According to an IndustryWeek Special Research Report entitled, “The Future of Manufacturing: 2020 and Beyond,” a majority (55 percent) of manufacturers with annual revenues greater than $1 billion report that they aim for annual productivity improvement between three and five percent. But, you can’t improve what you can’t measure. And we don’t know any manufacturers who would say that they don’t need to or want to improve, but the question of what to measure and when can be challenging. Key Performance Indicators (KPIs) are measurable values that allow manufacturers to track specified goals. In this post, we’ll answer “Why are key performance indicators important in manufacturing?”.
Reason One: KPIs Give You a Current Snapshot of Your Productivity
Featured KPI: Count
Count is a common KPI for a shop floor. Count up and count down timers are commonly used to time actual work on a manufacturing or assembly task. They count “work time” by allowing non-productive time (breaks, end of work-day, weekends, station down, etc.) to be excluded. Monitoring this process with production timers can help supervisors get an accurate picture of both productive and non-productive time.
Reason Two: KPIs Can Measure Efficiency
Featured KPI: Takt Time
Takt Time is the rate that a product needs to be completed in order to meet customer demand. It is calculated by taking the Planned Production Time and dividing it by Customer Demand.
Knowing the targeted Takt Time allows manufacturers to set up production pace timers to provide an efficiency goal for the shop floor (Actual Pieces / Target Pieces).
Reason Three: KPIs Can Be an Early Sign of Business Profitability
Featured KPI: Revenue per Employee
An indicator of efficiency and productivity, the higher the revenue, the greater the productivity.To calculate Revenue per Employee, divide the company’s revenue by the current number of employees. This gives you a quick look at your company’s financial health and when monitored regularly can be an indicator of whether your business is growing or if you need to re-evaluate.
Reason Four: KPIs Can Help You Solve Line Problems
Featured KPI: Downtime
Downtime is considered to be one of the most important KPIs to track because it means waste (of time and money). By identifying when people are standing idly—whether it’s because they are waiting for the parts they need to do their jobs or the next station is behind—this KPI may help you solve the bottleneck problem. Note: It’s important to continuously check for bottlenecks as eliminating one bottleneck may result in a new one forming in another part of the line.
Reason Five: KPIs Can Help Motivate Line Workers.
Featured KPI: Rate
Rate measures the time it takes to produce a product. Slower rates can mean decreased profits due to lower productivity. Faster rates can sometimes mean the product’s quality will suffer. When workers know the targeted pace and how they are measuring up, they are often motivated to keep the right pace. Production timers may be used to help you count up or down, be combined with other Lean manufacturing tools such as Andons, and they may come in a variety of configurations. Essentially, production timers in manufacturing help eliminate waste and maximize production helping you to optimize the rate of production.
So, “Why are key performance indicators important in manufacturing?” Ultimately, key performance metrics for manufacturing create a common lexicon and get everyone from the shop floor to the top floor on the same page, working towards common goals. See how Shop Floor IQ can help you keep an eye on your KPIs and improve your labor productivity by getting a free trial, or contact us to talk about your shop floor needs.