What are the best metrics and KPIs for manufacturing companies?
Choosing the right KPIs for your company
The metrics listed above can form a solid backbone for reaching your company’s business objectives. However, no two businesses are the same, and it’s important to make sure the metrics you track work for you.
Here are some tips for choosing manufacturing KPIs and metrics for your organization.
Start with business goals
The best key indicators begin with your business’s objectives. If they don’t support your objectives, then they’re probably not worth tracking, at least at the organizational level.
Take some time to put together a list of your business objectives. Those goals can range from providing the best quality products in your industry to minimizing delivery lead times.
Ultimately, however, they should make sense from a top-down perspective. A given metric may make sense on a facility level, but if shareholders are unlikely to find value in it, it probably won’t catch on.
Determine how maintenance can help you
A significant part of improving manufacturing processes is maintenance. When outlining what you hope to achieve as a business, take the time needed to figure out how your maintenance department can help you achieve those objectives.
Taking the example of improving product quality, part of accomplishing that would be to eliminate product defects. That, in turn, means making sure equipment runs properly with few, if any, errors. The metrics you choose in that case will likely reflect efforts to improve your equipment’s reliability.
Find which metrics best reflect progress
Once you’ve hashed out how your maintenance department can help, it’s time to outline the metrics you’ll need to guide them toward achieving your goals. The best metrics give you a way of monitoring progress while also inspiring maintenance personnel to improve their practices.
For example, if your goal is to deliver your products more quickly, you might track lead time to customer, as well as any of the metrics that factor into it (order processing, production lead time, etc.). Maintenance metrics may also help support your efforts by allowing you to investigate into root causes when one of those numbers moves outside of acceptable parameters.
Monitor and adjust
As you implement new KPIs in your organization, you’ll want to keep a close eye on them. A CMMS or other system that logs maintenance and operations data will help you see whether the metrics you’ve chosen are making a positive impact.
For instance, if you’re trying to minimize costs and decide to track maintenance overtime hours, an unintended result might be the outright dismissal of a needed overtime shift. Instead of working on the causes of the problem—such as poor preventive maintenance practices—the team has cut short-term costs while likely increasing the odds of future equipment failures.
In that case, you’d want to adjust the metrics you focus on. Instead of overtime, try focusing on a metric that will inspire positive change.
How to track and use manufacturing KPIs
Once you’ve nailed down the KPIs and metrics you’ll track, it will come time to actually track them. There are a few strategies you can use to make sure you’re on top of recording what goes on in your facilities and getting the most out of that data.
Use a CMMS
One of the most common ways to track manufacturing KPIs is to implement a computerized maintenance management system, or CMMS. A CMMS automatically logs data from work orders, meter readings, and so forth, which gives a great deal of insight into your processes, particularly where maintenance is involved.
The power of a CMMS only expands when coupled with enterprise software, which can provide valuable data from other departments in your organization.
Implement predictive analytics
Predictive analytics software takes data from your CMMS and other sources and analyzes trends that occur over time. That analysis allows the system to anticipate problems before they occur, and it’s invaluable when it comes to troubleshooting.
Whether implemented on a facility level with predictive maintenance sensors or as part of business intelligence software, predictive analytics are a powerful way to keep ahead of issues in your company and stay competitive in fast-paced markets.
Post them where they can be seen
When you’ve determined your KPIs, it’s helpful to post them where they can be seen. Some organizations do this by putting up boards in common places such as breakrooms, while others prefer to include important metrics on their software’s dashboard.
With the latter option, any time someone logs into the system, they’ll see how they’re currently comparing to company goals, which can be a powerful way to get everyone on board with improving performance.
Industry-specific benchmarking
The targets you strive for with your KPIs should be based on your industry. The ideal situation varies by industry, with world-class targets changing from one industry to the next. As such, when benchmarking, look at what’s common in your sector rather than in general.
Use KPIs to fuel improvement
When you’re striving to meet business goals and achieve world-class standards, it’s important to focus on improvement, rather than just reaching a target number. This is part of the reason why you should be careful when choosing KPIs in the first place. In some cases, your crews may take shortcuts to avoid unhealthy shifts in data at the expense of causing other problems later on.
Put simply, don’t strive for numbers alone, but think of KPIs as a natural result of your team’s actions.
Conclusion
There are a number of metrics and key performance indicators that manufacturers should track, but the exact metrics you target should be based on your industry and business objectives. By carefully selecting the right metrics, you’ll be able to help processes in your organization improve by giving maintenance, operations, and other teams clear targets to shoot for.
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Among the most important metrics and key performance indicators (KPIs) for manufacturing companies to track are:
In this article, we’ll go into more depth on each of these metrics, why they’re important to track, and how manufacturers can best handle KPIs and metrics in their facilities.
What are manufacturing metrics and KPIs?
First, let’s define metrics and KPIs.
Manufacturing metrics
A metric is any number your organization might track. Each metric has its uses, and some may be more useful for marking progress than others, but all of them should give you some insight into what goes on in your processes.
For example, PM schedule compliance may not tell you much about the company’s profitability as a whole, but it does provide insight into how your maintenance processes are going.
