Obtaining Operational Excellence is one of the most important things a manufacturer can do to stay competitive in today’s competitive market. The best way to start improving is to benchmark your current state and find ways to improve. Measuring KPIs is a great way to start.
Measuring Manufacturing KPIs
Measuring Key Performance Indicators (KPIs) in a manufacturing facility is one of the most important activities that a manufacturer can do. The KPIs can give feedback to all levels of the company from the operators all the way to the CEO.
First, we must define KPI. As the name states, a KPI is a quantifiable measurement essential to evaluating the state of a manufacturing process, for example, measuring the throughput of a process (parts/minute) or the number of defects during a shift. These indicators can give operators insight into how well the process is performing.
Why is this important?
If you don’t measure KPIs, then you don’t have insight into your processes. If you don’t have a single “truth” within your organization, you are losing margin. Manufacturers reach their single truth when all parties agree on what and how to measure these KPIs.
You then need to understand what KPIs are important to your process. There is no one answer for which ones are important. This will vary depending on your processes and what is important for your process. Many manufacturers are measuring Operational Equipment Effectiveness (OEE), and that becomes their main KPI. Another KPI might be scrap/hour. If your process uses something like a valuable commodity (i.e. silver), then waste of this might be the most important KPI. Typically, operators and managers measure several KPIs to help understand the state of their process.
How do I determine the most important KPIs to measure?
You most likely already know what KPIs are important to your process. One way to determine what to measure is to ask yourself:
- What changes would have the largest effect on your processes?
- What other KPIs can you have an effect on?
- What will make a difference to you and your processes?
The one caveat is that too much data can be bad, at least when you are starting this journey. You can easily become overwhelmed by data and make it impossible to see what changes you can make for the better. Too many KPIs can cloud your vision of where the problems are and where you can make improvements. So start out small and pick some KPIs that really have meaning. You can always add or modify later.
Just a few examples of KPIs are:
Once you have decided on your KPIs you need to start measuring them.
These four steps can help you get started:
Step 1: Collect the Data
You will first need to start collecting the data in your processes. You could try to do this manually by the clipboard method. However, nowadays that is very inefficient. The information is probably already available for the process and equally available for automatic collection.
Step 2: Turn the Data into Information
The data that is collected can then be turned into information. For instance, if you have the data of the number of parts made (data) and the amount of time it took to make those parts (data) you can turn that into a KPI of parts/hour (information).
Step 3: Visualize the Data
Visualizing the data Is key to using KPIs. If you can’t see the information, you cannot effect change. The visualization consists of what graphic makes it easy to understand the KPI (number, pie chart, bar graph, etc.) and how the data is to be visualized (desktop, Andon, mobile, etc.). Choosing the graphic and the display is important when visualizing the information.
Step 4: Store and Analyze the Information
Once you have the information (and data) you should store the information. Why? Storing information allows you to go back in time and see how you did. You can use the stored information to benchmark your KPI and as you make changes, determine each change’s effect on the process.
Step 5: Take Action!
All of the data that you have measured and benchmarked is worthless until you turn it into actionable information. Start with finding areas that would be relatively simple to make more efficient. For example, compare identical production lines to each other. Is one doing worse than the others? According to quality KPIs, is there a specific product that performs worse than others? Once you start measuring, you can start managing the process, increase efficiencies and boost the bottom line.
Now on to the results. Why should you implement a system to measure, visualize, and analyze KPIs? Companies can see up to a 40% increase in margins based on increased efficiencies by having a single “truth” in how the processes are running. For instance, by measuring and bench-marking quality, you can make changes to improve quality. By increasing a quality KPI, you reduce wasted materials, increase productivity, and reduce energy costs by not making a bad part.
Other items you can identify while measuring KPIs:
- Identify bottlenecks
- Identify downtime issues
- Identify problem areas
- Move towards operational excellence
- And so on…
Hopefully this will help you in identifying KPIs and give you a process to collect, visualize, store, and analyze information on your processes. Measuring KPIs is essential in running a modern digital factory.