How to

Calculate 34
Manufacturing
KPIs
 Table of Contents

Introduction ……………………………………………………………………………... 3

Utilization …………………………………………………………………………….…. 4

Costs ………………………………………………………………………………………... 9

Labor ………………………………………………………………………………………... 17

Processes ………………………………………………………………………………... 21

Product ……………………………………………………………………………………. 34

Failure & Repair ……………………………………………………………………... 38

 INTRODUCTION

ey performance indicators (KPIs) are calculations that help someone answer the
K question “How is X doing?”. Manufacturing KPIs can highlight progress towards
goals set at at various levels of a company. Together, the sum of these KPIs tells a story
about the performance of the line, plant, and/or company.

The goal of this post is to explain how to calculate 34 manufacturing KPIs.

3
 CHAPTER 1

Utilization
Asset Utilization
Asset utilization is a metric used to understand efficiency. To complete this
calculation, you’ll need to know both actual output and maximum capacity. Divide
actual output by maximum capacity and multiply the result by 100 to calculate
asset utilization.

Asset Utilization = (Actual Output/Maximum Capacity) x 100

5
Opportunity Gap
Opportunity gap is a metric related to asset utilization. The opportunity gap is, “the
difference between what an asset is capable of producing and what it actually
produces.” To calculate the opportunity gap KPI, subtract maximum capacity from
the actual output.

Maximum capacity – Actual Output = Opportunity Gap

6
Capacity Utilization
Capacity utilization measures how much a line, plant, or factory uses its total
productive capacity. For example, if you have the potential to significantly expand
orders, you should check your capacity utilization before agreeing to deliver
product. This will help you understand whether you could fulfill an expansion with
existing capacity, or if you need to adjust your production.

Calculate factory utilization by dividing actual factory utilization by your total

productive capacity.

Actual Factory Utilization/Total Productive Capacity = Capacity Utilization

7
Utilization
Utilization is the amount of output you generate as a proportion of your total
possible output.

Output / Optimum Output = Utilization

8
CHAPTER 2

Costs
Avoided Cost
Avoided cost is an estimated savings based on preventative measures. This metric
calculates how much you’ve saved by spending. “[T]he result is cost avoidance—if
and only if it is reasonably sure that the charge will arrive, absent the action.” Using
machine breakdowns as an example, the avoided cost KPI could be calculated by
subtracting preventative maintenance costs from an assumed repair cost plus
productivity losses connected to the downtime.

Assumed Repair Cost + Production Losses – Preventative maintenance

cost = Avoided Cost

10
Avoided Cost (contd.)
A related calculation is the ratio of unscheduled to scheduled maintenance. This
helps you identify how often you are missing necessary maintenance. Calculate
this KPI by dividing the number of planned maintenance events against
emergency maintenance events.

# of emergency maintenance events / planned maintenance events =

Ratio of unscheduled maintenance

11
Maintenance cost per unit
Maintenance cost per unit “is total maintenance cost divided by number of
produced units in measurement period. Total maintenance cost includes total
costed maintenance man hours, parts and any other costs associated with the
maintenance effort (preventive and corrective).” You can calculate this metric with
the formula below:

Maintenance cost per unit = Total maintenance cost / Number of

produced units

12
Manufacturing cost per unit
Manufacturing cost per unit calculates all possible costs of production (materials,
labor, variable overhead, machine depreciation, etc.) and divides that value by the
number of units of product produced.

Manufacturing cost per unit = Total Manufacturing Costs / Units

Produced

13
Materials Used / Materials Expected
Material costing, usage is a metric that compares the amount of materials expected
to make the number of units produced, against the amount of materials actually
used to make those units.

Material costing, usage = Materials Used/Materials Expected

14
Unplanned capacity expenditure
Unplanned capacity expenditure is unplanned for expenses.

Total capacity expenditure – planned capacity expenditure = Unplanned

capacity expenditure

15
Unused capacity expenditure
Unused capacity expenditures or the cost of unused capacity measures how much
available capacity from machines, people, etc. was supported but went unused.

Unused capacity expenditure = Fixed costs x (1 – Company output /

Company maximum possible output)

16
Cash-to-Cash Cycle Time
Cash-to-Cash Cycle Time measures the time between the a manufacturing plant
purchase or inventory purchase, and the collection of payments from the sale of
the inventory produced or purchased.

Sell Date – Plant/Inventory Purchase Date = Cash to Cash Cycle Time

17
CHAPTER 3

Labor
Labor / Gross Sales
Labor as a percentage of cost is a straightforward metric.

Labor as a percentage of cost = Labor / Gross Sales

19
Labor Usage
Labor usage is a metric that calculates how much of the time someone is working
is spent working versus how much time is spent idle, or otherwise.

