Manufacturing KPIs
1. Throughput – This is probably one of the most fundamental KPIs for the
manufacturing industry while also arguably one of the most important. The
Throughput KPI measures the production capabilities of a machine, line, or plant;
also known as how much they can produce over a specified time period.
Throughput = # of Units Produced / Time (hour or day)
2. Cycle Time – The cycle time KPI is very simple in nature, but that doesn’t mean it
can’t be manipulated to be a very powerful tool. In the manufacturing industry, cycle
time is the average amount of time it takes to produce a product. Simple, right?
Maybe not as simple as you think. The cycle time metric can be used to measure the
time it takes to manufacture a completed product, each individual component of the
final product, or even go as far as to include delivery to the end user. Thus, cycle
time can be used to analyse overall efficiency of a manufacturing process on the
macro scale, as well as determine inefficiencies on a micro scale.
Cycle time = Process End Time – Process Start Time
3. Demand Forecasting – This manufacturing metric is used by companies to estimate
the amount of raw materials they will require to meet future customer demand. This
metric can be a little bit trickier for companies to fully utilize, as it is highly dependent
on uncontrollable external factors. The basic formula is as follows:
Projected Customer Demand = Raw Materials * Production Rate
4. Inventory Turns – This is a measure of how many times inventory is sold over a
specific time period and helps indicate resource effectiveness. Low ratio numbers
indicate poor sales and excessive inventory, while high ratio numbers represent
strong sales or insufficient inventory.
Inventory Turns = Cost of Goods Sold / Avg. Inventory
5. Production Attainment – This production performance metric measures production
levels over a specific time period and calculates what percentage of the time a target
production level is achieved.
Production Attainment = # of Periods Production Target Met / Total Time Periods
6. Cash to Cash Cycle Time – This is a time-based manufacturing KPI metric. It
measures the amount of time it takes from an initial cash outlay for raw materials,
inventory, or a manufacturing plant until the company receives cash from its
customers for its products. This KPI is typically measured in days.
Cash to Cash Cycle Time = Inventory Sale Date – Inventory Purchase Date
7. Avoided Cost –The avoided cost manufacturing metric is an estimate of how much
money you saved by spending money. Seems strange, right? The most common
example is how much money is spent on machine maintenance vs. repair cost if a
machine were to break down, plus the lost production value associated with the
repair downtime.
Avoided Cost = Assumed Repair Cost + Production Losses – Preventative
Maintenance Cost
8. Changeover Time – At the most basic level, changeover time represents the amount
of time required to switch from one task to another. Typically, in manufacturing, it
represents the amount of time lost from switching a production line from one product
to another. However, it can also represent the amount of time lost during a shift
change.
Changeover Time = Net Available Time – Production Time
9. Takt Time – This is a very useful manufacturing KPI when scheduling production
orders or deciding whether to take an order from a client. Takt time is the maximum
permissible amount of time that can be spent manufacturing a product while still
meeting a client’s deadline. For those who are curious, Takt stands for “taktzeit,” a
German word meaning “cycle time.” While very similar in nature, this is not to be
confused with the cycle time KPI.
Takt Time = Net Available Time / Customer’s Daily Demand
10. Return on Assets (ROA) – You might be thinking, this seems like it has less to do
with manufacturing and more to do with finance. That is because it does. However,
financial metrics are just as important as manufacturing metrics. You can’t have a
business if you aren’t making money. This metric evaluates how well your business is
making use of its assets (money). It is the annual net income divided by total assets
(fixed assets + working capital).
ROA = Net Income / Avg. Total Assets
11. Machine Downtime Rate – While this is commonly used as a manufacturing metric
to give a general snapshot of how operation is going, it doesn’t paint a full picture.
Machine downtime is a combination of both scheduled downtime and unscheduled
downtime.
Machine Downtime Rate = Downtime Hours / (Downtime Hours + Operational Hours)
12. Percentage Planned Maintenance – This production metric is used to analyze the
ratio of scheduled maintenance against the unscheduled maintenance. This KPI is
useful in identifying when more preventative maintenance is required for certain
assets.
PPM = (# Planned Maintenance Hours * 100) / # Total Maintenance Hours
13. Downtime to Operating Time – This manufacturing metric can be used to measure
the effectiveness of machinery maintenance and the machine itself. With effective
preventative maintenance, the amount of downtime can be reduced, creating a more
optimal manufacturing process. Companies aspire to reduce this ratio as much as
possible.
Downtime to Operating Time = Downtime / Operating Time
14. Capacity Utilization – This production KPI measures the amount of capacity being
utilized as a function of total capacity available. Ideally, companies want this number
to be as high as possible, as it indicates they are making better use of their
production capabilities and maximizing return on their assets. This metric can also be
used by management when deciding whether to take on new orders or quoting lead
time, as it gives a snapshot of available resources.
Capacity Utilization = Actual Factory Utilization / Total Productive Capacity
15. First Pass Yield – This is one of the most fundamental production KPIs. It calculates
the percentage of products manufactured to specification the first time through the
process. This means that they do not require any rework or become scrap. A higher
FPY rate is very desirable for any company.
