Leading vs Lagging Indicators in Manufacturing

With indicators, you are able to measure current conditions, forecast trends, and outcomes within your manufacturing operation. Key Performance Indicators (KPIs) measure value that demonstrate how well a company is completing or achieving business objectives. Some of these objectives of key performance indicators include predictability, ROI, cost minimization, quality, and others. Utilizing indicators can provide insight into the future by analyzing current conditions. This is where leading and lagging indicators can come into play. Leading indicators provide insight into the future, while lagging indicators analyze and quantify current conditions.

Lagging Indicators in Manufacturing

Lagging indicators usually pertain to being “output” oriented. These are much easier to measure but harder to improve. With lagging indicators, they tend to follow an event. The importance of a lagging indicator is the ability to confirm that a pattern is occurring. With lagging indicators measuring the pattern and current conditions, how does an operation reach future objectives such as product or item deliveries? This is where leading indicators come into play.

Leading Indicators in Manufacturing

With leading indicators, the indicators are usually easier to influence but much more challenging to measure. It is considered challenging due to having to put the process and tools in place in order to effectively measure them. For example, when you begin to build a product, a lot of the knowledge acquired will build over the time the product is being developed. There is no way to measure the efforts to build the product until you have completed it. This is where when you are utilizing leading indicators, you can see if you are accurately tracking in the correct direction. You can utilize leading indicators to make any changes to individual behavior or environment while there is time still available.

Some examples of leading indicators for product and services teams include the following:

• Percentage of Team Availability

• Amount of Ready Backlog

• Number of known Blockers

• Percent of Incidents not Worked on For 2 Hours

• Average Backlog of incidents per agent

Software that can easily analyze and measure KPIs in your manufacturing operation includes advanced planning and scheduling software. Advanced planning and scheduling software has implemented KPI measuring along with various other attributes within the software.

Advanced Planning and Scheduling Software

Advanced Planning and Scheduling (APS) software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures. APS can be quickly integrated with a ERP/MRP software to fill gaps where these system lack planning and scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans.

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

Implementation of Advanced Planning and Scheduling (APS) software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.