Manufacturing KPIs
A key performance indicator (KPI), on the other hand, is a metric that provides insight into your organization’s performance as a whole. Ideally, they’re linked with business goals.
For instance, a manufacturer striving for top customer satisfaction will likely use customer rejects and satisfaction as key indicators. However, PMP and other maintenance metrics will likely be less useful here.
Why manufacturers should track important metrics and KPIs
Manufacturers that monitor their companies with key performance indicators and other metrics tend to be better off than those who do not. Numerous manufacturers have found this to be true as they’ve gained the following advantages.
More consistent product quality
A manufacturer that tracks the right metrics will be better at finding and eliminating problems that impact their product quality. That means higher production rates with fewer rejects.
Improved maintenance practices
Maintenance practices also improve when the right KPIs are tracked. Enterprises that track metrics such as mean time between failure (MTBF) and planned maintenance percentage (PMP) tend to focus more on preventive tasks than reactive ones. Instead of rushing to fix a problem once the system goes down, they’ll work more on keeping that breakdown from occurring in the first place.
Ultimately, that streamlines maintenance costs and helps make facilities more reliable.
Meet business objectives
Finally, KPI tracking helps manufacturers meet their business goals, especially when the indicators chosen align with those goals. For instance, a business that tracks product throughput will likely improve productivity by making sure their machines are able to operate continuously, without breaking down.
7 important manufacturing metrics and KPIs
Manufacturing is a bit of a different beast to facilities management, which means that the most useful metrics and KPIs to track are also somewhat different. While FM tends to be specific to a given facility or site, manufacturing KPIs, in general, should be connected with the business’s overall objectives.
Some of the most important KPIs and metrics that manufacturers should track include those detailed below.
1. Overall Equipment Effectiveness
One of the most commonly tracked—and most useful—KPIs for manufacturers to track is overall equipment effectiveness (OEE). OEE is a calculation of how effective a manufacturer’s equipment runs when it’s scheduled to run.
On its own, OEE can give companies a general look at how their production processes are doing. If OEE is starting to tank a little, it’s a sign that something is going wrong in one of the following areas:
Each of these areas factor into OEE, and while the metric itself doesn’t give insight into the causes of slowed production or poor maintenance, these metrics that are used to calculate it do. As such, OEE helps manufacturers track the overall pulse of their company.
2. Downtime
Downtime and uptime are the heartbeats of a manufacturer – when the facility has too much downtime, everything trends downwards and the health of the organization suffers.
With that being said, tracking equipment downtime (amount of downtime, downtime per asset/area, why downtime occurs) is vital for both understanding a facility’s health and administering solutions to those problems.
When we understand where downtime occurs and why it happens, we can fix issues and shift a facility’s maintenance percentage away from reactive and emergency maintenance.
This all applies to planned downtime as well – sometimes equipment needs to be put down for routine maintenance, which is an important thing to track.
3. Yield, Cost, and Throughput
In tandem with downtime, tracking production metrics like product yield and input costs is also important for optimizing a facility’s profit.
One particular important facet of this is throughput, which measures the amount of product created over a specific period of time. When we measure throughput, we can understand how specific assets perform, as well as which assets underperform (diagnosing areas for maintenance).
4. Customer Rejects
Just as it’s important to track products before and during their creation, it’s equally critical to understand how your products fare after the customer has them in their hands (or when they send it back to you).
One key customer metric is customer rejects, which involves the number of products that are poorly reviewed or returned by the customer for a refund/replacement. Ultimately, these products are either dead in the water - or, they require significant financial and time commitment to rework, quantifying them as a form of waste. Too many rejects indicates problems somewhere in the manufacturing process.
5. Lead Time to Customer
It’s also important to track the efficiency with which products get to your customers. What’s the fill rate of your product with customers? Are we delivering products on schedule? This metric tells us the efficacy of a facility’s customer service efforts.
Lead time to customer is calculated from these metrics:
Like OEE, lead time to customer gives you a general view on how long it takes you to fulfill a customer’s orders. If this number gets too large, it’s a hint for management to look at the underlying factors.
6. Inventory turns
Inventory turns is a measure of how often inventory turns over, and it’s useful both in terms of MRO and product inventories. It was actually one of the six metrics used in the University of Tennessee’s “Six Metric Areas to Best Practices” initiative in 2015.
If your inventory turns over more quickly than you can produce an item, that may be a sign that you’ll need to improve productivity in some way. On the other hand, if it’s too low, then you might be holding on to product too long and spending more on housing it than you need to.
7. Maintenance metrics
Finally, maintenance metrics are highly important to track, especially on the level of individual facilities. These metrics provide extra information on why KPIs may suffer at any given point. While they may not always have a ton of direct relevance at the executive level of the company, they do give the insight needed to make improvements to maintenance practices.
Some of the most important maintenance metrics to track include:
Each of these metrics gives manufacturers insight into how their maintenance practices are holding up. If these metrics start falling short, then either they might have inefficiencies in their equipment maintenance processes, or their practices aren’t actually in the best interests of their equipment health.