First Pass Yield Rate = Quality Units / Total Units Produced
16. Overall Equipment Effectiveness (OEE) – This key performance indicator is
considered the gold standard for measuring manufacturing productivity. The higher
your OEE, the more effective your equipment is. A score of 100 percent means that
you are manufacturing 100 percent of the time, at 100 percent capacity, at a 100
percent yield (no defective parts).
OEE = Availability * Performance * Quality
17. Manufacturing Cost Per Unit – It is very important that you know the total cost
associated with manufacturing a product on a per unit basis. Without it, you wouldn’t
be able to price a product properly. This KPI takes into account all costs associated
with production and divides the cost by the number of units manufactured. Typical
costs include materials, overhead, depreciation, labor, etc.
Manufacturing Cost Per Unit = Total Manufacturing Cost / # of Units Produced
18. Material Yield Variance – This lean manufacturing KPI takes the estimated amount
of material required for a product and compares it against the amount of material
actually used.
Material Yield Variance = Actual Material Use / Expected Material Use
19. Maintenance Cost Per Unit – This production metric is often overlooked as people
tend to consider maintenance cost to be an overhead item. However, it is an
important lean manufacturing KPI to take into consideration when trying to optimize
efficiency. This calculation takes the total cost of maintenance (both preventative and
emergency) and divides it by the number of units produced for a specified time
period.
Maintenance Cost Per Unit = Total Maintenance Cost / # of Units Produced
20. Overtime Rate – This metric compares the amount of overtime worked by
employees to the amount of standard hours. It helps to identify inefficiencies in
scheduling and/or staffing.
Overtime Rate (Percentage) = (Overtime Hours * 100) / Regular Hours
21. On-Time Delivery – This is less of a production performance metric, but a
very important KPI in the manufacturing sector nonetheless. You can have the
most efficient production line in the world, but if you can’t deliver on time,
clients are not going to want to work with you. This metric measures the
percentage of products delivered on time to clients.
On-Time Delivery = (# Units Delivered On-Time * 100) / # Units Delivered
22. Health and Safety Incidence Rate – In an ideal world, this manufacturing
metric would not even exist because it would be zero. Unfortunately, the
reality of the matter is that workplace accidents and near misses do occur.
This metric monitors the number of incidents or near misses over a given
period of time (normally per annum).
Health and Safety Incidence Rate = (Number of Incidences * 200,000) / #
hours worked by all employees
23. Employee Turnover – While this metric isn’t manufacturing specific, it is as
equally important as the other KPIs in this list. While employee turnover
typically has a negative connotation associated with it, not all turnover is bad.
Some turnover may be required to remove underperformers and replace them
with higher performers. However, having too high of a turnover can lead to
lower moral.
Employee Turnover Rate (%) = (Employees who left * 100) / Avg. # of
Employees
24. Non-Compliance Events / Year – Every country has regulatory compliance
rules that manufacturers must follow when producing their products, whether
it be safety, emissions, or something else. Not only is it important to record
the number of times a non-compliance event occurred, it is also good practice
to document the reason why it occurred, and what the resolution was.
Non-Compliance Events = # of Non-Compliance Events / Specified Period of
Time (Annually)
25. Customer Returns (Rejects) – This is a classic example of a KPI used in
manufacturing, and it is still used to this day for a reason. Keeping track of
returns is imperative. This metric calculates the percentage of products that
customers return because they have received a bad product. Needless to say,
a company should strive for the lowest percent possible.
Customer Return Rate = (# of Products Returned * 100) / Total # of Products
Shipped
26. Total Manufacturing Cost Per Unit Excluding Materials – This is a
performance metric that attempts to pin down the fixed costs associated with
operating a factory or production line. These are arguably the costs that
companies are able to control.
TMC Per Unit Ex Materials = TMC Per Unit – Material Cost Per Unit
27. Manufacturing Cost as a Percentage of Revenue – This manufacturing KPI
will help bring insight into how much your company is spending on
manufacturing with respect to total revenue. This is very useful data to
compare against competitors in the same sector.
Manufacturing Cost as a Percentage of Revenue = Total Manufacturing Cost /
Total Revenue
28. Energy Cost Per Unit – This is a fairly nitty gritty manufacturing KPI that a lot
of companies tend to overlook. It only really comes into play when companies
are fine-tuning their operations and trying to become leaner. This KPI takes to
total cost of energy spent over a period of time and divides it by the number of
units produced in that time frame.
Energy Cost Per Unit = Total Energy Cost / # of Units Produced
29. Work-in-Process – This manufacturing KPI metric measures the value of
partially completed products. It helps manufacturing companies understand
how much of their working capital is tied up in incomplete products, and can
help identify supply chain management issues.Ending
Work-in-Process = Beginning WIP + Manufacturing Costs – Cost of Goods
Manufactured
30. Scrap Rate – This is a fairly straightforward manufacturing KPI. It keeps track
of the number of products that are deemed scrap due to manufacturing
defects that can’t be reworked. It gives companies insight into the ratio of
products deemed scrap in a production run, helping identify an inefficient
process.
Scrap Rate = # of Scrap Units / Total # of Units
More Examples:
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