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7 manufacturing KPIs that actually matter

5 min read
12.09.2020

7 manufacturing KPIs that actually matter

Key performance indicators in production are an effective tool for analyzing production processes and assessing employee performance. These are useful for various tasks depending on what the company focuses on as each business has its own priorities. Someone needs to improve the quality of their customer service, for others, it is important to improve the quality of the production, another company may seek to optimize its costs.

After identification of the business goals, you can proceed to the selection process the most important production KPIs. However, to achieve the highest results, it is worth using several indicators together.

In this article, we discuss 7 of the most effective factors that are crucially important to consider in the production sector. They allow you to identify areas that need improvement, as well as to customize operational processes, taking into account the main business goals.

  1. Throughput

    Business goal: improvement of the production process efficiency.

    First of all, it is important for the production departments to pay attention to such KPIs as throughput. This characteristic allows you to calculate how many units are produced on a specific piece of equipment, line or an organization as a whole for a certain period of time.

    Most probably you have a monthly or an annual production plan where the target amounts are specified. If you study it and compare with your optimal amounts, you can see how efficiently the process is set up and whether it matches your forecast. It is also possible to track the decline in results. The solution could be automation, equipment upgrades, etc.

  2. Defect density

    Business goal: product quality enhancement.

    Defect density is a production KPI, which allows you to determine the number of damaged units produced in relation to the total number of products manufactured. Goods with defects not only delay processes and reduce profitability but also pose a threat to the company's reputation.

    Having a defect density as one of the indicators on your KPI dashboard can help you understand when is the product line more likely to malfunction. In relation to time, the indicator is useful when tracking the incidence of the defect. In addition, over time it will be possible to see how effectively the measures were taken and whether the quality of the product has improved since then.

  3. Yield

    Business goal: product quality enhancement.

    This key performance indicator takes into account material costs, although it also copes with defective products. As a rule, this KPI is divided into two parts: the first one and the general one. The first indicates the number of things produced correctly. In contrast to the defect density indicator, the units with no defect become the main focus here.

    The yield already includes the share of manufactured products that need or do not need to be improved in order to meet the quality standards.This indicator is also useful for optimizing the performance indicator #1 - throughput.

  4. Takt time

    Business goal: optimization of production deadlines.

    The task completion time is important for projects and manufacturing operations. This indicator helps identify the weaknesses in meeting deadlines and define “your rhythm”. Such an indicator on your KPI dashboard will show the time between the production of the units on demand. Simply put, this is the time of making one product by the time the consumer needs it. In addition to finding the rhythm, the takt time is useful for ensuring you keep up with the schedule and understand whether you are lagging behind it, advancing, or being right on time.

    In practice, takt time is often used to match the pace of production with consumer demand. The indicator is also an integral part of standardized work since the whole idea is to establish a predictable and reproducible production rate.

  5. Downtime

    Business goal: minimizing the downtime.

    One of the most important performance indicators for tracking is production downtime. If even only a part of the equipment is not functioning, it’s keeping you from making a profit. Monitoring and timely response to such pauses will help to avoid losing profit in the future. If you track it using KPI dashboards, you will be able to monitor equipment downtime. It would be best to make a plan and schedule the maintenance only on some brakes such as lunch or shift changes when the equipment won’t be working anyway.

  6. Unit cost

    Business goal: increase profits.

    This production KPI helps estimate the cost of a single production unit. To illustrate the production cost of a unit on your KPI dashboard you should take into account every cost related to it including labor, warehousing, equipment, etc.

    Tracking this indicator helps you see if your business is able to keep within the framework of specific salary ranges in order to make a profit from the product. Otherwise, it will be necessary to optimize production or recalculate costs.

  7. Health and safety incidents

    Business goal: regulatory compliance.

    Health and safety incidents is a metric with a specified number of incidents. Statistics includes cases that have been recorded as past incidents for a certain period of time. Recorded accidents and incidents are fairly obvious tracking information. In addition to monitoring, it will be possible to calculate how to convert them to ratios per employee. These indicators will also help you see the situation before the incident. For example, an incident where a person slipped and fell due to extraneous building materials is part of a reactive analysis of the data because it was performed in the past. The proactive analysis is when you use your KPI data to a test the quality of the surrounding area and prevent similar situations in the future. These have estimative characteristics.

All the above mentioned production KPIs are really important tools, but first of all, you need to focus on the specifics and nature of your business. In case you want to have more detailed information on each part of your process you can add some other indicators to your dashboard along with the top 7 performance indicators.

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