mrpeasy.com In manufacturing, there are many outside influencing factors, tracking the performance of an operation with KPI metrics means the difference between success and failure. Here are the most important manufacturing performance indicators.

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TOP 10 MOST IMPORTANT
MANUFACTURING
PERFORMANCE INDICATORS
IN 2019

2. The goal of every manufacturing business is to be as efficient, innovative and
flexible as possible. An effective manufacturing operation can offer its
customers a wider range of services and products, thinks about its employees
wellbeing, has healthy financial indicators and is able to adapt to the changing
environment.
Different manufacturing companies have different objectives and targets. No
matter what they are, to understand whether the company is moving in the right
direction it crucial to be able to track all of the changes happening.

3. What are manufacturing performance
measures?
The best way to track whether the company is moving in the right direction is to
employ different types of manufacturing performance indicators, also known as
KPIs (Key Performance Indicator).
Manufacturing performance indicators help the manufacturer to reach its
strategic and tactical goals in the long and short run. The use of indicators helps
the manufacturer to better understand the current situation and help evaluate
the effectiveness of strategy implementation.

4. What are manufacturing performance
measures?
In general, the goal of manufacturing efficiency indicators is to track the
performance of operations in different areas. These areas can vary in different
companies, depending on the current circumstances at any given time. Another
thing to keep in mind is that effective indicators must be both measurable and
actionable – there should be a clear understanding what is measured, how it is
done and what actions can lead to the improvement of the indicator in the
future.

5. Manufacturing performance indicators are
always changing
KPIs are never constant. They are constantly changing. Some measures are more
important during one period of company developments when this period ends,
other become more important and need to be focused on.
For example, for a new manufacturing operation, it is important how fast it can
ramp up production volumes and keep this momentum going. In case of
increased number of customer complains the manufacturer has to turn extra
attention towards the quality of the products and its yield.

6. Manufacturing indicators research by
MESA
The situation for each manufacturer is unique and to find the list of metrics that
would be equally relevant and important for all companies is a difficult task.
One of the biggest studies in the area of manufacturing KPIs in recent years has
been ordered by MESA (Manufacturing Enterprise Solutions Association). During
this research, a total of 28 manufacturing performance indicators have been
identified as the most important by decision makers. All metrics were divided
into the following 7 categories:

7. Manufacturing indicators research by
MESA
• Customer Experience
• Supplier and Product Quality
• Operations Efficiency
• Ensuring Compliance
• Reducing Maintenance Spending
• Increasing Flexibility and Innovation
• Cost reduction and profitability increase
After carefully analyzing all of the measures in the study, we have chosen the
top 10, which in our opinion is must have for every manufacturing operation,
big or small.

8. Cost reduction and profitability increase
• Manufacturing Cost per Unit – calculated by dividing the total number of
units produced by their production cost, excluding material spending. The
number shows how effectively the current resources are utilized, whether
human resource and equipment usage cost is on track.
• Productivity in Revenue per Employee – Similar to the previous indicator,
productivity per employee is calculated by dividing all generated revenue by
the number of all employees. This can be calculated on several levels, on a
company level, on a department level and even production line level.
Revenue per employee shows areas with the lowest and biggest ROI.

9. Cost reduction and profitability increase
• Downtime in Proportion to Operating Time – calculated as the ratio
between the time production lines was stopped and time when they were
operating. This ratio is a direct indicator of asset availability for production.
The lower the number, the more efficiently manufacturing equipment is used.
If the ratio is 0.5 this means that the production lines were stopped half of the
time.

10. Supplier Quality
• Incoming Material Quality – the quality of materials usually determines the
quality of the end product. If the quality of materials supplied is low,
spending for product repairs is increased. This means extra cost to the
manufacturer. This can be calculated also in different ways: by supplier; by
product category; as a percentage of faulty materials vs good materials.
• On-Time supply – calculated as the difference between purchasing orders
delivered on time and late orders, then divided by the number of total orders.
Tracking this KPI helps to understand whether the supplier is reliable or not.

11. Customer Experience
• On-Time delivery – tracking this KPI helps to understand whether the
product is shipped as promised or with delays and helps to prevent
conditions where customers would leave unsatisfied with the service. It will
also help to identify possible issues in customer logistics.
• Yield – in simple terms, measures the level of product quality. It is the
number of good units without rework or scrap coming from the production
line. High yield means all elements of the manufacturing process are working
fine and there is no issue with material quality, workers qualification or
equipment. Low yield might mean that there are problems somewhere during
the manufacturing process. This is one of the key metrics that signal that
something is wrong and a closer investigation into the process is needed.

12. Operations Efficiency
• Capacity Utilization – shows at which rate manufacturing facility is using its
production capacity. In simple words, whether its production capacity is used
effectively or not. It is a relationship between actual output, that is actually
produced with installed equipment and potential maximum output, that can
be produced with the same equipment. The higher the rate, the more
efficiently equipment is used.

13. Operations Efficiency
• Schedule or Production Attainment – the ability of production to execute a
plan. In manufacturing, planning plays a very important role. The more
complex manufacturing processes are, the more important is the ability to
execute the plan, but also it is more difficult to achieve. Matching the
schedule of production to produce a certain amount of output according to
the plan is very important if the manufacturer wants to meet expectancies of
the customers and corporate strategy. This performance indicator can be
calculated as the difference between planned output and real output, divided
by planned output.

14. Operations Efficiency
• Inventory turnover control – extra inventory means tying up valuable
financial and real estate resources. The main idea of manufacturing is to use
its space for production, not for storing extra materials and components. The
higher inventory turnover rate is, the more efficiently supply chain is built.
Inventory turnover rate can be calculated as the number of days materials
haven’t moved from warehouse storage to production. The targets depend
largely on manufacturer specific needs, but as the general rule, the turnover
over 30 days could be considered as a long period.

15. Conclusion
• In manufacturing, where there are many outside influencing factors, tracking
the performance of an operation with KPI metrics means the difference
between success and failure.
• It is very important to keep in mind, that manufacturing metrics by
themselves can’t solve the ongoing issues. They act more like a roadmap and
a compass, showing whether the operation is developing in the right
direction. After identifying the problem and what causes it, it is very
important to start taking actions and continuing measuring the effectiveness
of these actions with performance indicators.

16. Conclusion
• These actions can be absolutely different – from implementing a just-in-time
material flow process to reduce inventory levels, to installing MRP software
that will let you have full overview and control over all steps of the
manufacturing process. The main thing that actions are taken and there is a
specific manufacturing metric it can influence.
• Read more about Manufacturing Software.