In any business, it is vital to keep your top and bottom line healthy.
This is particularly essential if you are a manufacturing company. As a fast paced industry, you need to be efficient in your manufacturing process – KPIs are necessary to ensure your manufacturing metrics are driving the results you want.
Success is dependent on timing and quality, so it is vital to constantly monitor every stage of the production process.
We outline below the most important KPIs you should be measuring in your manufacturing business.
Accurate Inventories
This metric measures the accuracy of your raw goods inventory before you put your order into production. In manufacturing it is crucial that you keep things running as smoothly as possible.
Without adequate levels of accuracy, a company cannot plan or forecast resulting in poor productivity and throughput.
To achieve accuracy, we would recommend that you use inventory software – Unleashed is inventory management software which is a perfect fit for any manufacturing business – read our blog to find out more: How Can Unleashed Inventory Software Automate Your Manufacturing Business.
Quality Rate
This measures the ratio of bad to good product – losses from poor quality products can be very expensive as raw materials and effort are wasted as well as production time.
It is essential to establish clear and consistent quality standards to ensure you are meeting customer requirements, reaching your specified goals and the possibility of expansion in the future.
Your goals should be to streamline processes, reduce errors and waste and increase overall quality so that a higher percentage of your goods get to market.
On Time Delivery (OTD)
A key metric to measure delivery performance and supply chain efficiency.
The on time delivery performance refers to the ratio of customer order lines shipped on or before the required date versus the total number of orders and is usually given as a percentage.
On time delivery is so important as it drives better relationships with customers and builds up customer loyalty – if you can’t meet customer expectations, they will find a supplier who can.
Throughput
This is a KPI that measures the rate at which a product moves through the production process and is shipped to the customer – it is the speed at which something is processed.
Throughput should be measured in real time so that any issues can be rectified quickly, without losing any down time – the goal is to identify and reduce the weakest links in the production process.
Total Cycle Time
This measures the time it takes to transform the raw materials into finished goods from the start of the production line to the end – it is usually calculated using machine cycle time.
It measures how efficient a machine is and allows for real time reporting on the machine’s performance.
Capacity Utilisation Rate
This KPI measures the amount of available capacity that is used to meet customer demand and provides an insight into how a company can increase its output without increasing the costs associated with production.
A reduction in the capacity utilisation rate can indicate an economic downturn, whereas an increase indicates an economic upturn.
Yield
This measures the proportion of correct goods that match specifications you achieve out of a process compared to the number of raw goods you put in – it measures the effectiveness of the overall process.
It is the measurement of quality, performance, production efficiency and profitability.
Overall Equipment Effectiveness (OEE)
In simple terms, this KPI measures the percentage of productive manufacturing time.
An OEE score of 100% means you are manufacturing only good parts, as quickly as possible with no stop time.
It is the best metric to identify any losses and improve productivity of manufacturing equipment.
Scrap Rate
This KPI measures how much waste you are producing from a production line – it can help you lower material costs while you focus on producing more quality products.
During production a certain number of scrap is inevitable, however it should be detected early in the manufacturing process.
Changeover Time
This KPI measures the time it takes to switch a manufacturing line from one product to another – it can identify which job types and parts require reduction in set up time.
It helps manufacturers define total cycle times by part and helps them to improve estimates.
Availability
This is a vital metric which measures a machine’s uptime and downtime.
It analyses the equipment on the factory floor which refers to the amount of time it takes a machine to conduct its run time and dividing this by the maximum time it would be available if there were no downtime for repair or unplanned maintenance.
Takt Time
This measures the maximum amount of time that can be spent manufacturing a product while still satisfying customer demand.
Takt time is a fundamental part of the manufacturing process and is used to regulate the production of goods.
Customer Return Rate
This KPI measures performance – if there has been an increase in customer returns, this could indicate a problem in the production process or quality control.
It is important to analyse the reasons why each product has been returned to establish the root cause of the problem and try to keep the rate of returns as low as possible.
These are just some of the main KPIs that you should be using in your manufacturing business, however, different manufacturing sectors will require specific KPIs relevant to their organisation.
Our Business Advisers can help you identify which KPIs you should be using to ensure you are running your manufacturing business as smoothly and efficiently as possible.
For help or advice, please get in touch with Lee Sugden or Mark Tooby on 0161 761 5231 or email theteam@horsfield-smith.co.uk.
