Manufacturing metrics are used to measure and analyze the performance of production processes. They provide valuable data to manage production activities over time. Use these metrics to support KPIs. They provide a quantitative measure of strengths and weaknesses and offer insight into how production contributes to company goals.
A key enabler of industry 4.0 is manufacturing analytics. ERP platforms with advanced manufacturing capabilities automate and unify disparate data that you can use for real-time analysis. Manufacturers can improve product quality, performance, and efficiency by taking a data-driven approach to their processes through real-time KPIs and dashboards.
Guidelines for Manufacturing KPIs
Using metrics that track, measure, and analyze performance based on business objectives has maximum impact. Focus on KPIs that enhance the speed and quality of your business processes, improve customer experience, and streamline operations. Consider the following factors while defining metrics and KPIs in manufacturing:
What are you trying to accomplish? Do you wish to align manufacturing goals with business objectives, such as improving product quality or increasing output? Define metrics that indicate when you achieve these goals.
Set SMART Goals
Define SMART (specific, measurable, actionable, realistic, and time-based) goals, collect accurate data, and measure your progress toward these goals.
Identify Data Sources
After setting SMART goals, capture real-time information using your ERP system. Having accurate, reliable data gives your management the insights they need to make informed decisions faster.
Consolidated dashboards that can be configured and accessed easily provide the right information to the right people at the right time.
Top Manufacturing Metrics and KPIs
Overall Equipment Effectiveness
One of the most useful KPIs for manufacturers is overall equipment effectiveness (OEE). OEE calculates how effectively manufacturing equipment runs when it’s scheduled to run. OEE helps you understand how your production processes are doing. If OEE is decreasing, it’s a sign that something is wrong with one of the following areas:
- Availability refers to the time your equipment runs versus the time that it’s supposed to run
- Performance refers to the efficiency of each machine while it’s running
- Quality refers to the overall quality of the products produced (accepted vs. rejected products)
Each of these factors impacts OEE, and while the metric itself doesn’t offer insight into the causes of slow production or poor maintenance, these metrics calculate it. Some manufacturers prefer Total Effective Equipment Performance (TEEP), which measures equipment performance 24x7x365. It is ideal for companies that run their equipment continuously rather than during specific times.
Downtime and uptime are critical in manufacturing – when the facility has too much downtime, everything shuts down, impacting the organization’s overall health. Tracking equipment downtime can help you understand a facility’s health and solve your problems.
Understanding how and why downtime occurs can help you fix issues and minimize reactive and emergency maintenance. It also applies to planned downtime – sometimes, the equipment has to be shut down for routine maintenance, which is an important metric to track.
Yield, Cost, and Throughput
Production metrics like product yield and input costs are essential to optimizing your facility’s profits. Throughput measures the products created over a specific period, helping you understand how specific assets perform and identify underperforming assets that need scheduled maintenance.
It’s essential to track how your products perform after the customer receives them. One key metric to measure this is customer rejects, which refers to the number of products that receive poor reviews or are returned by the customer for a refund or replacement. These products typically require significant reworking, time, and resources, leading to wastage. Too many customer rejects indicate problems in your manufacturing or quality control processes.
Lead Time to Customer
How quickly are your products delivered to customers? Are they delivered on time? This metric measures the efficacy of your customer service. Lead time to customer is measured using these metrics:
- Order processing lead time refers to the time taken to process a customer’s order
- Production lead time refers to the time taken to produce the items ordered
- Delivery lead time refers to the time taken for quality control and shipping
Like OEE, lead time to customer provides an idea of the time it takes to fulfill customer orders. If this number is too high, it’s an indicator for management to analyze the underlying factors.
Inventory turnover measures how often inventory turns over, and it’s useful in terms of (maintenance, repair, and operations) MRO and product inventories. If your inventory turns over more quickly than you can produce an item, it’s a sign that you need to ramp up productivity. On the other hand, if it’s too slow, you might be holding on to the product for too long and spending more on storage. For most manufacturers, MRO inventory only turns over once a year, often driving up inventory storage costs.
Maintenance metrics can explain why other KPIs are lagging. They may not directly be of interest to the executive team, but they provide valuable insights to improve maintenance practices. Some of the most critical maintenance metrics to track include:
- Percentage of reactive maintenance versus preventive maintenance
- Maintenance costs as a percentage of replacement asset value (RAV)
- Mean time between failures (MTBF)
Each of these metrics gives manufacturers insight into their maintenance practices. If these metrics are poor, they must evaluate their equipment maintenance processes.