Top 10 manufacturing KPIs to measure Operational Excellence

Why Should Manufacturers Use KPIs?

KPIs are essential tools in the manufacturing sector, furnishing excellent manufacturing process monitoring.

Let’ explore its key advantages

• Provide the required data and insights to navigate operational excellence
• Boost efficiency
• Reduce costs
• Ensure quality
• Identify bottlenecks
• Cultivates a culture of continuous improvement and accountability

What is a Manufacturing KPI?

Manufacturing KPIs are the specific metrics that are tailored to track and enhance manufacturing processes. It measures the production performance and assists producers in realising where they need to make improvements. A good manufacturing KPI is defined based on certain factors, which are given below.

• Relevance : Relates to manufacturing objectives and business goals
• Measurability : Based on its quantifiable nature that enables easy monitoring and comparison
• Actionability : Offers perceptions that can influence decisions and advancements
• Timely : Allows for responsive actions by reflecting up-to-date facts

Now, it is clear that the Key Performance Indicators matter. Non-identification of the right KPIs creates a situation like navigating a ship in the dark. However, things start to fall into place when you choose and monitor the appropriate KPIs.

So, what should be your main priority? Let's dive into another section that takes the uncertainty out of your daily grind.

Top 10 KPIs Every Manufacturer Should Track for Optimal Performance

1. Overall Equipment Effectiveness (OEE)

Overall equipment effectiveness (OEE) is one of the crucial KPIs used to measure the Performance and effectiveness of the manufacturing process.

OEE is calculated by multiplying the Availability, Performance and Quality factors together:

→ OEE = Availability x Performance x Quality

Let's understand these key factors:

• Availability : The difference between the actual and anticipated production times is measured by the availability score. It takes into account things like planned maintenance, equipment malfunctions, and changeovers.
• Performance : The equipment's performance score evaluates how well it is operating in relation to its maximum capability. It takes into account things like idle time, smaller pauses, and equipment speed.
• Quality : This assesses the production rate of "good count" products—i.e., items that don't require rework or faults. It considers elements like reject, rework, and scrap.

The OEE result gained by the multiplication will be a percentage value, which indicates the overall effectiveness of the process. The higher the OEE, the higher the Performance of the equipment. If it is lower, improvisation is needed.

2. Total Cycle time

As an important manufacturing KPI, the Total Cycle Time acts as a metric that defines the average time it takes to process raw materials into a finished end product. Cycle time may also be used to quantify certain activities that are part of the overall manufacturing process of a product. In detail, This KPI calculates the time it takes to finish an order for a client, from the point of manufacturing to the point of dispatch.

→ Total Cycle Time= Production Time + Inspection Time + Transportation Time+ Wait Time + Any Other Relevant Time

3. Throughput

The Throughput KPI calculates how much a machine or line can produce in a given amount of time or its production capacity. That means it solely focuses on the production volume. This KPI is examined in real time to address problems before they get out of hand.

→ Throughput = Number of Units Produced ÷ Total Time of Production

4. Return on Investment (ROI)

ROI is a pivotal key indicator of the financial effects of continuous improvement initiatives. ROI KPI measures the amount of revenue a campaign is producing and compares it with the cost of running that campaign. Hence, the KPI answers the important question, "What percentage of our expenditure are we earning back?"

Through this, manufacturing companies can measure the effect of cost-cutting efforts by calculating the ROI from labour, production, and overhead expenses.

→ ROI = (Net Profit / Total Investment) × 100

5. On-Time Delivery

Ideally, you need a 100% success rate, which enables smooth, on-time delivery and higher customer satisfaction. However, several reasons, such as unrealistic production schedules, delayed supplies, or frequent machine malfunctions, may create delayed deliveries. Maintaining a high delivery success rate is essential to drawing in new business and retaining existing ones.

→ On-time delivery = On Time Units Delivered ÷ Total Units Delivered

6. Changeover Time

This measures the time needed to complete a manufacturing run from start to finish. It focuses on the tasks including loading and unloading, calibrating, retooling, and programming in preparation for the following task. Having access to this data enables firms to identify areas for development. Through this, the firm can decide if there is any need for additional staff training on the equipment or if there is any requirement for better organisation of the setup process. The cost of production decreases with a faster changeover time.

→Changeover Time = Time to Produce First Quality Item in a Product Set – Time to Produce Last Quality Item in a Product Set

7. Yield

The yield KPI is also called First Time Through (FTT). Based on the overall quantity produced, it calculates the number of goods that were made error-free. Therefore, in the event that ten items were available and one was flawed, your product yield would be 90% without defects (10 – 1) = 9 ÷ 10 =.90).

