Since restarting "Warehouse Wednesdays," I've been reading about and reviewing lots of manufacturing solutions. I not only frequently read about the solution, but also many of the supporting articles the solution offers their customers to assist in the various inventory and manufacturing related issues that are common.
Recently, I read a great article sponsored by MRPEasy on manufacturing performance indicators. In other words, "key performance indicators" for manufacturing.
The article, "Top 10 Manufacturing KPIs in 2023," written by experienced inventory and manufacturing content writer Madis Kuuse starts out with this:
"The goal of every manufacturing business is to be as efficient as possible. But without being able to accurately gauge your efficiency, it is hard to know where you stand and what goals to set. Here is where Manufacturing KPIs come into play."
The article was very well organized and to the point:
- What is a manufacturing KPI?
- Using manufacturing KPIs
- Top 10 most important manufacturing KPIs (Equipment effectiveness, WIP, Lead-time, On-time-in-full, Yield, Production Downtime, Inventory turns Production Attainment, etc.)
- Key takeaways
I also felt the article focused primarily on the KPIs most easily obtainable from the common reports found in today's manufacturing software solutions without really having to dig into the nitty gritty.
While Kusse identified his Top 10 most important Manufacturing KPIs, many might be considered light weights when it comes to major manufacturing measures. They are certainly valuable to a majority of light manufacturing operations.
Still, there is a resource for a comprehensive list of Manufacturing KPIs that will fit almost any industrial manufacturing requirement. You guessed it, right here within Insightful Accountant and our Measuring Manufacturing Performance series.
Below are just some of the metrics the series provides, their definitions and links to related articles I wrote in 2015:
Capacity Utilization — How much of the total manufacturing capacity is being utilized at a given point in time. Part 1; Part 2
Downtime in Proportion to Operating Time — Ratio of downtime to operating time; a direct indicator of asset availability for production. Part 1
Efficiency — Measure of how well some resource performed relative to an established standard. Part 1; Part 3; Part 4
Labor Efficiency/Productivity — Expressed as a percentage of actual hours versus planned hours. Part 1 Part 2
Manufacturing Cycle Time — The time it takes for manufacturing to produce a specified product from the time the order is released to production, to finished goods. Part 1; Part 3
Manufacturing Cost as Percentage of Revenue — Ratio of total manufacturing costs to the overall revenues produced by a manufacturing facility. Part 1; Part 5
On-Time Delivery to Commit — Percentage of time that manufacturing delivers a completed product on the schedule that was committed to customers. Part 1; Part 3
Productivity — Measures the overall production ability for manufacturing the product. Part 1; Part 2
Throughput — Measures how much product is being manufactured over a specified period of time. Part 1; Part 3
Total Manufacturing Cost per Unit Excluding Materials — Measure of all potentially controllable manufacturing costs used in production of a manufactured unit, item or volume. Part 1; Part 5
Utilization — Measure how intensively any resource was used in manufacture of a product. Part 1; Part 4
Work in Progress — Typically, the amount of inventory tied up in the manufacturing process, expressed as a dollar amount. Part 1; Part 5
Yield — Percentage of products that are manufactured correctly and to specifications the first time through the process without scrap or rework. Part 1; Part 2
These metrics—or as everybody today wants to call them, KPIs—are timeless. Be sure to revisit Part 6 "The Series Wrap-up," where we used all of the metrics we covered in the series to analyze the performance of a simulated business.
It doesn't matter if you were in the manufacturing business at the turn of the 20th Century or the start of the 21st Century, if you're manufacturing from raw materials with manpower or machines, these are the measures you should be using to evaluate your business.
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