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Key Performance Indicators

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  • 1. Key Performance Indicators (The January 2004 edition of IW [IndustryWeek] includes two articles on manufacturing that include “key performance indicators”. One article is TIES THAT BIND: IndustryWeekValue Chain Study reveals manufacturers’ struggle to add value from product development to delivery (page 49). The second is TICK TOCK IW/MPI Census of Manufacturers shows challenges, reality and, yes, even optimism (page 20). Both articles are by David Drickmamer. Both articles are based on surveys and span a broad range of manufacturing industries. The results are typically presented in three categories: 1. Poor performance in the ‘Bottom 25%’, 2. Average performance as ‘Median’, and 3. Top performance in the ‘Top 25%’. The information below is an effort to keep you abreast of best practices in manufacturing and give you and opportunity to benchmark yourself. For the complete article, please obtain a copy of the January edition of IW.) SUPPLY CHAIN PLANNING Key Performance Indicators Bottom 25% Median Top 25% Cash-to-cash cycle time (days) 90 56 30 Total inventory turn rate 3.2 6.0 10.0 Production schedule attainment 77% 90% 97% Cost of Quality (percent of annual 3.1% 0.7% 0.1% revenues) NEW PRODUCT DEVELOPMENT Key Performance Indicators Bottom 25% Median Top 25% Percent of sales from products launched 10% 15% 25% previous year Time to market (days) 258 150 60 Products launched on budget 50% 75% 90% Products launched on time 30% 60% 86% Percent R&D cost for new products 3% 25% 50% Page 1 of 3
  • 2. PROCUREMENT Key Performance Indicators Bottom 25% Median Top 25% Supplier lead time (days) 28 14 7 On-time delivery 80% 90% 95% Purchases from certified vendors (% of 40% 75% 90% total spend) Direct materials sourced outside the U.S. 2% 10% 25% Direct materials sourced outside U.S., 0% 5% 20% Canada and Mexico CUSTOMER ORDER MANAGEMENT Key Performance Indicators Bottom 25% Median Top 25% Percent of total sales orders that require 0.0% 0.0% 30.0% no manual intervention Total annual sales orders placed with 85.0% 93.0% 97.5% your site delivered on time Percent of your total annual sales orders 5.0% 2.0% 0.0% not fulfilled due to stockouts Customer retention rate over the past 80.0% 90.0% 95.8% three years LOGISTICS Key Performance Indicators Bottom 25% Median Top 25% Customer order-to-delivery time (days) 14 7 3 Supplier delivery dock-to-stock cycle 12 4 2 time (hours) Customer order pick-to-ship cycle time 10 4 2 (hours) Order fill rate 90.3% 97.7% 99.0% Total logistics costs as a percentage of 10% 4.3% 2.0% sales Page 2 of 3
  • 3. MANUFACTURING Key Performance Indicators Median Top 25% Average wage for production employees ($/hour) $13.00 $15.50 Annual sales per employee $150,000 $220,000 Raw material turns (COGS/Average raw material) 11.6 22.0 Work-in-Progress turns (COGS/Average value WIP) 16.0 38.2 Finished Goods Turns (COGS/Average Value Finished 12.0 25.0 Goods) Total Inventory Turns (COGS/Average Value of Total 8.0 13.0 Inventory) Asset Turn Ratio (COGS/Average Assets) 2.5 4.0 Return on Invested Capital 13.5 25.0 Page 3 of 3