Whether you have just stepped into the field of business or are an already established business, you need to have an insight into what matters for the growth of your business. For that purpose, you need to measure the key performance indicators (KPIs).
KPIs help organizations and businesses analyze their manufacturing processes which are then utilized to measure the success relative to a set of already decided goals or objectives of the organization.
Manufacturing companies will commonly use these KPIs for production which provides insight into the manufacturing process. This not only helps them gain a proper insight but also allows both management and operators to achieve the objectives related to production.
What is the importance of Production KPIs?
The manufacturing industry has been expanding at an exponential rate. In this ever-increasingly competitive manufacturing industry, production is considered to have a very prime importance.
To meet the demands of customers and the need to produce products faster and more efficiently, manufacturing companies have to set and monitor the goals closely. This is where production KPIs help such companies achieve their goals.
KPI in production is crucial because it provides you with a standard with which to compare your current performance. KPIs in production demonstrate whether or not you and your team are reaching your manufacturing goals. Executing and utilizing KPIs in your company allows you to set goals, develop a successful technique to achieve your objectives, and assess your performance.
Benefits of Key Performance Indicators
Key Performance Indicators (KPIs) are a way to measure the success of an organization and its employees.
You may have heard about KPIs before, but if not, here’s what they are:
- Key Performance Indicators are metrics that measure how successful an organization is at accomplishing its goals.
- KPIs can be used to track how well an organization is performing against specific goals or objectives.
- KPIs can be used as a tool for measuring employee performance and satisfaction so that managers can make sure they’re addressing any issues before they become more serious problems
How to make good use of Manufacturing KPIs in a business?
When you make good use of quality KPIs in manufacturing in the business, you are guaranteed to enhance the productivity and efficiency of your team. You can make better use of production capacity and enhance the quality of the product. In addition to that, you can also make delivery times better, minimize the production of waste, and control the overall costs of production.
KPIs for the manufacturing industry need to be constantly changed according to the demands of the business. So periodical reviewing of the manufacturing KPIs is necessary to ensure advancements are made where they are most needed.
Every typical KPI for manufacturing follows an iterative method to enhance and reach business goals, as follows:
- Accurately measuring the KPI
- Classifying the KPI
- Sorting out the categories with an elevated percentage of losses
- Finding out what causes the problem
- Enforcing countermeasures for problem-solving
- Re-measuring the KPI as an iterative process.
Types of Production KPIs used:
Production KPIs can be classified into three different categories:
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Machinery or Asset Focused
Those KPIs in production that are primarily used to monitor the machinery are included in this category. Examples of machinery or asset focused KPI include the machine uptime rate, which is used to calculate the time the machine is maintenance-free and is working as anticipated. This category also covers defects and changes over time (time taken to set up the machine for another product line).
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Unit or Product Focused
Production planning KPIs whose aim is to focus on the products produced are included in this category. Unit rate, Throughput, and cycle rate are included in this classification.
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Cost Focused
This category includes those KPIs which measure the costs that are attributed to the production procedure. KPIs such as avoided costs, staffing costs, or raw material costs would fall into this category.
5 Key Performance Indicators for Production
Production planning KPIs vary according to the demand of the organization and from one organization to the next. There are several KPIs used but there are 5 common production KPIs examples that are used in production.
- Count – A very common production planning KPI for a factory floor is the count. Count refers to the number of products that have been produced. In many cases, the individual employee or shift output is compared to build-up competition amongst employees.
- Reject Ratio – The goal of this KPI is to decrease the amount of scrap created as much as possible to reach profitability objectives.
- Rate – This KPI estimates the speed at which goods are being manufactured in the organization. Lesser rates mean lesser products are being produced which means decreased profits, and faster rates may influence the quality of the product.
- Target – This KPI can be used to set values for output, rate, and quality. This motivates workers to reach the set goals and targets for each of the above-mentioned types.
- Overall Equipment Effectiveness (OEE) – This KPI is used to estimate whether resources, such as personnel and machinery, are being used efficiently or not. A higher OEE value means the machinery is being used efficiently to produce more products.
