6 Manufacturing KPIs for Operations Management
The latest annual data for the UK manufacturing industry, collected by Make UK before the coronavirus pandemic, shows the sector accounts for £191 billion of output, placing us in the Top 10 largest manufacturers in the world. The only way to keep up with such fierce competition is by monitoring key performance indicators (KPIs) and optimising manufacturing operations.
But just what are these KPIs? In the below article we outline the 6 manufacturing KPI’s for operations management namely;
- Operational Equipment Effectiveness (OEE)
- Overall Labour Effectiveness
- Scrap Rates
- Right First Time / First Pass Yield
- On-Time In Full (OTIF)
What are Manufacturing KPIs?
Manufacturing Key Performance Indicators (KPIs) are a way of measuring a manufacturing business’ performance over time in order to achieve overall business goals. These measurements can be analysed to make smart changes to manufacturing operations that ultimately come together to improve the business’s bottom line.
What makes a great Key Performance Indicator in Manufacturing?
Your manufacturing KPIs need to have a clearly defined and realistic goal. It is important to be specific – what do you want to achieve, and by when? Is this practically achievable? You should also ensure that this goal is quantitative, i.e, it can be measured definitively using numbers. This will ensure that you can accurately measure your progress objectively.
Next, you need to identify your data source and define how you will measure and use the data; this will make sure nothing is left open to interpretation. What metrics will you use to measure? How often will you measure? So when you have all this information at your fingertips, what do you do with it?
You will probably need to communicate your findings with teams, shareholders or even board members so you will need to make sure you have a complete understanding of what you are looking at. Having a manufacturing intelligence system that handles reporting, takes the headache out of data analysis because it presents information in easy-to-interpret data charts that you can translate quickly.
Challenges of measuring manufacturing performance:
Data collection is difficult
Data gathering without the right tools is always going to be a challenge. A little like trying to eat soup with a fork; it may get you by slowly, but it is not the best thing for the job. Using paper-based timesheets and relying on your shop-floor operators to collect this data is not only a poor use of their time but also allows the possibility of inaccuracies. Data collected in this way is not reliable enough to make big business decisions.
The data we collect gets old quickly
When you want to use KPIs for operational improvements, it is essential that the data you are using is both accurate and up to date. You will find it hard to make real improvements like increasing productivity and reducing costs when you can only react to historic data.
It takes a long time to analyse the data
The Manufacturer noted in its 2021 Digital Transformation Assessment that time is a problem for many people when it comes to data collection. A global automotive manufacturer reportedly said, “We still spend more time making the report than we spend doing something with it.”
6 KPIs for Manufacturing Operations Management
Now you know what KPIs are and how to make a great one, but what KPIs could you use to make manufacturing operations management a whole lot easier? Here are some examples of the types of manufacturing KPIs that will make a real difference:
1. Operational Equipment Effectiveness (OEE)
One of the most significant KPIs for those looking to maximise productivity, OEE is all about measuring how your equipment actually performs in relation to how you expect it to perform.
2. Overall Labour Effectiveness
Understanding the value of your resources is essential to operations management and that includes your people. Labour makes up such a large proportion of your operational costs, yet it is often overlooked when measuring productivity. Instead of making opinion-based assertions on the performance of your employees, you can gather quantitative data, just like you do with your equipment. This allows you to spot trends like; best-performing shift patterns, and identify employees that may require additional training, and even acknowledge and reward those that are performing particularly well. A good manufacturing operations platform will allow you to look at various dimensions within your organisation, whether that be across: individuals, teams, departments and even plants. You’ll be able to determine the speed at which your operators work as well as the quality of the work being produced.
OLE = Availability x Performance x Quality
Availability = amount of time operators are actively working / amount of time the operators were scheduled for
Performance = actual operator / expected output or labour standard.
Quality = number of sellable units / total units produced.
3. Scrap Rates
Material costs can soon add up when the output from your production process cannot be used as finished goods. There are several reasons why scrap occurs, but all of them result in a cost of both money and time. A high scrap rate could indicate poor raw material inputs, flawed production procedures, faulty machinery or the need to upskill operators. You may need to review how you process work instructions on the shop floor. If you tend to use paper on the shop floor
Scrap Rate % = (Number of Units Scrapped / Total Number of Units Produced) x 100
4. Right First Time / First Pass Yield
There are times when a finished product may not pass quality inspections, resulting in goods being sent back to the shopfloor for reworks. If you want to maintain a lean approach, then you are going to want to find out where and why your products went wrong and keep this
down to a minimum. That is where the ‘right first time or ‘first pass yield’ KPI comes in. Calculating the percentage of products that meet specification requirements, the first time they have been through your processes is a key indicator of how well your production facility is running.
If you find yourself with a low ‘right first-time’ rate, you are going to want to take preventative measures to correct any issues and make sure money is not wasted on repeat reworks. You can use a digital solution that keeps a complete audit trail of each and every stage of your processes to investigate the root cause of these issues.
Right First Time % = (Quality Units / Total Units Produced) x 100
5. On-Time In Full (OTIF)
The number of deliveries made on time and complete / the total number of deliveries.
Non-conformance or nonconformity is the failure to meet specified requirements. Nonconformity can occur in both the process and the product. Consequently, nonconforming procedures such as not utilizing the management system correctly or not following the standard operating procedures can lead to nonconforming products.
Ultimately, choosing the right technology to measure and manage KPIs for your business can be the difference between success and failure as that directly impacts time and money.
With a clear focus on Product, People and Process, TotalControlPro® helps manufacturers manage operations effectively.
TotalControlPro® brings real-time cloud-based AI/Machine Learning technology to manufacturers via a simple modular and agile Smart Manufacturing platform – a disruptive subscription-based platform that delivers smart work planning, execution, process control, inventory management and real-time performance reporting. Right resources at the right place, at the right time, doing the right task, against the right job.
In addition, we do not charge upfront set-up costs but invest our services into a long-term monthly SAAS agreement so you can focus on your business and maximise your ROI.
If you would like to see how to take Total Control of your manufacturing operations, contact us.