Manufacturing KPIs serve as an indicator to organizations where there is room for improvement, where success lies—which may be replicable elsewhere—and when it’s time to level up. There are thousands of KPIs that can be measured; however, these are the seven KPIs that must be measured to achieve success in manufacturing.
7 essential manufacturing KPIs
- On-time delivery
On-time delivery measures how many products were delivered according to schedule. This simple-sounding metric is arguably the most essential manufacturing KPI. Late deliveries can result in lost business, rendering all other metrics moot. Missed deadlines should be analyzed for their cause—whether supply chain disruptions, production delays, or externalities.
- Rate of return
The rate of return measures how many products were returned. As with on-time delivery, the rate of return should be prioritized—or you risk losing business. Depending on the return policy, some instances may simply be down to customers changing their minds, but most will indicate a problem further up the chain. This simple metric could reveal anything from defective production to poor product design.
- Defect density
Of all the products you’ve produced, how many have had defects? To a certain extent, defects are inevitable. However, the cost of waste, rework, and even returns—if they go undetected—can become a significant problem if left unchecked. Defect density is another manufacturing KPI that can reveal systemic or underlying issues beyond the immediate problem.
“Scrap” has a number of definitions within manufacturing. It is treated here as meaning the material left over—that cannot be reused—after producing a product. Again, scrap is to some extent inevitable. However, it also represents a significant cost over time, and can substantially narrow your margins. Important in itself, scrap can also be a symptom of inefficient processes, skills gaps, or deteriorating equipment.
Throughput is the raw production volume of your operations. It is listed fifth here, as although it is the fundamental measure of a plant floor’s efficacy, it can be rendered meaningless if the manufacturing KPIs above drift off target. However, the number of units you can produce in an hour—that is, against fixed costs—is still the basic metric.
Availability refers to the uptime—or downtime—of machinery. Primarily, availability is an essential component of throughput. If machines are idle for whatever reason, they aren’t producing. However, the causes of downtime can also lead to greater amounts of scrap and defects, and lead to production delays.
Overall-Equipment-Effectiveness (OEE) is a catch-all, relative KPI, that captures uptime, performance, and quality, setting it against the capability of the machine. The benchmark you set depends on the constraints and parameters of your particular plant, but used as a basis of continuous improvement, optimizing OEE can be a major factor in improving every other KPI on this list.
How technology can measure and meet manufacturing KPIs
KPIs have always been essential for improving manufacturing efficiency. Beyond merely measuring performance, they play a fundamental role in analyzing where things have gone wrong, where opportunities lie, and how successful interventions are. Digital manufacturing technology is dramatically amplifying both the measurement of KPIs and the ability to respond to them.
Industrial Internet of Things (IIoT) sensors can generate real-time production information from machinery—eclipsing the conventional Tuesday report. Digital supply chains can reveal gaps and opportunities in procurement and sales. AI and machine learning can turn granular analysis into predictive measures. The clearest early use case is in predictive maintenance—enabling 99% asset uptime—with substantial impact on OEE.
As digital manufacturing matures, the humble KPI is becoming even more central to ensuring the effectiveness of plant floors.