7 Important Key Performance Indicators for Manufacturing

When it comes to overseeing production and managing a production facility, it is important to make decisions that will help you achieve your business objectives. Key Performance Indicators (KPIs) are a great way to measure the performance of your business and to increase visibility. While you may be aware of what some KPIs may be, you may also be asking yourself what exactly do they represent?

What is a KPI?

A Key Performance Indicator (KPI) is a measurable value that tells you how a company is effective at achieving its business objectives. They are a type of performance measurement that helps manufacturing operations understand how an organization or department is performing. Manufacturing companies use KPIs to analyze, monitor, and enhance their production operations. KPIs should be linked to a target value so that they can be evaluated as meeting expectations or not.

There are many benefits to using KPIs, including:

• Greater Accountability
• Increased Visibility
• Better Decisions
• Better Performance
• Increased Profits and Performance
• Reduced Waste

While specific KPIs may vary from each operation or industry, there are a few that are important within most areas. Here are some of the key performance indicators for manufacturing.

Important Key Performance Indicators

The Top Key Performance Indicators for Operations Managers include the following:

1. Profit - One of the most important performance indicators available is profit. Analyzing both gross and net profits can allow you to better understand the success in generating a high return. A Net Profit KPI is an especially useful measure as it represents that amount of revenue that remains after accounting for all of the expenses incurred by the operations.
2. Cost - Measuring cost effectiveness and locating the best methods to reduce and manage costs are key within a manufacturing operation. You can track and monitor production costs and even inventory costs to locate areas where costs can be reduced while boosting efficiency. This will allow your operations to have a much more lean and optimized approach toward production.
3. Resource Utilization - This KPI represents the percentage of available time across the schedule span that is schedule to be busy. A higher value means that your resources are nearing their maximum capacity utilization. This KPI can be particularly useful in the case where you have resources that have limited capacity which can restrain the entire schedule, such as a Drum resource. You can use this KPI to see whether all resources are being utilized to their full potential or to decide whether there is enough capacity to take on new orders. 
4. Late Jobs (Count or %) - This represents the number or percentage of jobs that are scheduled to be completed after their need date. In manufacturing, the target for this KPI should always be zero to ensure that all of your items are produced on time. Without customers, there is no point in making products. One of the top ways to increase customer satisfaction and retention is to consistently deliver your products on time. 
5. Setup Time - This represents the time that is used for setting up operations. A lot of time can be lost to setup and changeovers within production. This KPI allows you to identify areas that are incurring a lot of setup and work towards minimizing this number. Using techniques such as attribute sequencing can help optimize your schedule to reduce the time required for setup.
6. Throughput - Generally speaking, throughput refers to the rate of production of a resource, or the number of units that can be produced for a period of time. Financial throughput represents the revenues generated by a production process minus all expenses incurred by that process. The goal of manufacturing is to maximize throughput. This can be done by enhancing the productivity of the slowest resource or by prioritizing products that have the highest throughput per minute. 
7. Percentage of Defective (Scrap) Products - To get this number, you have to take the number of Scrap items and divide it by the total number of items produced in the time frame being examined. The lower you can get this number, the better. This is important because scrap products or defective products may require additional work, which increases production costs. By tracking this, you can determine if there is a problem to be addressed if this number is consistently high, or if there is a product that is not worth producing. 

KPIs in PlanetTogether APS

PlanetTogether offers a KPI Pane that provides a visual representation of various KPIs for each schedule change. Users can then decide which schedule or scenario is best in terms of their preferred KPIs to use as their Live Scenario.

Additionally, you are able to compare multiple schedules in terms of their KPIs to identify and select the best possible production schedule for your company.

PlanetTogether's Advanced Planning and Scheduling software can provide thorough insight within your manufacturing operation and locate areas that are in need of efficiency optimization.

Advanced Planning and Scheduling (APS) Software

Advanced Planning and Scheduling Softwares have become a must for modern-day manufacturing operations as customer demand for increased product assortment, fast delivery, and downward cost pressures become prevalent. These systems help planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans. APS Systems can be quickly integrated with an ERP/MRP software to fill the gaps where these systems lack planning and scheduling flexibility, accuracy, and efficiency.

With PlanetTogether APS you can:

• Create optimized schedules that balance production efficiency and delivery performance
• Maximize throughput on bottleneck resources to increase revenue
• Synchronize supply with demand to reduce inventories
• Provide company-wide visibility to resource capacity
• Enable scenario data-driven decision making

The implementation of an Advanced Planning and Scheduling (APS) Software will take your manufacturing operations to the next level of production efficiency by taking advantage of the operational data you already possess in your ERP system. APS is a step in the right direction of efficiency and lean manufacturing production enhancement. Try out a free trial or demo!