Total Labor Content/(Labor content + total idle time)

If someone is on the shop floor for 5 hours, but is idle for 2 of those hours, the labor
usage rate is 60%.

20
Overtime Rate
Overtime as a percentage of total hours is a straightforward metric. It calculates
how many of an organization’s hours are overtime, versus standard hours. This can
highlight a production scheduling issue.

Overtime Hours / Regular Hours X 100% = Overtime Rate

21
 CHAPTER 4

Processes
Cycle time

Cycle time is the average time between process completions. Manufacturing Cycle
Time is a related metric that measures the speed or time it takes to manufacture a
given product. Calculate this metric by subtracting process start time from process
end time.

Cycle time = Process End Time – Process Start Time

23
Projected Customer Demand
Demand forecasting is a metric that helps manufacturers understand the amount
of raw materials they need to fulfill their expected customer demand.

Projected Customer Demand = Raw materials * Production Rate

24
Plant Uptime, Plant Run Time, & Plant Downtime
Plant uptime and plant downtime measure production performance at the plant
level. There’s some controversy around which measure is more valuable. However,
we’ll cover how to calculate each. You can divide the total number of units
produced by plant operating time to calculate average production rate. Use this
value to multiply by total downtime and find the total number of units you failed to
produce during planned production hours.

25
Plant Uptime, Plant Run Time, & Plant Downtime
Plant Uptime = plant run time (production) / Total available time to run or
produce

Plant run time = Total available time to run – scheduled and unscheduled
downtime/stoppages.

Plant downtime = 1 – (Plant run time/Total available time to run or

produce)

26
Overall equipment effectiveness (OEE)
Overall equipment effectiveness (OEE) is a way to measure manufacturing
productivity.

OEE = Availability X Performance X Quality

27
Manufacturing Cycle Efficiency
Manufacturing Cycle Efficiency measures “value-added time as a percentage of
throughput time.”

Manufacturing Cycle Efficiency = Value-added time / Throughput time

28
Takt Time
Takt Time is the average between the production start time of one unit and the
next unit.

Takt Time = Production Time / Customer Demand

29
First pass yield (FPY)
First pass yield (FPY) is the number of units without rework or scrap defects
exiting a process divided by the number of units entering the same process over a
set time period.

Quality Units/Total Units Produced = FPY Rate

30
Rolling throughput yield (RTY)
Rolling throughput yield is a FPY-related metric that measures the likelihood that a
production line will produce a quality unit in a process with multiple steps. See the
equation below, written assuming 4 steps, y, z, x, and a.

RTY= FPY of x * FPY of y * FPY of z * FPY of a

31
Changeover Time
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.

Net Available Time – Production Time = Changeover Time

32
Throughput
Throughput measures how much product a machine, line, unit, or plant produces
within a given amount of time.

33
Production Attainment
Production Attainment measures the percentage of time a target level of
production is attained within a specified schedule.

Production Attainment = Periods when Production Target Met/Total Time

Periods in Schedule

34
Health and Safety Incidents
Health and Safety Incidents is the number of health and safety incidents recorded
during a set period of time. Depending on your industry, you may also want to
measure the number of non-compliance events you have in a year. This metric is
the number of times the plant violated regulatory compliance rules during the year.
In addition to the number of events, you may want to measure the length of time
the plant was non-compliant, the reasons for non-compliance, and the way the
event was resolved.

35
 CHAPTER 5

Product
On-time delivery
On-time delivery is the percentage of time that a manufacturer delivers a
completed product to the customer on schedule.

On-time delivery = number of units delivered on time / number of

units ordered

37
Work-in-progress (WIP)
Work-in-process (WIP) is the value in partially completed goods.

Percentage Complete * Sale Price – (Costs to date / Cost Estimate)

38
New Product Introduction Rate
New Product Introduction Rate measures the amount of time it takes to design,
develop and ramp up production for a new product.

Full Production Start Date – Product Development Start Date =

New Product Introduction Rate.

39
 CHAPTER 6

Failure & Repair

Mean time between failure (MTBF)
Mean time between failure (MTBF) “is the predicted elapsed time between
inherent failures of a mechanical or electronic system, during normal system
operation.” Calculate this metric by taking the average time between the system’s
failures. Note that this is a metric used for repairable systems.

41
Mean time to failure
Mean time to failure is a metric used for repairable systems. Like MTBF, it’s
calculated as the average time between failures.

42
Mean time to repair
Mean time to repair “is a basic measure of the maintainability of repairable items. It
represents the average time required to repair a failed component or device.
Expressed mathematically, it is the total corrective maintenance time for failures
divided by the total number of corrective maintenance actions for failures during a
given period of time.”

43
Rejects
Rejects, or customer returns, measures how often customers reject products or
request returns because they received bad product.

44
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