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As a business owner, it's important to know the key performance indicators (KPIs) and metrics that are used in your industry. This knowledge will help you understand how your business is performing and what you can do to optimize production.
In this post, we'll take a look at the most commonly used KPIs and metrics in modern manufacturing companies. We'll discuss what each one means and how you can use them to improve your business.
If you're not familiar with KPIs and metrics, don't worry—you're not alone. A lot of people aren't sure what they are or why they're important. But KPIs (key performance indicators) and metrics are actually a really important part of any business, especially manufacturing businesses. You might be wondering, what's the difference between a KPI and a metric? Well, KPIs are specific goals that a company sets that they want to achieve, while metrics are the data points that help track whether or not those goals are being met.
For example, a company might want to increase their production by 10% this quarter. To track whether or not they're meeting this goal, they would look at metrics such as output per hour, number of defective products, and customer satisfaction.
These KPIs and metrics are important because they help companies optimize their production and control their costs. By knowing which areas need improvement, companies can make changes to their process in order to increase efficiency and decrease waste.
KPIs and metrics are basically just a way of measuring how well a company is doing in terms of production. They help businesses to see where they need to improve and make changes accordingly.
There are a lot of different KPIs and metrics that businesses can use, but some of the most common ones are discussed below
Now that we've gone over what a KPI is, let's look at some of the most commonly used KPIs in manufacturing. Remember, these are just a starting point—you'll want to tailor your KPIs to your own company's specific goals and needs
Production Downtime:
Production downtime is the time, when a machine or a process is not running. Downtime can ben due to planned maintenance or unexpected problems. Unrelated to the cause, the downtime is costly to manufacturer because it reduces the overall production capacity.
Resource downtime / Planned operating time x 100 = Downtime %.
Overall Equipment Effectiveness (OEE)
OEE is the analysis of efficiency and productivity and its recognized globally as a best practice measure and key performance indicator in a number of industries. OEE evaluates quality, speed and downtime, to give you a comprehensive picture of your machines or process’s effectiveness.
Here is the formula to calculating your production downtime:
Availability x Performance x Quality
Order Lead Time:
Lead Time is the time that goes from the time the order is placed to the time its delivered to the customer. A shorter lead time implies that customers get their orders faster, which increases customer experience.
Here is the formula to calculating your order lead time:
Supply delay + reorder delay
Cycle Time:
Cycle Time is the time required to complete a manufacturing cycle. A shorter cycle time means that a product is produced faster, leading to higher efficiency and lower production costs.
Here is the formula to calculating your order lead time:
Net production time / number of units produced
Changeovers time:
Changeover is the process of changing over a line or a machine from one product to another. This metric measure the speed or time it takes to make the changeover. Depending on the production, a changeover can take minutes, hour or days. By tracking this metric, it can help you to determine how and where you can improve your changeover times.
Takt Time:
The takt time is the pulse of a production process. It is time passes between consecutive production units.Takt time is measured by dividing the available production time by the number of product units demanded by customers. Takt time is an important metric as it determines the production speed and helps to ensure that customer demand is satisfied.
Here is the formula to calculating your order lead time:
Available working time per shift / tariff of the customer
Revenue per employee:
Revenue per employee is the calculation used to determine how productive a company's employees are. Companies use the formula total revenue/total number of employees to determine revenue per employee. This formula indicates how productive each employee is in generating revenue for the company. Using this formula to benchmark against industry standards or key competitors can also help determine the productivity of employees in the company.
Here is the formula to calculating your order lead time:
Divide the company's total revenues by the current number of employees.
Now that you know what some of the most commonly used KPIs and metrics in the manufacturing industry are, it's time to learn how to use them to optimize your production.
First and foremost, you need to track these KPIs and metrics regularly. This way, you can spot trends and patterns that can help you make adjustments to your production process.
You should also compare your KPIs and metrics to industry benchmarks. This will give you a good idea of how your company is performing in comparison to others.
Finally, make sure to keep your KPIs and metrics up-to-date. As your company grows and changes, so too will your KPIs and metrics. By regularly updating them, you can ensure that they accurately reflect your current production process.
There are a few benefits to using KPIs and metrics in manufacturing. For one, it can help you optimize your production process and make sure you're making the most efficient use of your resources.
It can also help you identify areas where you can improve your production process, whether that's by streamlining your assembly line or by finding ways to reduce waste.
Using KPIs and metrics can also help you track your progress over time and see how your manufacturing company is doing compared to others in the industry. This information can be invaluable when it comes to making strategic decisions about where to focus your efforts.
There are challenges that you might face when using KPIs and metrics in manufacturing. For one, it can be difficult to collect accurate data. This is because manufacturing is a complex process with many moving parts. It can be hard to track every aspect of the production process and get accurate data points.
Another challenge is that KPIs and metrics can be interpreted differently. For example, one company might see a 10% improvement in their cycle times as sufficient improvement, while another might see it as a sign that they need to make even more changes to their production process. It's important to know how to interpret the data you collect and put it in perspective with the Industry standards so you can make the best decisions for your business.
Finally, it's important to use KPIs and metrics wisely. Too much data can be overwhelming and make it difficult to identify opportunities for improvement. Simply measuring individual KPIs will not lead to positive change, but only if you actively draw conclusions and derive improvements. That's why it's also important to focus on a few key KPIs and metrics that will give you the best insight into your manufacturing process.
You might be wondering, what's the difference between a KPI and a metric? Well, KPIs are specific goals that a company sets that they want to achieve, while metrics are the data points that help track whether or not those goals are being met.
For example, a company might want to increase their production by 10% this quarter. To track whether or not they're meeting this goal, they would look at metrics such as output per hour, number of defective products, and customer satisfaction.
These KPIs and metrics are important because they help companies optimize their production and control their costs. By knowing which areas need improvement, companies can make changes to their process in order to increase efficiency and decrease waste.
With Stryza's knowledge platform, identification and interpretation is greatly simplified. With the help of our software, you not only have access to real-time data with clear activities about your production lines and machines and their utilization, we also connect this data with your employees and give suggestions for further improvements. They can also simulate how the utilization of your machines would affect the future and can compare your real-time data with historical data at any time. This leads to a faster increase in productivity and employee satisfaction.
Book a free demo of our application and see how it can take your manufacturing operations to the next level.
