In the competitive world of manufacturing, success hinges on the ability to measure and improve crucial metrics that drive operational efficiency, quality, and profitability. Key performance indicators (KPIs) provide valuable insights into the performance of various aspects within a manufacturing company, enabling data-driven decision-making and fostering continuous improvement.
In this article, we will explore the essential KPIs that every manufacturing business should track, highlighting their significance and how they contribute to overall success. Whether you're a seasoned industry professional or new to the manufacturing landscape, this comprehensive guide will equip you with the knowledge to optimize your operations and achieve remarkable results.
Inventory turn is exactly as it sounds in that it measures the frequency at which inventory turns over. Take a close look at your inventory turn. If you find it turns over at a high frequency or faster than the rate at which you can replenish stock, it is an indication that you are committing the cardinal sin of business: leaving money on the table. However, if your inventory turn is low, it is an indication that your business is retaining inventory for an excessive period of time.
OEE, short for overall equipment effectiveness, determines the efficacy of equipment when scheduled for operation. Monitor your OEE and you’ll have invaluable insight into how production processes are faring. If your OEE is declining, it is an indication that your performance is declining. Performance is an indication of machine functionality when operating.
Declining OEE is also a sign that product quality is declining. A decline in OEE can also signify that there is an availability problem in that equipment is not running at the optimal frequency. However, additional investigatory work will be necessary to understand the root cause of a reduced rate of production.
Lead Time for Customer Delivery
Every manufacturing business should be laser-focused on the amount of time it takes to deliver products to customers. Analyze the product fill rate with customers. Get a sense of whether products are being delivered on time and in accordance with your schedule. If necessary, alter production processes to shrink production lead time or the lead time for order processing to expedite the delivery of orders.
A manufacturing business with excessive downtime has significant problems. In particular, equipment downtime is especially problematic. Equipment downtime is the length of time equipment is not functional. Get a sense of your downtime along with the cause of that downtime, address the issues causing the downtime and your business will operate that much more smoothly.
Rejections by Customers
A high frequency of customer rejections indicates the quality of your manufacturing business’ output is poor. If you notice customers are requesting refunds or replacement at a high rate, the products are nonfunctional, malfunctioning, or require more quality control throughout the manufacturing process.
Yield and Input Costs
Proactively measure the production yield and input expense and you’ll pave a path toward optimizing your manufacturing facility’s profitability. Pay particularly close attention to throughput which gauges the quantity of product generated in a certain period of time. The ongoing analysis of throughput provides an understanding of how certain assets perform, creating an opportunity to conduct additional analysis for maintenance.
MTBF, Maintenance Cost, and More
Zero in on the subtleties of your manufacturing business’s maintenance and you’ll have helpful data for tracking. An ongoing analysis of metrics and KPIs provides invaluable insight into how your company’s maintenance efforts are faring. If you notice a downtick in maintenance cost, the mean time in between equipment failures (MTBF), or the maintenance cost in relation to the replacement value of an asset, changes will be necessary.
Review all maintenance processes for equipment to identify inefficiencies. Take a close look at the nuances of these processes and you’ll likely find there are fallibilities that compromise equipment functionality.