2. Many companies, both small-sized and international
market giants, take advantage of the Balanced
Scorecard approach to measure their business'
success. The core of this strategy evaluation system
are Key Performance Indicators, or KPIs. These
metrics are quantifiable values that reflect the
underlying drivers of the company's success.
Typically, these measurements belong to one of the
four BSC's Perspectives (Finance, Customer, Internal
Processes, and Learning and Growth), are
categorized by function or department, and thus can
help point out weaknesses and strengths of the
organization. Scorecards have become very popular
ever since their introduction to the business sphere
in the 1990's. This approach is very flexible and can
be successfully applied for both manufacturing and
non-profit organizations. In this article we are going
to dwell upon the specifics of manufacturing KPIs.
3. Typical Manufacturing KPIs
Designing a Balanced Scorecard for a manufacturing company
starts with identifying proper indicators. These metrics should
reflect the innermost manufacturing processes that influence
on the overall performance. In production management these
can be linked with cycle time, rejection rate (waste), etc. So,
let's try to identify some of the most typical metrics for
manufacturing organizations:
Manufacturing cycle. This measure reflects the amount of time
spent on production of the item.
Amount of defective production. This measure is also referred
to as Defects per million opportunities or DPMO.
4. Average product cost. This measure is essential for
estimating cost-efficiency of the entire enterprise.
Meantime between failure. This measure reflects time
between failures of the system.
Loss of material per order. This measure is presented
in percents and is equal to the amount of lost material
divided by the quantity of material stated in order.
The standard, acceptable value for this metrics is 3 to
5%. In case the loss is higher than 5% it is advisable
to reexamine the manufacturing process.
In addition to these, you can enter other KPIs which
are the most crucial in your particular production
process. These can include rate of material defect,
rate of lost production due to the workers' errors, etc.
5. Tips on Selecting Manufacturing KPIs
Designing a Balanced Scorecard and identifying Key
Performance Indicators isn't an easy task. Usually,
business owners hire skilled analysts who know how to
create the most effective and comprehensible
scorecards. However, you can try to design your
business evaluation framework yourself, in case you
know exactly the way your company functions.
Designing BSC also requires time, dedication, and ability
to think analytically. The most common tips on creating
strategy evaluation systems for manufacturing
organizations would be:
Inspect the most important processes in your production
to identify the underlying drivers that influence the most
on your company's overall performance. The number of
indicators should not be great (on average, 10-12 KPIs
for each Perspective).
