Most Important Performance Indications (KPIs)
Helping you focus your business on what really matters
1Improving Quality
- Yield – Indicates a percentage of products that are manufactured correctly and to specifications the first time through the manufacturing process without scrap or rework.
- Parts Per Million (PPM) – A measure of how many times customers reject products or request returns of products based on receipt of a bad or out of specification product.
Observed Improvements
2Improving Efficiency
- Throughput – Measures how much product is being produced on a machine, line, unit, or plant over a specified period of time.
- Capacity Utilization – Indicates how much of the total manufacturing output capacity is being utilized at a given point in time.
Observed Improvements
3Reducing Inventory
- Total Inventory Dollars /Turns – A commonly used ratio calculation to measure the efficient use of inventory materials. It is calculated by dividing the cost of goods sold by average inventory used to produce those goods.
- Lot Size Reduction
Observed Improvements
4Improving Customer Experience & Responsiveness
- Total Cycle Time – Total cycle time calculates how long it takes to perform one repetition of any task or production of one part. Commonly referred to as “Start to Start,” this calculation can help minimize downtime and maximize productivity. Examining TCT is a critical step in measuring manufacturing performance and matching supply with demand, a necessity for avoiding inventory shortfalls or excess.
- Time to Make Changeovers – Measures the speed or time it takes to switch a manufacturing line or plant from making one product over to making a different product.
- On-Time Delivery to Commit – This metric is the percentage of time that manufacturing delivers a completed product on the schedule that was committed to customers.
Observed Improvements
5Reducting Costs & Increasing Profitability
- Cash-to-Cash Cycle Time – This metric is the duration between the purchase of a manufacturing plant or business unit’s inventory, and the collection of payments/accounts receivable for the sale of products that utilize that inventory – typically measured in days.
- EBITDA – This metric acronym stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a calculation of business unit or company’s earnings, prior to having any interest payments, tax, depreciation, and amortization subtracted for any final accounting of income and expenses. EBITDA is typically used as top-level indication of the current operational profitability of a business.
- Safety – Keeping employees safe is vital to increasing production and lowering costs. Systematically incorporating safety measures into production and shop floor processes is an integral part of lean manufacturing. From ensuring floor spaces are clutter free, to integrating safety inspections into daily activities and audits, to eliminating extra inventory to maximize space, incorporating safety measures into lean processes helps to save time, money, and resources.
- Hiring, retention, attraction- Potentially the hardest challenge for employers today. An employer must be attractive enough to bring employees in. Then they must be retained. If a company is not focused on these pieces of the puzzle, they are missing the mark. Using tools, we implement; a company can make ground in all these categories. If an employee is engaged, these will improve, alongside a culture shift that allows companies to thrive.
When examining or incorporating any of the metrics below, it is essential that one step does not degrade the performance of the other. When transitioning to lean manufacturing, the goal is to aggregate data, shift processes, and make changes that seamlessly function to serve increased efficiency, productivity, reduced waste, and lower costs.
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