How to Choose the Right Manufactaring KPIs?
KPIs are called “Key” Performance Indicators for a reason. You can measure performance with any kind of metric, but KPIs are the ones that matter the most. And the things that are important to companies can vary a lot depending on the industry they work in.
Most of the time, a company shouldn’t track more than ten manufacturing KPIs so that things don’t get too complicated. Then, these ten metrics should show how well the business is doing in different areas, such as production efficiency, customer satisfaction, lead times, etc.
Depending on the type of business a company is in, it has to come up with its own KPIs. However, for each of these metrics to be useful, it has to meet a set of rules.
A good KPI for the manufacturing industry:
- Strategic goals are reflected. Before choosing a KPI to track, you should know what you want to accomplish. After you’ve set a goal, the KPI should help you measure how far you’ve come toward it.
- Is quantifiable and measurable. As has already been said, you can’t measure your progress if there isn’t a concrete way to do so. For KPIs to be useful to a business, goals should be as transparent as possible.
- It is doable and can be done. It doesn’t make sense to set goals that you can’t reach, just like it doesn’t make sense to track vanity metrics that don’t really show what’s going on in your business.
How to Make Better Use of Manufacturing KPIs?
With good manufacturing KPIs in place, you can make better use of your production capacity, increase productivity, improve product quality, shorten delivery times, reduce waste, and keep costs in check.
But it is also important to know that the KPIs for manufacturing may change all the time. When a company is in a certain stage of growth, some measures are more important than others. When this stage is over, other measures become more important.
For example, it’s important for a new factory to be able to ramp up production quickly and keep this momentum going. Then, if there are more complaints from customers, the manufacturer needs to pay more attention to the quality of the products and the yield.
So, the manufacturing KPIs that your business keeps track of the need to be looked at every so often to make sure that improvements are made where they are most needed.
Consequently, it is important to regularly assess the manufacturing KPIs your company monitors so that you may focus your efforts on where they will have the most impact.
In any event, the following iterative approach is used to enhance and achieve business objectives across all KPIs:
Analyze the Key Performance Indicator
Classify the key performance indicators
Use tools like DoerHRM to prioritise fixing the areas where losses are concentrated.
Get to the bottom of what’s causing the issue.
Take corrective action in order to fix the issue.
Measure the KPI again as part of an ongoing process.
Top 10 Best Manufactaring KPIs
Despite the fact that manufacturers should also monitor general KPIs such as sales revenue, net profit margin, etc., being in the production industry also involves monitoring manufacturing-specific KPIs. Here are some of the most crucial KPIs in manufacturing.
Assets Turnover
The asset turnover is more of a financial KPI than one related to manufacturing. But because it gives such important information, it is used a lot in many different fields. It shows how much your sales are worth compared to the value of your assets. It is a good efficiency indicator for figuring out if your assets are making money or not, and it is even more important if you work in an industry with a lot of assets, like manufacturing.
Capacity Utilization
Equipment is expensive, as is the building where you make your goods. The machines that make your goods are also expensive. The goal is to get the most out of your capacity so that your machines work at the right speed and you can figure out if you need to make more or if there are problems somewhere in the process.
Defect Density
In the manufacturing environment, it is important to evaluate the number of defects. This is a very important and easy-to-measure sign. The defect density shows how many bad products there are compared to the total number of products made. With this kind of manufacturing metric, you can compare the quality of your different products.
First Pass Yield (FPY)
The first pass yield (FPY) is a key performance indicator (KPI) for a product. This metric keeps track of the quality and growth of your production processes. It is also known as the throughput yield. The FPY is found by dividing the number of perfect units (those that didn’t need to be fixed or had no problems) by the total number of units that went through the same process in a certain amount of time.
Maintenance Costs
After figuring out how much your assets produce and how much money they bring in, you can’t let them go to waste. They need to be taken care of. That’s why it’s important to measure this manufacturing KPI to find out which machines need more work than others, where the resources should be put, and what kinds of preventive measures can be taken to make maintenance better in the future.
On-time Delivery
On-time delivery is the next example on our list of the most important manufacturing KPIs. This simple metric shows how many products were delivered on time, and the goal should be 100%. Customers are important, and if they get their orders on time, they will be happier and the business relationship will grow.
Overall Equipment Effectiveness (OEE)
If you want a full picture of quality KPIs in manufacturing, you need to include overall equipment effectiveness (OEE). This metric only counts scheduled time. If a machine is not scheduled or maintenance is done during this time, it is not counted in the OEE. In essence, the metric combines performance, quality, and availability, which are the three main parts of calculating OEE and making sure that your manufacturing facility is running well.
Overall Operations Effectiveness (OOE)
Overall operations effectiveness (OOE) is a measure of production that takes into account availability, standard time, and off-standard time. It uses total operations time as its maximum value. That means you need to multiply the performance by the quality and the availability, where the availability is the actual production time divided by the operating time.
Production Costs
The production cost by product tells you how much each part of your product costs and how much it adds up to the whole thing. If you break this manufacturing metric down into the different types of costs, you can find out which ones make up the most of your unit. This can help you keep track of different costs that can be optimised.
Production Downtime
Production downtime is one of the most important metrics to keep track of when making things. If your machines aren’t working, you can’t make money. To avoid losing more money, your number one goal should be to cut down on machine downtime as much as possible. When there is downtime, it is important to report why it happened.
