Key performance indicators (KPIs) are observable aspects of business or manufacturing that provide insight into operational efficiency, productivity, and overall performance. A KPI must be something that can be tracked and measured, like cycle times, number of units produced in a given timeframe, or rates of scrap material or defects.
Plant managers and those responsible for plant performance often turn to KPIs to assess how well a facility is meeting its goals and to identify redundancies and other areas for improvement. But, it’s important to know which KPIs are the most valuable and give useful data. KPIs must also be readily measurable over time to establish a baseline and then note variations from it.
Here we’ll look at some essential KPIs managers can use to optimize manufacturing operations.
WHAT MANUFACTURING PLANT KPIs SHOULD I FOLLOW?
The best KPIs for a manufacturing plant will reveal ways to improve customer satisfaction, boost competitiveness, and lower production costs. The data collected needs to be specific and measurable, so that it’s clear what the data really means. For example, does measuring output mean you have production bottlenecks or that your raw material supply is insufficient? KPIs also need to be actionable and point to what’s causing a change in the metrics. This is what allows you to make changes or adjustments and observe their effect.
The most valuable manufacturing plant KPIs fall into five categories: production, quality, finance, safety, and environment. Tracking metrics in each of these areas will provide a well-rounded snapshot of how your plant is performing and areas for improvement.
PRODUCTION KPIs
Overall equipment effectiveness (OEE)
A calculation of equipment availability and performance that indicates if it is operating as intended and contributing to a higher quality outcome.
Production output
The total quantity of products manufactured within a given time frame.
Production lead time
The amount of time it takes to produce a product, from start to finish.
Production cycle time
The time it takes to complete a single unit of production.
Production yield
The percentage of quality output compared to total input.
QUALITY KPIs
Defect rate
The number of defective products manufactured within a given time frame.
Customer complaints
The number of customer complaints received within a given time frame.
First pass yield
The percentage of products that pass their quality checks on the first attempt.
Customer satisfaction
How satisfied customers are with your products.
FINANCIAL KPIs
Cost of goods sold (COGS)
Any direct costs associated with production, such as material and labor costs.
Gross profit margin
The profitability of your products or services, measured by subtracting the cost of goods sold from your total revenue.
Return on investment (ROI)
The amount earned or lost as a result of investing in things like equipment or capital improvements, relative to their costs to purchase, install, or construct.
Operating expenses
The ongoing costs associated with operating your facility, such as utilities, maintenance, and labor expenses.
SAFETY KPIs
Injury frequency rate (IFR)
The average number of injuries that occur within your plant over a specific number of hours worked.
Lost time injury frequency rate (LTIFR)
The number of times an injury occurred that prevented a worker from performing their regular job duties, over a specific number of hours worked.
ENVIRONMENTAL KPIs
Energy consumption
The amount of energy your manufacturing plant consumes over a given time frame.
Water consumption
The amount of water used during production processes over a given time frame.
Waste generation
The amount of waste your plant generates.
USING KPIs TO DRIVE IMPROVEMENT
Tracking a range of KPIs and regularly reviewing them allows you to make crucial improvements to your operations. Some of the most significant changes you may be able to make include:
- Identifying bottlenecks. Discover the production processes that are causing inefficiencies and delays.
- Improved decision-making. Use data-driven insights to make more effective, evidence-based decisions.
- Optimized resource allocation. Identify where your available resources are most needed, or where they could be redirected, to maximize productivity and quality.
- Enhance quality. Develop successful strategies for reducing product defects and improving overall quality.
- Reduce costs. Find areas to reduce costs for materials, consumables, physical space, or labor costs without a negative impact on productivity.
- Improve safety. Monitor plant safety, identify and mitigate risks, and develop more effective safety initiatives.
- Reduce your environmental impact. Review and improve your plant’s environmental footprint for enhanced sustainability.
Avoid measuring things simply because you can: only measure what provides the most meaningful data for analyzing your process and goals. Also, be specific. For example, if you discover a single component in an assembly is the source of a bottleneck, tracking that component’s production details may give more insight than tracking the number of total assemblies.
Implementing a KPI Tracking System
Implementing a KPI Tracking SystemThe right tools make tracking KPI metrics easy and provide clarity into what’s really going on on the plant floor. While there are many software options to consider, the most valuable options offer features like real-time monitoring, data visualization (i.e., graphics and charts), customizable reporting, and integration capabilities with your enterprise resource planning (ERP) and other systems.
Again, it’s critical to focus on KPIs that are relevant to your business objectives and don’t just add data clutter. As you put the gathered data into action to make improvements, be sure to use the SMART goal framework to create specific, measurable, achievable, relevant, and time-bound goals. This will help ensure KPI tracking leads to impactful action steps.
Overcoming Challenges in KPI Implementation
It’s common to experience employee resistance when implementing a new KPI tracking system, especially if it impacts their daily processes and workflow. To ease the transition, limit the number of data points being collected. Explaining the why behind the changes and the data you hope to analyze also goes a long way toward improving personnel buy-in.
Observe new metrics so you can establish a baseline for each one. This gives you a point of comparison and makes it easier to see short- and long-term departures from the norm.
To avoid being overwhelmed by too much data, it’s critical to set a schedule for review. Many software packages can automate data collection, compiling, and reporting to make this easy. This keeps the amount of feedback manageable. If you find that certain metrics are not as useful as originally thought, it’s reasonable to stop collecting them so you can focus on what is most meaningful.
Explore Manufacturing Challenges With American Crane
Using KPIs effectively allows manufacturing plant managers to pursue continuous improvement and achieve long-term success. Identifying which KPIs are the most meaningful for your goals is critical, as is establishing baseline metrics, and following a routine for data review.
If you’ve identified material handling and transfer as an ongoing problem area based on your metrics, American Crane and Equipment Corp. can help. We have expertise in designing, building, testing, and installing material handling equipment to meet the needs of the manufacturing industry and others.
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