If you’re a manufacturing business, how do you measure your results? It’s not enough to put manufacturing processes and procedures in place and just hope for the best. Most industries are competitive, and efficiency is vital. Here is what you need to know about manufacturing KPIs to measure your results and a list of the top manufacturing KPIs you should be using in 2022.
What Is a Manufacturing KPI?
A KPI is short for a Key Performance Indicator. These are metrics used to gauge the performance of an operation over time. Manufacturing companies use KPIs to monitor, optimize, and analyze operations. They can also be compared with competitors in the same industry.
Why Your Company Should Be Using Manufacturing KPIs
The manufacturing industry accounts for over 15 percent of the global GDP and more than 10 percent of the U.S. economy. This means it is incredibly competitive. So the only way to gain an edge in this sector is to optimize your operations using KPIs. Every company wants to be number one at what it does. Many also want to be the employer of choice in their industry. Using KPIs helps your business work smarter, not harder, to reach the highest efficiency level.
Top Manufacturing KPIs You Should Be Measuring in 2022
KPIs might seem intimidating at first, but you will quickly become accustomed to measuring various aspects of your manufacturing business. As with anything else, you’ll have the best chance of success with a deliberate plan in place. Here are 14 manufacturing KPIs your business should be measuring in 2022 and beyond.
Units Produced / Time
This KPI measures how many units on average a line or machine produces or time, i.e., 15 units per hour. This is usually a real-time measurement, meaning it can tell your business if there is an immediate issue in the factory you need to address. You can generally increase throughput by optimizing machinery and reducing machine downtime.
Overall Equipment Effectiveness (OEE)
Availability x Performance x Quality
This is a complex KPI that measures the overall effectiveness of your equipment. OEE can highlight any issues related to setup time, breakdowns, and other contingencies that your business will want to address.
Total Cycle Time
Also known as lead time, this is the total time it takes to complete a customer order from start to finish. It includes order processing, materials sourcing, manufacturing, packaging, shipping, and delivery. You may wish to measure total cycle time per product, product line, and overall for business to see what items have the longest production time.
Manufacturing Cost Per Unit
Total Manufacturing Cost / # Units Produced
It’s vital that you know the total cost of producing your products on a per-unit basis. This is a figure used to help price your products properly. It takes into account all costs associated with production, such as labor, materials, and overhead. You can calculate this metric by bringing together data derived from Hertzler’s GainSeeker Platform and production data from an ERP or MES.
Good Items Produced / Total Units Produced
This KPI measures quality as a percentage of your total production. It’s an important metric if your business is concerned about quality and wants to reduce waste. When you have no defects in your manufacturing process, your yield will be 100%.
Actual Output / Potential Output x 100
This KPI can tell you whether your manufacturing equipment is living up to its potential. When a machine is idle or running slower than it should, this percentage will drop, indicating untapped potential in the system. If you make better use of it, you can scale your operations when the need arises.
This is the time your business takes to calibrate, retool, load/unload, or program a new job. It’s a relevant metric if you do a lot of switchovers before the different product runs. Being inefficient with the process can cost your operation time and money.
Overall Operations Effectiveness (OOE)
Performance x Quality x Availability
This is a KPI that is a must-have for manufacturers as it is a measure of your operation’s overall effectiveness. 100% is a perfect score, but seeing improvement in the KPI over time should be the goal. It’s not a simple calculation but rather something that you generally get from a more robust manufacturing KPI dashboard providing detailed insights into your operations.
Customer Return Rate
Returned Goods / Total Number of Goods Delivered
As a performance measure, an increase in customer returns might be a sign of a weakness in the production process. There may also be problems with quality control. When customer returns get out of control, this can eat into your profits and erode your business’s reputation. By using Hertzler’s GainSeeker Platform, you can determine the problem areas you need to target.
Total Amount of Products Produced
This is a simple manufacturing metric and one that many manufacturers measure. Having a big picture of what your organization is producing can be important, but don’t forget to drill down into the other KPIs to help analyze your business and improve it.
Maintenance Cost Per Unit
Total Maintenance Costs / Number of Units Produced
Many companies consider maintenance to be an overhead expense, but it is still a cost that factors into the efficiency of your operations and your margins. This metric considers the total cost of maintenance relative to the number of units produced in a given period.
Revenue Per Employee
Company revenue / Total Number of Employees
How you utilize your workforce is vital to the success of your manufacturing business. This KPI will give you a strong signal about your labor productivity levels. Don’t forget that the revenue per location will shift according to the location of the plant and any automation solutions being used.
First Pass Yield
Quality Units / Total Units Produced
This is an essential production KPI. It will tell you the portion of the manufactured products that were done right the first time. This means that they don’t become scrap or require reworking. The higher the rate, the better.
Orders delivered by the due date / Original scheduled work orders due
This KPI measures the percentage of orders delivered on time to the customer. Obviously, the goal is to have 100% since customers expect orders to be delivered when promised. This metric should be one of the primary goals of manufacturers.
Make the Most Out of Your Manufacturing Business
Tracking the production and efficiency of your manufacturing operation is no simple task, but your business doesn’t need to struggle any longer because there are plenty of metrics it can use. Now that you have a list of manufacturing KPIs, you can choose the most meaningful ones for your business and its overall results.
Keeping track of KPIs is essential to understanding how your manufacturing business is performing, but what happens when these metrics come up subpar?
Hertzler’s GainSeeker Platform provides data and analytic solutions to bring value out of these numbers and to help you understand what they mean. KPI measurements are a valuable resource and crucial to help move your business forward. If you want to better understand your company’s KPI data, schedule a demo today to experience these solutions firsthand.