Key Performance Indicators, or KPIs, are used in all manufacturing industry segments to measure performance, business activities, and successes. But, simply measuring various parameters for the sake of compliance isn’t enough. Only with useful intelligence can KPIs be used to improve efficiency and decision making. A recent white paper from Acumatica offers insights and best practices.
What Are KPIs for in Manufacturing?
In manufacturing, analytical and data visualization tools make it easier to track everything from production volume to data from sensors and devices. These provide valuable business intelligence. Profit, loss, cash flow, inventory turnover ratio and adherence to production schedules are among the thousands of measurements that are considered KPIs.
Enterprise Resource Planning (ERP) software presents pre-defined KPIs in graphical format according to the role of the user within the company. Nonetheless, one must be careful in avoiding information overload. Despite the shear number of measurements available, a relatively small number are most useful for your business.
The Best KPIs for Manufacturing
A KPI may summarize events and data as historical measurements. Financial and predictive KPIs are often used as well, but tracking operational KPIs are crucial to the success of a manufacturing business. These include:
Plan vs. Actual Hours and Cost
Comparing a plan to actual hours and cost can identify trends indicating whether performance is improving or deteriorating. Cost factors include labor, machinery, materials and tools as well as fixed and variable overhead. The planned and actual performance of these factors can be compared over a specified time period. If the goal is to improve results, this KPI can help compare the performance and processes of different areas of the plant.
Utilization and Capacity
The Work Center Dispatch KPI provides visibility into planned, in-process and optionally completed work. Tracking utilization can help balance resource loads, which can lower costs, reduce overtime, and increase on-time completions. It can also provide insights into work and process that are “in-queue” to be completed. Greater certainty in the planning schedule enables manufacturers to improve on their delivery promise, while tracking capacity helps avoid overproduction, which consumes more resources than having idle equipment.
With this KPI, insights into quantity trends and total costs of labor and machinery are available. It’s also possible to monitor production schedules to assess resource utilization and workflow. A manufacturing dashboard, displaying a list of production orders, their status, and location, enables plant personnel to view the status of work center loads and order types across the plant or its departments. They can also identify orders invoiced and quantities produced, completed, or scrapped.
Working with a Partner That Can Help Set Up Your KPIs
Improved visibility into business operations isn’t enough. The right KPIs must be available for organizations to grow. To this end, it’s often best to work with an experienced partner. An Acumatica partner like us can help you find and set up the most relevant KPIs (including Plan vs. Actual Hours and Cost, Utilization and Capacity, and Scheduled Production). We have worked with many companies in figuring out how the right KPIs can help their manufacturing businesses grow.