Among the most important metrics and key performance indicators (KPIs) for manufacturing companies to track are:
- Overall equipment effectiveness (OEE)
- Downtime
- Yield, cost, and throughput
- Customer rejects
- Lead time to customer
- Inventory turns
- Maintenance metrics
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 compliancemay 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.
Tip: As a manufacturer, you’ll want to track both KPIs and metrics. If your KPIs seem off, the more detailed metrics will give you more insight into why.
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 manufacturershave 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 isoverall 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:
- Availability, which is how much time your equipment runs versus how long it’s supposed to run.
- Performance, which is how efficient each machine is while it’s running.
- Quality, which is the overall quality of the products produced (quality vs. rejects).
Each of these areas factor into OEE, andwhile the metric itself doesn’t give insight into the causesof 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.
Tip: Some manufacturers like to measure total effective equipment performance (TEEP), which is a measure of how well equipment performs 24/7/365. TEEP is ideal for companies that want to run their equipment continuously, rather than just during specific times.
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, trackingequipment 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 isthroughput, 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 eitherdead 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:
- Order processing lead time, or how long it takes to process a customer’s order.
- Production lead time, which is how long it takes you to produce the items ordered.
- Delivery lead time, or the time that quality control and shipping take.
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 actuallyone of the six metrics usedin 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.
Tip:For most manufacturers, MRO inventorydoesn’t even turn over once in a year, often driving up carrying costs.
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:
- Percentage of reactive maintenanceversus the amount of preventative maintenance.
- Maintenance costas a percentage of replacement asset value (RAV).
- Mean time between failures (MTBF), or the average amount of time between equipment failures.
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.
