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KPIs, or key performance indicators, are the measurements, metrics, and statistics that help you understand your business. Tracking KPIs can tell you how successful your sales are, if your marketing tactics are working, if customers are satisfied, and if your manufacturing plant is running at its optimal level. They also ensure that your reporting is accurate and that your data is verified, and provides clarity and insight for your organization's decision makers.
Without KPIs, it would be hard to gauge success and learn if your efforts have been successful or not. Metrics from your production floor can give you a better idea of how productive your factory is — but what should you track? There are dozens of manufacturing KPIs that can provide insight into your business’s performance, but below we’ll cover 17 of the most important manufacturing KPIs to track.
Your overall equipment effectiveness, or OEE, is a metric that tracks how effective each piece of machinery or equipment on your line is during each cycle time. This is often used as one of the foundational key performance indicators, as it tells you exactly how productive your manufacturing facility is. When you have a higher OEE score, you have a more productive and efficient factory that produces a higher yield for your customers.
The on standard operating efficiency metric tracks how your employees are performing against the different labor goals that you set when determining the cost of your product. In manufacturing, the actual cost of labor is often underestimated, making it difficult for managers and owners to balance budgets and understand the true costs of their production. This metric helps you understand your costs much more accurately.
Your capacity is the amount of products that you are able to produce in a given time frame, otherwise known as throughput. Capacity utilization measures how much of your maximum capacity you are achieving in your production lines. A high capacity utilization means that you are getting the most out of your buildings, equipment, and labor, while a low capacity utilization might mean that there are flaws in your production line that are inhibiting your growth.
Machine downtime is an important production metric to track on its own. Machine downtime refers to the total time that a machine is down and not making any product. This can either be attributed to routine maintenance, personnel issues or machine setups as well as errors, equipment breakdowns or other reasons that unexpectedly shut the machine down.
Unscheduled downtime is a more specific metric used to measure the downtime that is not planned. Think of it as a component of your total machine downtime KPI. While scheduled and preventive maintenance can help prevent unscheduled downtime, it can still occur unexpectedly. This leads to many further complications in your production line — like bottlenecks or production shutdown — and should be avoided at all costs. According to Forbes, unscheduled downtime costs manufacturers roughly $50 billion per year, which is not a statistic you want your organization to be part of.
When you can track your unscheduled downtime, you’re more likely to notice patterns and discover what needs to be done to stop it from happening altogether. Sometimes, this can translate to something as simple as modifying your machinery’s maintenance schedules. In other circumstances it can be more involved, like making changes to your hiring and onboarding process to ensure that equipment operators have sufficient training.
One of the common reasons for machine downtime is setup and changeovers. Whenever operators are changing out jobs, programs, tools, materials, and/or parts, it’s likely the machines are at a standstill at some point. And this downtime can be very costly to a company. This is why tracking machine setup time is imperative. Cutting down on setup and changeover times can help reduce downtime in a big way–so you can build more efficiency into your production line schedules.
Every manufacturer wants to keep their inventory and back stock to a minimum. Reducing backstock reduces product and material waste, which not only incorporates lean manufacturing principles, but also saves on material costs (e.g., sourcing, storing, and replacing unused raw materials). This can save manufacturers quite a bit of money, which they can then invest into other parts of the business. Using this type of pull approach to inventory can help you track your inventory turns more efficiently and accurately.
Having an accurate inventory is one of the most important KPIs to track. After all, is there anything worse than realizing your numbers were off and you don’t have the raw material on hand to produce the number of units a customer ordered? With the supply chain as unpredictable as it is, being short on your inventory calculations could mean that you won’t meet your output goals. Inventory inaccuracies can lead to slowdowns and production delays that snowball into much bigger problems for your company. Tracking your inventory accuracy lets you know when mistakes are made, who is making them, and how often they occur.
The first pass yield metric calculates the percentage of products that are manufactured to the right specifications on their first time through the production process. When you have a high first pass yield rate, it means that you have fewer products that require rework or scrapping, which helps you increase your output and avoid additional waste in your production process.
An audit of your products is one of the most important manufacturing metrics to track. A failed audit refers to a failed quality control (or quality assurance) check just before a batch or product shipment leaves the production facility. This is an extremely negative outcome as it translates to quite a bit of scrap, rework, and delays for the company — as well as potential backlash from the customer who was expecting the product. By tracking how many failed audits you have and determining the exact cause, you can find out if there are any recurring problems that can be fixed. The goal for all manufacturers is, of course, zero failed audits.
As mentioned earlier, rework can happen when you have failed audits or a poor first pass yield. When a product doesn’t meet quality standards, it goes through rework to be modified to meet standards. The problem with rework is that during the process, your facility wastes time, materials, and human resources that could be going toward new production instead. As a result, your production line slows down and you lose money. Tracking the amount of rework in your facility can help you determine — and hopefully eliminate — the cause, like providing additional training for machine operators or adjusting a machine that wasn’t set up correctly.
When a customer returns a product for being defective or made incorrectly, it causes a huge setback for the entire organization. Not only do you have an unhappy customer, but your brand’s reputation can take a hit. You can also lose even more money in refunds, or during the reworking process as you work to ensure that the customer gets a high quality replacement — hopefully boosting customer satisfaction along the way. While this is a result metric, it is still valuable to track as it can help you find problems in your production process and recognize when an issue is recurring.
It can cost a significant amount of money to scout, hire, and train new employees. It takes time for a new employee to learn how your business runs, and to gain the confidence to operate machinery and equipment. Keeping your current employees happy reduces the amount of employee turnover in your business, which helps your organization maintain consistent, efficient production lines.
Making sure that your factories are a safe and hazard-free environment for employees and staff is paramount to running a successful business. Many organizations post the number of days they go through without an accident, and the importance of keeping health and safety incidents to zero is highly ingrained in manufacturing culture. However, it’s important to track any and all accidents that occur on the line or on the production floor to prevent them from happening again.
Labor is often one of the costs that is miscalculated in the manufacturing budget planning process. Labor costs don’t only refer to employee paychecks — they include benefits and other insurance costs, paid time off, sick days, and taxes. Tracking your labor as a percentage cost can help you get a better idea of exactly how much labor is costing you, and where there might be opportunities to optimize or reduce your labor costs.
Calculating the revenue per employee can help you measure your current workforce’s success. When you divide the revenue of the company by the number of employees, you can calculate the level of productivity that your employees generate. This can help you see if the business is growing and if new personnel are adding to or taking away from the organization's revenue overall. This metric is often used in competitor analysis reports, as it can help you get benchmarks to see where you stack up in comparison to others in your industry.
Similarly to the revenue per employee KPI, profit per employee takes a look at the productivity of the entire workforce. It takes into consideration what the actual net profits of the company are, not just the revenue, and gives you more clarity about opportunities to improve the company’s profitability. When you know what each employee brings in on average, you can determine whether or not your organization is moving in the right direction or falling behind.
Manufacturing KPIs are the metrics and statistics that you can use to track your manufacturing processes, gauge success, and standardize real-time data collection. When you have set goals for your KPIs, you can begin to see what areas of your business are doing well, and where you are falling short. By keeping an eye on these important manufacturing KPIs and creating a manufacturing KPI dashboard, you can make better decisions for your business and be a more data-driven leader.
Tracking KPIs without the right software and tools can be difficult. If you rely on manual data collection, you can have wildly inaccurate data from which you draw incorrect conclusions. A partner like Amper can change that. Amper collects real-time data from your machines, which can improve the accuracy of your manufacturing KPIs. Learn more.
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