attainment, total cycle time, and scrap. Lean manufacturing KPIs also evaluate the progress of lean and process improvement initiatives or?Kaizen.?

How modern manufacturing ERP helps track KPIs?

Today's advanced manufacturing ERP systems are adept at tracking your KPIs efficiently. As manufacturing businesses expand, keeping track of KPIs becomes increasingly challenging. Without the right tools, maintaining competitiveness can also be challenging. Intelligent manufacturing ERP solutions offer automation and essential modules for streamlined operations. They feature interactive dashboards displaying real-time metrics and KPIs, providing valuable business insights.?

Modern ERP systems have sophisticated functionality to identify opportunities for enhanced productivity and increased revenue. These systems include pre-defined KPIs that can be utilized as-is or customized to align with your business needs. Additionally, modern ERP solutions integrate business intelligence capabilities, allowing you to analyze KPI data to gain deeper insights or to create additional measurements for specific scenarios.?

Effective use of KPIs is crucial for making informed business decisions. Those responsible for KPI monitoring should take ownership of their designated manufacturing metrics and regularly track them to drive improvements as necessary. KPIs should be adaptable to evolving business requirements, such as monitoring specific situations. However, limiting the number of KPIs to around ten is essential to prevent overwhelming complexity and ensure effectiveness in managing critical management issues.?