The objective of all manufacturing businesses is to be as efficient, innovative and flexible as possible. To achieve this, there is nothing better than having established production indicators .
Effective factory operation can offer its customers a wider range of services and products, thinks about the well-being of its employees, has healthy financial indicators and is able to adapt to the changing environment.
Different companies have different objectives and goals. Regardless of what they are, to understand if the company is moving in the right direction, it is essential to be able to monitor all the changes that occur.
How to achieve it?
What are production indicators?
The best way to monitor whether the company is moving in the right direction is to employ different types of indicators.
Production indicators help manufacturers achieve their long- and short-term strategic and tactical objectives.
The use of indicators helps to better understand the current situation and evaluate the effectiveness of the implementation of the strategy.
In general, the objective of manufacturing indicators is to monitor the performance of operations in different areas. These may vary across companies depending on the circumstances at any given time.
Another factor to take into account is that effective production indicators must be measurable and viable ; There must be a clear understanding of what is measured, how it is measured and what actions can lead to improvement of the indicator in the future.
Characteristics of production indicators
The production indicators of a factory change constantly. Some production metrics are more important during a period of company development and when this period ends other measures become more important and we should focus on them.
For example, for new manufacturing operation, it is important to know how quickly production volumes can be increased and maintain this momentum. In case customer complaints increase, the manufacturer should pay more attention to the quality of the products and their performance.
Importance of production indicators
Measuring production indicators in a factory is of vital importance due to several reasons:
- Performance evaluation : Production indicators provide a quantitative measure of factory performance in terms of production and efficiency. They allow us to evaluate whether the established objectives are being met and whether the expected production levels are being achieved. This helps identify areas for improvement and take corrective action in case of deviations or non-compliance.
- Informed decision making : By measuring and monitoring these indicators, you get a clear view of the efficiency and productivity of the processes. This allows identifying opportunities to optimize production, reduce costs, improve quality, implement changes in the supply chain, among other strategic decisions.
- Identification of bottlenecks: By measuring production at different stages and areas of the factory, you can detect places where delays, inventory accumulation or inefficiencies occur. This allows you to focus improvement efforts on critical points and optimize the overall workflow.
- Quality control : Production indicators are closely related to the quality of the manufactured products. By measuring and monitoring quality indicators, such as the number of defective products or the percentage of rework, the effectiveness of quality control processes can be evaluated. This helps detect quality issues early and take corrective action to ensure products meet required standards.
- Efficiency in the use of resources : Production indicators also allow evaluating the efficiency in the use of resources, such as labor, raw materials, energy and time. By measuring indicators such as performance per work hour or raw material consumption per unit of production, inefficiencies and savings opportunities can be identified. This contributes to cost reduction and improved factory profitability.
Examples of production indicators
The situation for each manufacturer is unique and finding the list of production indicators that are equally relevant and important for all companies is a difficult task.
Here are some examples of indicators that you can use to measure the quality of the production process of any company, regardless of its size:
Cost reduction and increased profitability
Manufacturing cost per unit – Calculated by dividing the total number of units produced by their production cost, excluding material cost.
The number shows how efficiently current resources are being used, that is, whether the cost of using human resources and equipment is appropriate.
Productivity in revenue per employee – Similar to the previous indicator, productivity per employee is calculated by dividing all revenue generated by the total number of employees. This can be calculated at various levels, at the company level, at the department level and even at the production line level. Revenue per employee shows the areas with the lowest and highest ROI.
Downtime in proportion to operating time – Calculated as the ratio between the time the production lines were stopped and the time they were operating. This ratio is a direct indicator of the availability of assets for production. The lower the number, the more efficiently the manufacturing equipment is being used. If the ratio is 0.5 it means that the production lines were idle half of the time.
Quality of incoming material: The quality of materials generally determines the quality of the final product. If the quality of the materials supplied is low, the expense for product repairs increases.
This means additional cost for the manufacturer. This can be calculated in different ways: by supplier, by product category, as a percentage of defective materials vs. good materials.
On-time delivery: Calculated by looking at the difference between purchase orders delivered on time and late orders, then divided by the number of total orders. Monitoring this KPI helps to understand whether the supplier is trustworthy or not.
Delivery compliance: Monitoring these types of production indicators helps understand whether the product is shipped as promised or with delays, and helps prevent conditions in which customers would leave dissatisfied with the product. It will also help identify potential problems in customer logistics.
Performance: In simple terms, it measures the quality level of the product. It is the number of good units without repairs or waste coming from the production line. High performance means that all elements of the manufacturing process work well and there are no problems with material quality, employee qualifications or equipment. Poor performance means there are problems at some point during the manufacturing process. This is one of the key metrics that indicate that something is wrong and that further investigation of the process is required.
Capacity utilization: Shows the rate of production capacity, that is, whether the production capacity is used effectively or not.
It is a relationship between the current production, which is actually produced with the installed equipment, and the maximum possible production that can be produced with the same equipment. The higher the rate, the more efficiently the equipment is used.
Production or planning achievement: It is the production capacity to execute a plan. In manufacturing, planning plays a very important role.
The more complex the manufacturing processes, the more important the ability to execute the plan will be, but it will also be more difficult to achieve.
Meeting the planning or schedule to produce a certain quantity of something is very important if the manufacturer wants to meet customer expectations and corporate strategy.
Inventory turnover control: Additional inventory means tying up valuable financial and real estate resources. The main idea of manufacturing is to use space for production and not to store additional materials and components.
The higher the inventory turnover rate, the more effectively the supply chain is built. The inventory turnover rate can be calculated as the number of days in which materials have not been moved from the warehouse or warehouse to production.
The objectives depend largely on the specific needs of the manufacturer, but as a general rule, rotation of more than 30 days can be considered a long period.