There is a philosophy in manufacturing that is “the right product at the right place at the right time at the right cost and at the right quality.” This means that every feature, from material to machinery is streamlined to meet the highest standard of efficiency. Setting effective KPIs is essential to production planning. It helps you monitor your operation processes and meet customer demands.
Tracking relevant KPIs differentiates your brand when it comes to excellence. Every individual involved in the supply chain force needs these metrics for efficiency and delivery. This reduces cost, enhances production capacity, and increases revenue. In this article, we outlined top 10 metrics used for effective production tracking.
10 Significant KPIs used for Effective Production Tracking
Cycle Time
This is the period it takes for a production process to complete its course. It shows the timeframe needed for a line of work to complete. Cycle time is needed for production planning and resource utilization. Cycle time calculates how long for one unit of production to be completed. Backed with this knowledge, workers can set realistic targets they can meet in order to improve efficiency.
The formula for cycle time is: (Net Production Time/Number of units produced)
Capacity Utilization
Capacity utilization measures how manufacturers use available resources. It looks at how staff utilize resources such as equipment, time, raw materials to meet the highest level of output. With this metric, manufacturers can spot bottlenecks on time and identify inefficiencies in the production line before it escalates. This improves the productivity of your employees and optimizes the production processes.
The formula for capacity utilization: (Actual Output/Maximum Possible Output)
First Pass Yield
This looks at the amount of goods produced that meets company standards. This aids manufacturers in assessing the quality of products made. For instance in a water bottling line where 500 units of table water are produced. After going through quality assurance, 400 units passed the QA test whereas 100 needed to be re-fixed. This means that 80% of the products passed the first pass yield whereby 20% needed adjustment.
The formula for first pass yield: (Good Units Produced of First Attempt/Total Units entering the process) X 100
Downtime
Downtime is one of the major blockers that affect productivity. It is the period in which manufacturing activities are delayed due to equipment breakdown, low inventory, poor maintenance etc. Calculating downtimes help manufacturers plan for unprecedented breakdown in equipment or prepare sufficient materials in advance. It helps manufacturers to cut down cost and minimize errors that cause downtime.
The formula for downtime is: (Downtime Hours/Total Available Production Hours) X 100
Inventory Turnover
Inventory turnover is the return gotten on the sale of products and the balance of stock remaining. It is a key metric used to analyze how a company manages the stockflow. An effective inventory turnover meets discrepancies ahead. It creates room for steady flow of materials and avoids delays. The benefit is that manufacturers can meet customer demands, reduce waste and optimize stock levels. This in return leads to better operations.
The formula for inventory turnover is: (Cost of Goods Sold/ Average Inventory)
Overall Equipment Effectiveness
OEE is the ability to meet up with production targets at the allowed time. The metric reveals the activities on the manufacturing machinery, spots problems on time, and maximizes the potential of your equipment. OEE gives insights into your production process and how to make the best of your factory performance. It is used to identify significant areas for improvement.
The formula for OEE is: (Availability x Performance x Quality)
Scrap Rate
This is a metric used to assess goods that are eliminated because they don't meet the company standards. The aim is to evaluate goods produced and remove damaged materials or finished goods that have errors from the production line. This metric is important because it means less waste which significantly improves workflows and ensures there is better utilization of resources. It curbs quality control issues.
The formula for scrap rate is: (Scrap material/Total Units Produced) X 100
Change Overtime
Change over time, in production, is the period it takes to switch from one production line to another. This metric is important because it allows managers and staff in the supply chain to meet customer demands on time. Also, it gives room for flexibility. Let's say Floor A was producing packaged rice but now needs to switch to producing packaged beans. The changeover time is the time it takes to clean the machines, adjust the settings, and get the production line ready for the new product (beans).
The formula for change-over time is (end time of last good part - start time of first good part).
Lead Time
Lead time is the estimated period it takes for an order to be fulfilled. From the time the customer places a demand right to delivery. It's an essential metric for manufacturers because it increases customer satisfaction. Customers are loyal to companies that are efficient and can meet their demands on time. It increases sales and leads to faster production.
The formula for lead time is: (Order Delivery Date - Order Placement Date)
Employee Turnover
Employee turnover is the amount of workers involved in the production process. When the actual number of employees expected to work on the production line is less than expected. This leads to delayed production schedules. It helps companies make strategic decisions and create structures to improve the workforce.
The formula for employee turnover: (Number of Employees who left/Average number of employees) X 100
Conclusion
KPIs aid manufacturers to set targets for efficiency and productivity. It is what makes the difference in your production planning. From estimating the cycle time to first pass yield, scrap rate, employee turnover etc. This article gives you a guide on what to measure for your production process.
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