KPIs for Manufacturing Operations
KPIs for manufacturing operations are very important for organizations to analyze operational performances. A manufacturing Key Performance Indicator (KPI) helps to monitor, analyze, and optimize operations over time. Organizations can easily evaluate operational performance by collecting and evaluating KPIs in a systemic way. Even the manufacturing KPIs dashboard can give a lucrative overview regarding performance. As a result, most of the fast-growing industries are giving focus on KPI implementation. Here are some best manufacturing KPIs examples are described.
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Benefits of Using Manufacturing KPIs
Business is most competitive in this recent economy. So, industry owners are trying to gain more profit and market share through the optimization of business operations. To implement manufacturing KPIs, organizations must know- how to build a KPI dashboard. The benefits of the KPIs for Manufacturing Operations can be as below:
- Reduces process costs,
- Reduces manpower costs,
- Reduces employee turnover,
- Reduces overtime costs,
- Reduces manufacturing waste,
- Improves employee morale,
- Improves organizational profits and growth,
- Improves employee satisfaction,
Major KPIs for Manufacturing Operations
When your company is just starting to implement KPIs, the whole concept can seem fairly daunting. In this section, we will discuss some manufacturing KPIs with basic examples that your company can use and measure the performances as well.
- Manufacturing Cost Per Unit
This is one of the most important KPIs for Manufacturing Operations, as it helps to identify the actual manufacturing cost of a product. The calculation formula of manufacturing cost per unit is as below:
Manufacturing Cost Per Unit = Total Manufacturing Cost / # of Units Manufactured.
Firstly, find out the total manufacturing cost of a single unit of a product which should include material cost, overhead cost, labor cost, electricity cost, etc. After that, just divided it by the total number of the produced units following the above formula.
- Machine Downtime Rate
This is one of the major KPIs for Manufacturing Operations which helps to know the overall operational situation of the company or manufacturing plant. High downtime hours turn organizations into negative trends of growth. The formula for calculating the machine downtime rate is as below:
Machine Downtime Rate = Downtime Hours / (Operational Hours + Downtime Hours)
- Defect Rate
This is a manufacturing operation KPI to know the quality defect rate of produced products. Generally, the sample quantity of products is tested or audited and we have to calculate the defect rate as per that test or audit data. These KPIs for manufacturing operations is important by considering the product’s reputation to the customer. The calculation formula will be as below:
Defect Rete = # of defective Units / # of tested products.
- Cycle Time
Cycle time is the most important KPI that you will find in the manufacturing KPIs list. Cycle time represents the average time needed to produce a complete product. These manufacturing KPIs will help you to measure the efficiency of the manufacturing process. Below is the measurement formula of cycle time KPIs for manufacturing companies.
Cycle time = Process End Time – Process Start Time
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- Energy Cost Per Unit
This manufacturing KPI is good enough to measure costs related to energy use and helps to take actions for saving money as well. This manufacturing KPI enables organizations to find out energy costs for a specific unit of product. These are the manufacturing KPIs for an industry where lean management is in practice. In the case of calculation, measure the total cost of energy spent for a specific period of time and divide by the number of produced units within that time frame.
Energy Cost Per Unit = Total Energy Cost / # of Units Produced
- Percentage Planned Maintenance (PPM)
PPM is the manufacturing KPI for analyzing the ratio of scheduled maintenance against your unscheduled maintenance. Percentage Planned Maintenance (PPM) is useful in identifying when more preventative maintenance work is required. This is considered a major KPI of the maintenance department.
Percentage Planned Maintenance (PPM) = (# of Planned Maintenance Hours * 100) / # of Total Maintenance Hours
- On-Time Delivery Rate
The on-time delivery rate is a very important KPI for a manufacturing company which is closely related to business performance. If product delivery is n not completed on time, then customers will close business with you as soon as possible. These manufacturing KPIs calculate the on-time product delivery rate to the customers.
On-Time Delivery Rate = (# of Units Delivered On-Time * 100) / # of Units Delivered
- Rejection Rate
This lean manufacturing KPI is mostly used in manufacturing plants. The implementation of six sigma DMAIC phases can significantly improve the rejection rate of the manufacturing industry and it is proven. The calculation formula will be as below:
Rejection Rate = (# of Rejected Products * 100) / # of Inspected Products.
- Efficiency Rate
Very well-known and acceptable manufacturing KPIs. Efficiency rate is the comparison of work output with work input in the same operation. You may find this KPI in most of the manufacturing KPIs examples. The efficiency rate calculation formula will be as below:
Efficiency Rate = (Work output ÷ Work input) x 100%
- Inventory Turnover Ratio
The inventory turnover ratio generally indicates how well a company is managing total stock. The higher inventory turnover ratio indicates that a company is selling products quickly and has market demand. On the other hand, a lower inventory turnover ratio indicates lower sales and declining product demands as well.
Inventory Turnover Ratio = Cost of Goods Sold / Avg. Inventory
- Changeover Time
There are the manufacturing KPIs which represent the required time amount to switch from one task to another task. Changeover time represents the amount of lost time for switching a production line to another product or time loss for shift change.
Changeover Time = Net Available Time – Production Time
- Man-Machine Ratio
These are the manufacturing KPIs that help to find out the ratio between available manpower and the total number of active machines. So, the number of total active employees and the number of total active machines are the two kinds of data required to calculate the MMR of any department of the factory.