KPIs for production have to be easy to interpret for the workers and this is the only way employees can act upon them. If it is difficult to interpret, it may be difficult for them to follow them accordingly. No strategy in manufacturing can work efficiently over time if not constantly made better.
Why is it so critical to select the right KPIs?
Simply put, KPIs can help your organization optimize its performance.
If your organization is focused on the KPIs, your workers will be willing to change the appropriate behaviors. On the other hand, if you select the wrong KPIs for your organization, you can increase the risk of workers choosing unintended behaviors.
There are generally 2 rules you need to follow to select the right KPI:
- Make your KPIs as easy to understand as possible. This will help your workers clearly understand what they need to do and how they can achieve the set goals.
- SMART KPIs: SMART stands for
- specific
- measurable
- attainable
- realistic
Imply all these things when selecting a KPI and this will make your organization reach all your goals in a matter of no time.
Selecting the right KPI is very important because it helps to ensure that the data being collected and analyzed is relevant to the goals and objectives of the organization. By selecting the right KPIs, organizations can focus on the areas that are most important to their success and make data-driven decisions to improve performance.
Here are a few reasons why selecting the right KPI is important:
- Relevance: By selecting the right KPIs, organizations can ensure that they are measuring the aspects of production that are most critical to their success. This can help to prioritize efforts and focus on areas that need improvement.
- Actionability: The right KPIs will provide information that can be used to make decisions and take action to improve performance.
- Alignment: The right KPIs will align with the overall goals and objectives of the organization and help to ensure that everyone is working towards the same goals.
- Benchmarking: The right KPIs will allow organizations to compare their performance to industry standards and competitors, which can help to identify areas of improvement and best practices.
- Continuous improvement: By selecting the right KPIs and monitoring performance over time, organizations can track progress and make adjustments as needed to improve performance and achieve long-term success.
By selecting the right KPIs, organizations can increase their chances of success by focusing on the areas that matter the most and making data-driven decisions to improve performance.
What KPI selection mistakes should you watch out for?
There are 2 common mistakes organizations usually make while selecting a KPI:
- Selecting KPIs you’ve always measured.
- Selecting KPIs that are the easiest ones to measure.
How can you create a culture of KPI monitoring and improvement?
When you introduce KPI into your business, you might face a few challenges. Not everyone in your organization may know what KPIs are, how to use them, and what benefits they provide.
For this purpose, you need to ensure that everyone on your team is on the same page. Everyone knows what KPIs are. Arrange some educational sessions for your team to help them understand the basic concept and why KPIs are very important for your organization to move ahead in this field.
How Can Microsoft Dynamics365 help?
Microsoft Dynamics 365 is a very flexible CRM system that allows companies to use out-of-the-box fields for the CRM records or develop a field for an OOB. Businesses can then guarantee that the KPIs that are important for them are correctly revamped in CRM. Later on, they can use the CRM records to investigate and monitor their KPIs for production planning.
Folio3 authorizes businesses to tap into the location element of the company’s data. It also permits them to imagine and use the CRM data and further dig into the analyzed data to explore other opportunities based on different KPIs.
Dashboards in Dynamics 365 CRM are an incredible way to have the information organized which is important for a user to analyze the KPIs.
FAQs
What Are Key Performance Indicators (KPIs)?
KPIs for production planning are estimates used to assess the performance of a business. KPIs can be quantitative or qualitative and are targets that can help you estimate your overall progress against your most strategic objectives.
Why are key performance indicators so important?
KPIs are important because they help you understand where you as an organization stands. It helps you set goals and gives you a deep insight into if you are making progress or not, if you are achieving your goals or not, and if you’re headed in the direction you want.
How do I pick which KPIs to track?
You need to evaluate everything for your organization. To best identify the right KPIs, make them easy to understand and follow the SMART criteria mentioned above. You also need to make sure they relate to what objectives you expect to achieve in your business.
