Why are Key Performance Indicators Crucial for Manufacturing

Why are Key Performance Indicators Crucial for Manufacturing?

What are manufacturing KPIs?

A manufacturing Key Performance Indicator (KPI) is a quantifiable measure that manufacturers use to evaluate performance for a certain amount of time. With KPIs, manufacturers can monitor, analyze, and optimize operations to increase efficiencies and stay competitive.

KPIs help manufacturers:

  • Make better business decisions by keeping track of critical measurements.
  • Discover opportunities to increase customer satisfaction, improve competitiveness, and lower production costs.
  • Convert abstract ideas into manageable targets.  

What KPIs should manufacturers track in 2023?

Key performance indicators offer insight into areas where improvement is required. It helps optimize the factory floor and eliminates activities or operations that do not add customer value. KPIs help businesses drive long-term business growth, save time, reduce information overload, and offer critical analysis.

Let’s see what manufacturing KPIs are essential for 2023

  • · On-time Delivery
  • Production Schedule Attainment
  • Total Cycle Time
  • Throughput
  • Capacity Utilization
  • Changeover Time
  • Yield
  • Scrap
  • Planned Maintenance
  • Availability
  • Customer Return Rate
  • Overall Equipment Effectiveness

Here is a brief look at how some of these KPIs help manufacturers.

1. On-time delivery 

Delayed supplies, machine malfunction, and unrealistic timelines lower productivity and hurt customer satisfaction. A high delivery success rate is crucial to attracting new customers and satiating current ones. 

2. Production schedule attainment 

Checks if production was well-planned and workers met their benchmarks. In addition, it helps ensure on-time deliveries and improves productivity. 

3. Total cycle time 

Total cycle time means the time taken for the customer order to be completed from the start of production until the shipment. It excludes breaks or waiting time.

4. Throughput

It shows how well your machines are producing on the shop floor. When the machines are in good condition, throughput is at its peak.

5. Capacity utilization

This KPI helps manufacturers understand the condition of machines operating and ensures their maximum productivity on the shop floor.

Use KPIs to fuel your business growth

Use KPIs to fuel your business growth

The speedometer in a car is similar to a KPI in a manufacturing business, it provides important information. Manufacturing KPIs provide insight into how employees perform, the status of machines and raw materials, and whether deadlines are met. In addition, available capacity in the production line is a measure that can increase the overall business bottom line. KPIs aim to maximize capacity utilization, giving the machines an ideal cycle time.

KPIs demonstrate challenges and successes across the entire production area. It lets you monitor cost and efficiency gains, customer satisfaction, productivity, employee satisfaction, and more. KPIs quantitatively measure strengths and weaknesses and offer insights into how production contributes to company goals.

But as a manufacturing business grows, tracking KPIs is a challenge. Intelligent Enterprise Resource Planning (ERP) software provides real-time dashboards that show metrics and KPIs to help manufacturers analyze information to define measurements in new ways. ERP allows you to develop custom reports and provides several existing reports to make smart business decisions.  

The role of ERP in KPI management

ERP is a complete suite of tools designed to help manufacturers integrate data and manage all business functions on a single screen. It centralizes organizational data, provides real-time visibility, and helps decision-makers plan their strategies.

With modules such as production, quality management, financial management, inventory management, sales, CRM, etc., ERP increases data visibility and provides greater control of all business activities.

With the right ERP software, you can set the foundation of your business and map out future plans.  For example, if your manufacturing business is concerned about tracking production KPIs, ERP software can help you stay competitive with the right tools.

ERP software has pre-defined KPIs that can be adjusted to your business requirements.

Modern ERP software shows real-time metrics and KPIs to achieve business insights. With a highly intuitive user interface and role-dependent dashboards, ERP software tracks long-term and short-term KPIs and helps businesses meet their goals.

Setting up KPIs is crucial if you select new ERP software for your manufacturing business. Ask your ERP vendor to outline the software’s KPIs and metrics. They should understand your business goals so they can set up KPIs to help you measure business performance.

Advanced ERP dashboards help decision-makers consume information at a glance through pre-built reports. KPI dashboards improve the speed of the manufacturing process to boost the company’s profitability.

Wrap up

Enterprise resource planning software provides business intelligence dashboards to view KPIs in real-time. You can select, view, manage, and edit the required data for measuring KPIs.  This allows decision-makers to address business challenges such as eliminating scrap, reducing costs, and decreasing the time it takes to meet customer orders.

If you want to learn more about how ERP software can manage KPIs and metrics and what role ERP plays in a manufacturing business, please contact us.

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