Man-Machine Ratio= # of Total Man-power / # of Total Active Machine
- Takt Time
These are the KPIs for the manufacturing industry which aims to match production pace with customer demand. Takt time is a very useful manufacturing KPI for scheduling production orders.
Takt Time = Available Production Time / Customer’s Demand Per Day
- Overall Equipment Effectiveness (OEE)
Overall Equipment Effectiveness (OEE) is one of the best manufacturing KPIs for the garments industry. Manufacturing productivity can easily be identified through these KPIs for manufacturing operations. The higher the OEE, the greater the effectiveness of the equipment. OEE links 3 elements in one percentage: a) actual machine running time, b) level of machine utilization, and c) quality of goods output.
OEE = Availability * Performance * Quality
- Machine Utilization Rate
This manufacturing KPI metric measures how efficiently your machines are running for production. In the below formula, actual machine running time indicates the time spent by the machine in each production cycle and available time means the total time of each shift.
Machine Utilization Rate = (Actual Machine Running Time * 100) / Total Available Time
16. Employee Turnover Rate
Employee turnover rate is a vital KPI for manufacturing operations Employees leave organizations for many reasons. HR managers always try to keep the longer relationships of employees with the organization.
Employee Turnover Rate = (Employees who left * 100) / Avg. # of Employees
- Maintenance Cost Per Unit
The KPI for the manufacturing industry is a lean manufacturing KPI to optimize maintenance efficiency. Maintenance cost per unit is calculated by dividing the total cost of maintenance by the number of produced units for a specified time period.
Maintenance Cost Per Unit = Total Maintenance Cost / # of Units Produced
- Throughput Rate
The KPIs for the manufacturing industry play a vital role in operational efficiency and company growth. The throughput rate is also known as the flow rate. This is output per unit of time. The calculation formula for the throughput rate is as below:
Throughput Rate = Daily Output / Daily Working Hours
- Return on Assets (ROA)
Return on Assets (ROA) is the KPI for the manufacturing industry which helps to identify how a company can effectively gain returns on the investment in assets. In order to calculate average total assets, you have to make an average of initial assets and ending assets. Also, consider the number of fixed assets and working capital together as total assets. Annual net income divided by average total assets will show the ROA of the company. The return on assets formula is as below:
ROA = Net Income / Avg. Total Assets
- Health and Safety Incidence Rate
These KPIs for manufacturing operations are very much important for every business operation as it is directly related to customer satisfaction. In the below formula, the number of incidents refers to injury or illness. This formula is given by OSHA where 200,000 is constant. The health and Safety Incidence Rate is calculated normally per annum.
Health and Safety Incidence Rate = (Number of Incidences * 200,000) / # of hours worked by all employees.
Bonus KPIs for Manufacturing Operations
In a recent business situation, companies are more aggressive to achieve their yearly goal. As a result, KPIs for manufacturing operations play a vital role in goal achievement through the optimization of the business process. KPIs for manufacturing operations may differ from industry to industry, actually based on business characteristics. Besides, below are some KPIs for manufacturing operations that can be used to achieve the business goals as well.
- Revenue per Employee
- Profit per Employee
- Training Hours
- Failed Audits
- First Pass Yield
- Inventory Accuracy
- Machine Set-Up Time
- Overall Operating Efficiency (OOE)
- Capacity Utilization
Manufacturing KPI Dashboard
The manufacturing KPI dashboard software represents the performance or achievement status of each KPI. The Manufacturing KPI dashboard generally picked data from data sources and gives a summarized graphical presentation for easy understanding and monitoring of performances.
Characteristics of Manufacturing KPI Dashboard
The manufacturing KPI dashboard represents the performance of KPIs for manufacturing operations. The Manufacturing dashboard excel file can be developed and managed easily which is able to represent all information as per requirement. So, you can consider below qualities of a manufacturing KPI dashboard during the development stage:
- The Manufacturing KPI dashboard should be dynamic in nature.
- The graphical presentation should be eye-catching.
- Periodical and accumulative analytical data presentation should be ensured.
- The Manufacturing dashboard design should be simple and understandable.
- The financial analytical overview should be available.
- The Manufacturing KPI dashboard should be first loading.
- The manufacturing dashboard should be calculation error-free.
- Manufacturing dashboard lack timeliness.
- A comparative analysis option must be available in the manufacturing dashboard.
Manufacturing Analytics Dashboard
Manufacturing dashboards are widely used for close monitoring of manufacturing KPIs at a glance. There are different types of manufacturing analytics dashboards that are developed and used based on industry-specific requirements. Below is the most used manufacturing analytics dashboard:
- Manufacturing KPI dashboard
- Quality Dashboard
- Cost Management and Return Analytics Dashboard
- Production Dashboard.
Manufacturing KPI dashboard
KPIs for manufacturing operations can be easily monitored through the manufacturing KPI dashboard. It provides a bird’ eye view to the end customer. It’s a kind of dynamic dashboard and is mostly used in the industry.
The quality dashboard gives an overview of quality KPIs like Defect Rate, Right First Time, Return Ratio, Defect pattern, etc.
Cost Management and Return Analytics Dashboard
The cost management and return analytics dashboard help to deeply monitor the KPIs for manufacturing operations. Maintenance cost, Unit production cost, Assets cost, Return on Investment, etc. are displayed in this dashboard. Basically, it’s an analytics dashboard.
The production dashboard helps to monitor production-related KPIs at a glance. Production capacity, Volume, Efficiency, and such kinds of production KPIs are monitored through the production dashboard. This helps increase industry efficiency and productivity as well.
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