→ Yield = (Total Items Produced – Defective Items) ÷ Items Produced

8. Scrap

Material that fails to perform up to expectations is usually regarded as junk. Some businesses, however, classify any raw material that isn't utilised in the manufacturing process as scrap. Monitoring scrap will assist in controlling expenses and yield higher-quality output.

→ Scrap = Total Scrap ÷ Total Product Run

9. Customer Return Rate

Understanding your customers is one of the fundamental KPIs related to product manufacturing. It's essential to maintain a close eye on this KPI because returns not only cause a business to lose money by having to rework goods. In addition, it also hurts your prominence and client retention rate. When goods are returned, it is vital to find out why and make modifications instantly.

→ Customer Return Rate = Rejected Goods ÷ Total Number of Goods Delivered

10. Maintenance Cost

The KPI that is essential for tracking machinery or process maintenance costs is maintenance cost. This includes parts, labour, and other associated costs. Because it directly affects the company's profitability. Lower maintenance costs equal more revenue. Manufacturers are able to ascertain whether operating a machine is cost-effective by analysing its maintenance expenses. This KPI sheds light on whether a machine's output justifies the operation cost.

→ Maintenance Cost = (Maintenance labour + Parts) / (Hours running)

Introducing Balanced Scorecard as a KPI tracker

Well, the problem remains: what? It's a daunting task to calculate every KPIs manually for every production line. When you're juggling various KPIs across different units, it will indeed become overwhelming. The degree of complexity and duration involved in collecting, evaluating, and using this data may result in mistakes, setbacks, and overlooked chances for enhancement.

Then what is the solution?

You need KPI measurement software. Using a Balanced Scorecard (BSC) as your primary tool for managing key performance indicators is the solution. The Balanced Scorecard monitors and tracks your key metrics in an effective way with its capacity to automate data collection, real-time insights, and streamline analysis.

BSC keep track of your KPIs through its

• Advanced technological interventions : Real-time data tracking and automated systems
• Dashboards : Visualisation using the dashboards for a comprehensive overview of Performance
• Regular Reviews : Schedule continuous check-ins to examine and analyse KPI data

You're not alone—tracking KPIs can feel like a full-time job. But there is a wiser, more effortless way to stay on the lid of your game. Say hello to the best Balanced Scorecard Software for your Manufacturing KPIs and Metrics. Let's dive in and see how you can monitor your KPIs effortlessly and become the smart, efficient manufacturing firm you've always aspired to be.

Summary

Measuring KPIs is essential for manufacturing conquest, as it helps monitor and measure performance, optimise processes, and guide continuous improvement. The top ten manufacturing key performance indicators include Overall Equipment Effectiveness (OEE), Total Cycle Time, Throughput, Return on Investment, On-time delivery, Changeover Time, Yield, Scrap, Customer return rate and Maintenance Cost. Out of the large number of KPIs, these KPIs provide deep insights into quality and production efficiency. However, manually measuring these important KPIs is a difficult task as it is time-consuming and error-prone. As a solution, utilising the best KPI software with advanced-level reporting tools and KPI dashboards can streamline every business’s KPI metrics management. It provides an easier monitoring and analysis of production, employee performance and operational processes. With the use of effective Balanced Scorecard Software, manufacturers can focus on their KPI measurements, which enables them to enhance operations and attain better results.

FAQs

1. What are the KPI examples for manufacturing performance?

• Overall Equipment Effectiveness (OEE)
• Throughput
• Cycle Time
• First-Pass Yield (FPY)
• Defect Rate
• Production Schedule Attainment
• Cost Per Unit
• Inventory Turnover
• Downtime
• Employee Productivity

2. How to measure manufacturability?

Manufacturing KPIs are the specific metrics that are used to measure manufacturability.

3. What is KPI scoring?

Key performance indicators (KPIs) are measurable metrics that are used to assess the overall long-term Performance of an organisation. KPIs, in particular, assist in identifying the strategic, financial, and operational accomplishments of a firm, particularly in relation to other companies operating in the same industry.

4. What is the KPI balanced scorecard?

The KPI Balanced Scorecard is a strategic management tool that aligns organisational Performance by measuring the Key Performance Indicators (KPIs). It provides a more complete picture of how effectively a company is accomplishing its strategic goals by going beyond conventional financial measures and taking into account additional significant viewpoints.