6 essential KPIs for world-class factory performance

6 essential KPIs for world-class factory performance

“If you can’t measure it, you can’t manage it,” so said Management Consultant Peter Drucker, and this certainly holds true for the manufacturing environment.

Depending on the systems and processes you have in place on your factory floor, you may face one of two problems; either you don’t know which key performance indicators (KPIs) you should track to enable you to improve your factory performance, or you are unable to collect sufficient data to accurately measure the KPIs you want to track.

Here are our “top six” essential manufacturing KPIs to get you started.

1. Overall equipment effectiveness (OEE)

OEE is a much talked about KPI and shows how manufacturing assets perform relative to their theoretical maximum potential. Businesses that invest heavily in plant will find that OEE measurement is an essential metric to track.

OEE measures three elements of performance:

  • Availability (actual running time vs running time)
  • Performance (actual speed vs standard speed)
  • Quality (good production vs total production)

OEE measures performance against an arbitrary benchmark, or standard. Your plant will have constraints that are very different to other businesses, so what matters is not the absolute OEE value, but the ongoing measurement and continuous improvement from your starting point.

2. Overall labour effectiveness (OLE)

Labour effectiveness is probably the most under-utilised manufacturing metric. Where OEE quantifies how your machine assets are performing, OLE does the same for your most important assets: your people.

Just like OEE, we can break labour effectiveness down into its constituent parts:

  • Utilisation (direct hours vs attendance hours)
  • Performance (actual speed vs standard speed)
  • Quality (per cent labour hours lost to rework or scrap)

Labour costs make up a large proportion of the costs of manufacture for most businesses. You probably know the theoretical labour content of what you manufacture, but how does that compare to your actual wage bill?

Whilst OEE has been widely adopted, OLE is rarely tracked in detail. To be able to improve labour effectiveness, you need to be able to measure and track it in detail by product, team, shift, operator, activity, and several other variables.

Unfortunately, most manufacturing teams only have the ability to produce an aggregated OLE for the entire organisation. This approach is not helpful in explaining who, why or when specific teams or operators are underperforming. Detailed OLE tracking enables manufacturers to address the specific areas that will deliver the biggest performance improvements.

In manually intensive industries, improving labour productivity will also help to make the most of fixed overhead costs as these become shared across more production effort.

3. Scrap/yield

After plant and labour costs, material costs are the subject of our third KPI. It’s essential to track scrap rates in order to keep track of material costs. Your Finance Director might be satisfied to know that your business’s overall scrap rate is 3%, but as Production Manager, that level of detail won’t enable you to find and fix the problems that are causing failures, so it will be more difficult for you to reduce the scrap rate. Like OLE, the devil is in the detail.

4. Right first time

Nothing is less lean than having to rework product. Tracking where and why your products fail their tests will allow you to examine the root cause of any issues. You can then put in place preventative actions to reduce the time and cost of repeatedly reworking products.

5. On-time in full

It’s no good manufacturing with ever-reducing costs if you can’t get the product to the customer on time. Tracking On-Time-In-Full (OTIF) delivery achievement will ensure that you are satisfying your customers’ demands.

‘On time’ means meeting whatever commitment you made to your customer, whether that’s next week, next Tuesday or 5pm on Friday. If a delivery is missing parts or materials, you haven’t delivered it ‘in full’.

Tracking OTIF will highlight deficiencies in your full order process, from order creation right through to delivery.

6. Non-Conformance/complaints

While first-time pass rate tells you a lot about the cost of achieving quality, complaints are the ultimate measure of customer satisfaction. You should formally track every complaint and track and monitor incident rates. Only by doing this can you continually improve quality to work towards 6-sigma levels of customer satisfaction.

How to implement manufacturing KPIs

While all of the above manufacturing KPIs are critical to improving performance, you will probably have other important KPIs depending on the nature of your business. For example, many factories will have identified safety as a key metric.

MESTEC’s software enables manufacturers to easily collect the data that they need to track KPIs, giving them access to the detail they need to inform decision-making, and embark on a journey of continuous improvement.

We offer our manufacturing system ‘as a service’ for a low monthly fee based on the number of touch terminals you need, which makes it affordable and easy to budget for. Typically, we can get a factory up and running within a week.

Contact us today to start managing your factory KPIs.

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