When it comes to overseeing production and managing a production facility, you may have heard of key performance indicators. While you may be aware of what some KPIs may be, you may also be asking yourself what exactly is it? Key performance indicators (KPIs) are a type of performance measurement that helps manufacturing operations understand how an organization or department is performing. While specific KPIs may vary from each operation, there are a few that are key within most in order to succeed. Therefore, here are 7 key performance indicators for manufacturing.
7 Key Performance Indicators
7 Key Performance Indicators for Operations Managers include the following:
- Profit - One of the most important performance indicators out there is profit. Analyzing both gross and net profit margin can allow you to better understand the success of your organization and your success in generating a high return. Turning a profit is an extremely important key performance indicator among a manufacturing facility.
- Cost - Measuring cost effectiveness and locating the best methods to reduce and manage cost are key within a manufacturing operation. Locating ways of cost reduction while also boosting efficiency allows an operation to have a much more lean and optimized approach toward production.
- Cost of Goods Sold - When tallying up production cost, you can achieve a much more thorough understanding of what your product markup should look like, as well as actual profit margin. This form of information is essential in determining how to achieve a competitive edge in your industry.
- Days Sales Outstanding (DSO) - In order to calculate days sales outstanding, take accounts receivable by the total credit sales. Then, take that number and multiply it the number of days within the time frame you are expecting. In terms of DSO, the lower the number the better your organization is at collecting accounts receivable. Running this formula every month, quarter, or year is vital in seeing how you are improving.
- LOB Efficiency Measure - Efficiency can be measured through various methods throughout the industry. Measuring your production facilities efficiency through analyzing how many units you have produced every hour can be insightful and enable you to locate areas that are in need of optimization.
- Number of Customers - Very similar to profit, this key performance indicator is straightforward. Determining the number of customers you have gained and lost can allow you to further understand if you are effectively meeting your consumers needs.
- Percentage of Product Defects - In order to achieve this percentage, you have to take the number of defective units and divide it by the total number of units produced in the time frame being examined. The lower you can get this number, the better.
A software that can measure key performance indicators accurately is PlanetTogether’s advanced planning and scheduling software. PlanetTogether’s advanced planning and scheduling software can provide thorough insight within your manufacturing operation and locate areas that are in need of efficiency optimization.
Advanced Planning and Scheduling Software
Advanced Planning and Scheduling (APS) software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures. APS can be quickly integrated with a ERP/MRP software to fill gaps where these system lack planning and scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans.
- Create optimized schedules balancing production efficiency and delivery performance
- Maximize output on bottleneck resources to increase revenue
- Synchronize supply with demand to reduce inventories
- Provide company-wide visibility to capacity
- Enable scenario data-driven decision making
Implementation of Advanced Planning and Scheduling (APS) software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.