10 Key Performance Indicators for production management

Most companies are concerned with achieving greater profitability and scalability as they enter the market and position their brand. However, to reach this stage, the production area has a notable influence, because it is in charge of transforming the raw material into products, which are then distributed to the stores that market them to the consuming public.

The problem is that the production process does not always work as it should, since delays in the delivery of products, discarded units, hateful product returns, among other failures, are more than common.

To keep track of the performance of your production area, so that you have a record of what is being done correctly and what is not, we recommend these 10 key performance indicators for production management.

1. On-time delivery.

Among the main key performance indicators for production management, we can first mention the KPI of delivery on time. This KPI measures the percentage of orders delivered on time.

The metric is often tallied monthly to determine statistical relevance and the goal should be 100% compliance. This metric was the number one indication of operations operating efficiently.

2. Compliance with the production schedule.

This KPI tracks how often the production team reaches the target level of production and provides an important way to set performance benchmarks, adjust work order lead time estimates, and ensure that production issues are met and that don't cause costly delays.

If a manufacturer only tracks delivery on time, for example, issues within the production process itself can be hidden and change, undocumented.

One of the keys to ensuring on-time delivery, if tracked daily, is adherence to the production schedule, which keeps the production team's eyes on the prize and could eventually be adjusted to track a level of performance in on-time delivery. This is a very important KPI production target.

3. Total cycle time.

Total cycle time measures the time it takes for a customer order to start and finish the entire production process to shipment. It represents the full time needed to turn raw materials into finished products from one end of the line to the other.

A cycle time KPI is the average of all cycle times for all orders in a specific period and is typically calculated using Machine Cycle Time. In any manufacturing metric of plant performance, we can find machine cycle time.

This efficiency measure sets the standard for a machine's efficiency and allows for real-time reporting of that machine's performance (down to the minute). Each machine should have an ideal cycle time based on the part being produced. When viewed as a set of multiple cycles, it can be measured as cell cycle time.

4. Efficiency.

This manufacturing KPI is the rate of how many units on average a machine, cell, or line is producing over time i.e. 1200 units/minute.

Performance can be increased by eliminating downtime, calibrating machines to run at an ideal cycle time, reducing the number of touches or steps in a cycle to reduce short stoppages, changing the raw materials or tools needed to produce the good, and improving the maintenance of the machine.

5. Capacity use.

If a machine produces goods in an ideal cycle time, it is said to be running at 100% capacity.

When running slower or anytime a machine is idle, this percentage will decrease, indicating available capacity and slack in the system. This is a great KPI to understand the facility's ability to scale production or institute more agile job scheduling during production time.

6. Changeover time.

Changeover time is the time it takes to unload/load, retool, calibrate, and schedule a new job. The changeover is most relevant when there is a changeover from one type of part to another before a production run.

When taken as an average, this KPI can help determine which types of jobs and parts may require some reduction in setup time, if possible.

By tracking turnaround time, manufacturers can define total cycle times per part, adjust their estimates, and recognize the need for more operator training, better planning, and proactive preparation of required materials.

7. Performance.

The Performance KPI is a measure of quality and performance and is at the core of production efficiency and profitability. This can be one of the most important KPI output measures.

The first step performance measurement will identify which processes require substantial rework that will impact performance, influence overall cycle times, and provide a performance target of 100% producing no defective parts.

8. Scrap.

Scrap is the material discarded or rejected from the manufacturing process, so it can be a measure of units or volume.

Some companies track scrap manufacturing metrics such as defective items (waste), while others focus on raw material left over from a subtractive manufacturing process.

Regardless of how your company defines scrap, tracking this manufacturing KPI should be one of the first steps in reducing your material costs, possibly increasing cycle times, and focusing on producing higher-quality products. Without real quality improvements, scrap is just money going down the drain.

9. Planned Maintenance Percentage (PMP)

This KPI is a combination of calculating the percentage of scheduled maintenance versus planned maintenance, plus any emergency maintenance needed to address breakdowns.

The PMP is essential for manufacturers to properly allocate resources for preventive maintenance. A general rule of thumb established by preventative maintenance advocates is 85% PMP, in which an organization aims to have less than 15% of maintenance time spent on emergency work orders.

Since emergency repairs can cost on average 3-9 times more than planned maintenance due to overtime, rushed parts, service calls, or scrapped production, this metric should be a stable one for manufacturing looking for uptime and dealing to reduce operating costs.

This manufacturing metric is very important in creating a culture of healthy maintenance. Measuring the right metrics and involving everyone in the plant in maintenance activities can have a big impact.

10. Availability.

Another important KPI within the performance indicators for production management is availability: the measure of machine uptime and downtime.

Downtime is by far the biggest loss facing most manufacturers today. No matter what industry your business is in, downtime costs money. Ideally, availability should take into account all downtime, without distinguishing whether it is planned or unplanned.

Additionally, to address the issues that cause downtime and reduce it, manufacturers need to start tracking the reasons for downtime so that when viewed on a Pareto chart, downtime can be analyzed within the context of the affected machine, by operator and shift, and by any other factors on the plant floor.

Bonus: Customer return rate.

And finally, the metrics that nobody would want to consult, but they exist if you have received a return of a product. As a performance measure, increased customer returns may indicate a flaw in the production process or a missing step in quality control. The costs of customer returns can add up quickly due to the rework required and the effort and cost of reverse logistics.

So far we have come with this tour through the main key performance indicators for production management that applying them will help you have better control and monitoring of your products and that they reach the final consumer on time. In addition, the KPIs will allow you to detect failures in such a way that, by working on them, you can overcome them by far.