The 12 Most Important KPIs for Manufacturing Production
Remember as a student, you had various areas to perform in- like numerous subjects, co-curricular activities, discipline, regularity, etc. At regular intervals you used to get a marksheet, which was nothing but your performance sheet. It was a sheet which depicted how you performed in various areas and what areas needed improvement.
Likewise, in manufacturing/production, there are numerous areas to be monitored like machine performance, profit and loss, lead time, logistics etc. By monitoring these areas, organizations can find out gaps to get better results. ?KPIs or say Key Performance Indicators are marks (or say metrics in manufacturing language) which give you an idea of how your production process is being carried out and what are the areas which need improvement.
These indicators are the most critical metrics used by manufacturers to improve customer satisfaction, productivity, and lower costs.
Let us dig down more in the subsequent sections and understand KPIs in context of manufacturing.
What are Manufacturing Metrics?
Manufacturing matrices are various key data points used for analysis. Metrics are not specific to a said goal, but they are wider set of data points. These data points when analyzed give a perspective of performance over a wide domain of production.
What are KPIs?
KPIs on the other hand are the most specific data points (metrics) used to measure specific goals. ?
So, we can say that all KPIs are metrics but vice versa is not always correct.
For manufacturing production, KPIs are those data points which are very important for your business—for example, revenue growth, profit margins etc. ?
What Defines Good KPIs?
For KPIs to be good, they must have some intrinsic properties. Following are some of the properties of good KPIs:
Top 12 Manufacturing Production KPIs:
1.?On-Time Delivery – Any business can make their customers happy by delivering on time.? Ideally, manufactures aspire to achieve 100% on time delivery, but there are many factors which can hinder this goal.? Logistics delay or strikes of transporter, machine malfunctioning, unrealistic production schedules and many more can impact the delivery time.
Calculation – Number of on-time Units delivered/Total units delivered
2.?Production Schedule Attainment – This KPI helps manufacturers to see if production is well planned and attains the set benchmark. It allows manufacturers to determine if there are production issues that impact deliveries. Just making delivery on time is not helpful. One must know the factors affecting production so that they can be adjusted to improve delivery performance.
Calculation – (Actual output/Planned output) * 100
3. Total Cycle Time – Cycle time is the KPI which determines that each product is given ample time to be perfectly crafted. It is the duration required to transform raw materials into finished products. It does not calculate gaps or breaks or waiting period. It considers only the actual time required for converting raw materials into finished products.? Divide total time it takes to produce certain goods by the number of units produced to get total cycle time.
Calculation - Total production time/number of units
4.?Throughput – This manufacturing KPI is the rate of how many units on an average a machine is producing over time. In simple words, it is the number of units produced in a given time frame.? Hence, to improve throughput, organizations must reduce downtime and increase the manufacturing capacity of the machine.
Calculation - Unit produced/Time
5.?Capacity utilization - As the name suggests, it is the indicator of percentage of machine capacity utilized. Divide actual production by production potential and multiply by 100 to get capacity utilization.? For any machine, if it is running at its ideal cycle time, the machine is utilized 100%.? If machine is running slower, or taking larger cycle time, it is running at lower percentage and under capacity utilized.
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Calculation – (Actual output/Potential output) * 100
6.?Change-over time – Change-over time is one of the key KPIs of manufacturing. It includes time taken to load/unload, calibrate, and program for a new job. Lesser the change-over time, lesser is the production cost. By knowing the changeover time, manufacturers can predict the production time more precisely. It is applicable where multiple production sets are used or there are change of machine, or assembly line during production.
Calculation – Time to produce first quality item in product set – Time to produce last quality item in a product set
7. Yield– This KPI is also known as First Time Through (FTT). It is the number of quality products a machine can produce out of total production. This KPI is important to measure efficiency and profitability of the system.? ?
Calculation – (Total production – Defective production)/Total production
8. Scrap – Scrap is the material that was not good in quality or was defective and materials that was not used in production. Hence, sum of both the factors make scrap.
This metrics determine how much costs got wasted during production. Keeping a track of scrap will help manufacturers to bring the costs in control and produce better quality products.
Calculation – Total scrap/Total Product Run
9. Planned maintenance – This KPI is ratio of scheduled maintenance vs total of all the maintenances including planned and emergency maintenance.? It is a KPI required to allocate resource for preventive maintenance.?
Emergency maintenance has high costs which involves scrap production, over time, rushed parts, etc hence it is recommended that organization try to minimize emergency maintenance and rely more on scheduled maintenance.
Calculation – Planned maintenance time / Total maintenance time?
10. Availability – Availability is the ratio of time a machine is deployed and available for production vs total time a machine is deployed.? This KPI is important and determines uptime and downtime.
Downtime costs money. Therefore, manufacturers endeavour to reduce downtime of machines and increase availability. It is also important to keep track of reasons of downtime. Those records can be guidelines for future improvements.
Calculation – Uptime / (Downtime + Uptime)
11. Customer return rate – It is a very important KPI. It indicates how many goods customers are rejecting. Customer rejection involve costs as it imposes rework to amend the rejected product and it damages organizational reputation. When goods are returned, it is very important to make necessary corrections immediately.
Calculation – Rejected goods / total number of goods delivered
12. Overall Equipment Effectiveness (OEE) – OEE measures how effectively the plant and production equipment are utilized compared to its full potential. OEE is determined by identifying availability, performance, and quality output of machines used in production.
Organizations must try to achieve OEE score by 85%. They can achieve it by regularly monitoring data, adopting digital solutions, and establishing quality standards.
Role of ERP in Measuring KPIs
Modern ERPs can easily monitor and measure KPIs which otherwise are difficult to track. Intelligent and modern ERPs provide the automation and modules you need to run your business efficiently.
With the help of dashboards provided by ERP software, organizations can track various KPIs real-time.?
BatchMaster ERP is one such ERP Solution with advanced analytics capabilities. Accommodating various metrices and KPIs, this ERP can easily track your organization’s performance and help to improve productivity.
To know more about how BatchMaster ERP can be helpful to your manufacturing organization, please contact [email protected]