Manufacturing boom or bust: Why KPIs can fail to deliver

Manufacturing boom or bust: Why KPIs can fail to deliver

After 10 years in the doldrums, UK manufacturing output has bounced back. According to the Office for National Statistics (ONS), manufacturing growth is expanding at its fastest rate since 2008. Strong global demand and the weaker pound has once again made UK exports more competitive.

On the other hand, business is still tough for manufacturers targeting the UK market, as domestic growth remains sluggish. Economists blame Brexit uncertainty and a decline in public sector investment for the conditions in domestic markets.

Whether you are enjoying an export-driven business boom or not, these diverse market conditions could be stretching your shop floor to its limits. Maximising production throughput while maintaining quality can be just as difficult as looking for ways to cut costs so that you can maintain profit margins. Whatever your priorities, you will struggle to achieve either of these objectives without having solid KPIs in place.

From KPI theory to practice

We identified some of the most important KPIs for success in manufacturing in this blog. Knowing the KPI theory is one thing, but in practice a lot of manufacturers still struggle to use KPIs effectively to improve performance. Why is that?

In our experience, these are the most common excuses we hear from manufacturers when we ask them why their manufacturing KPIs don’t deliver to their full potential.

“We don’t have the data.”

This is a really common problem on the factory floor, especially in environments that rely on a lot of manual labour. Look at any of the KPIs here, and you’ll see that measuring how long it takes to complete a task is a fundamental metric for calculating overall equipment effectiveness (OEE) and overall labour effectiveness (OLE).

A lot of factory floors still use paper-based timesheets that depend on operators filling them in accurately, and then someone entering and processing that data. This manual process is time consuming in itself, as well as being subject to gross inaccuracies. Minor discrepancies in source data can lead to big error margins when aggregated over multiple tasks, teams and products.

“The KPIs are too difficult to calculate.”

Assuming that you’ve collected accurate data, you still need to crunch the numbers to get meaningful KPIs such as overall labour effectiveness (OLE). To calculate OLE you need to consider three components: utilisation (direct hours vs attendance hours), performance (actual speed vs standard speed) and quality (per cent labour hours lost to rework or scrap). This doesn’t seem like an unmanageable number of variables, but overlay OLE for each operator, team and production line and the number crunching soon becomes unmanageable – if, like many manufacturers, you are using spreadsheets to manage the numbers.

It’s not surprising that many manufacturers stop at calculating KPIs for aggregated, monthly data. That might be good enough for the company accountant, but it doesn’t cut the mustard if your aim is to improve factory-floor performance.

“We only have last month’s KPIs!”

The other key variable that we didn’t mention above is time. The holy grail for performance monitoring is to have real-time or ‘near’ real-time metrics that enable Production Managers to quickly see if something is going wrong and put it right before too much production capacity is lost, or a product has to be re-worked because of a quality issue.

If you want to use KPIs to improve your operations, having up-to-date figures will open up more options to reduce costs or improve productivity.

“The KPIs are in a report in a filing cabinet.”

If KPIs are to be useful you need to share them widely and effectively. Pinning graphs to a notice board is marginally better than filing the numbers away in a cabinet, but the ultimate is to have real-time displays on screens on the shop floor. Many times we have seen a dramatic increase in productivity as a result of simply sharing accurate performance data with shop floor operators.

You should think of KPIs as live data, available to everyone, which enable continuous improvement of the production environment. KPIs should also be a tool for troubleshooting, available for Production Managers to interrogate for key operational information, such as labour and materials costs, yield and failures, and so on. Only by enabling easy analysis of data will you encourage the use of KPIs as a basis for improving manufacturing productivity and efficiency.

“We’ve got KPIs, but we don’t know what to do with them.”

Having actionable KPIs depends on addressing all of the above. You must have accurate, granular data that you can easily collect in real time. You must be able to take that data and use it to create relevant KPIs. Sharing up-to-date KPI information at an appropriate level with your teams – including production operators – in an easy-to-digest format, enables them to take action either to put something right or to support a process of continuous improvement.

No more tick-boxes…

If your use of KPIs has become a tick-box exercise that you only do to satisfy monthly reporting then it’s time to take a step back and re-evaluate what you want from the shop floor metrics you gather.

Our manufacturing solutions measure and transform factory and labour productivity. We provide shop floor software solutions that enable you to easily collect the data that you need to track KPIs. Our solutions enable access to the detail that you need to inform effective decision-making, promoting continuous improvement.

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

Discover how our real-time shop-floor data collection system can help your KPIs drive success here.

Ready to find out more?

Please contact us as we would be delighted to discuss your manufacturing challenges and demonstrate how our rapid, low-risk solution could bring major cost savings and performance improvements to your business.

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