What are Manufacturing KPIs?

Measuring performance is essential for any business desiring growth in today’s incredibly competitive
marketplace and unpredictable economy. Key performance indicators (KPIs) are metrics for measuring and
monitoring all production processes and workflows over a specified period of time. To help your manufacturing
company improve efficiency and reduce costs, you can establish specific, well-defined Key Performance
Indicators (KPIs), which, simply put, are metrics for measuring and monitoring all production processes and
workflows over a specified period of time. The data supplied by these metrics provides insights on how to
optimize performance and to meet organizational goals.

As a manufacturer operating in a highly competitive marketplace and a volatile economy, you know that
regularly measuring the performance of your manufacturing processes and workflows is essential for operating
at peak level. Measuring performance accurately requires setting and analyzing manufacturing-specific key
performance indicators (KPIs) and quantifiable manufacturing metrics. Actively using manufacturing KPIs can
lead to performance improvements, including better decision making, increased profitability, and enhanced
customer service. Data gleaned from the manufacturing KPIs provides insights into how to best optimize
production processes, meet organizational goals, and enhance customer service.
 KPIs Description

The Throughput KPI measures the production capabilities of a machine, line, or

Throughput plant; also known as how much they can produce over a specified time period.

Throughput =% of Units Produced / Time (hour or day)

Work in process refers to goods that are in mid-production or waiting to be

completed and sold. Work in process includes the raw materials, labor and
Work in overhead costs associated with unfinished goods. This KPI can give you insight
Process into how efficiently you're using materials and the value of partially finished
goods.

Work in process (WIP) = (Beginning WIP + manufacturing costs) – cost of

goods manufactured

In the manufacturing industry, cycle time is the average amount of time it takes to
Cycle Time produce a product.

Cycle time = Process End Time – Process Start Time

Demand This manufacturing metric is used by companies to estimate the amount of raw
Forecasting materials they will require to meet future customer demand.

Projected Customer Demand = Raw Materials * Production Rate

This is a measure of how many times inventory is sold over a specific time period
Inventory and helps indicate resource effectiveness. Low ratio numbers indicate poor sales
Turns and excessive inventory, while high ratio numbers represent strong sales or
insufficient inventory.

Inventory Turns = Cost of Goods Sold / Avg. Inventory

This production performance metric measures production levels over a specific

time period and calculates what percentage of the time a target production level is
Production achieved.
Attainment
Production Attainment = % of Periods Production Target Met / Total Time
Periods

Changeover time represents the amount of time required to switch from one task to
Changeover
another. In manufacturing, it represents the amount of time lost from switching a
Time production line from one product to another.
 Changeover Time = Net Available Time – Production Time

This is a very useful manufacturing KPI when scheduling production orders or

deciding whether to take an order from a client. Takt time is the maximum
Takt Time permissible amount of time that can be spent manufacturing a product while still
meeting a client’s deadline.

Takt Time = Net Available Time / Customer’s Daily Demand

Production volume measures how many units are manufactured during a specified
time frame. Production volume is fundamental for benchmarking manufacturing
Production efficiency. Use this KPI to understand the total output your factory is capable of
producing.
Volume
Production volume = Total % of products manufactured during a
specified time frame

Production downtime measures how long a factory's production lines are not
Production operating. It covers both planned and unplanned downtime. Minimize and control
the amount of time production lines are not operational to boost productivity.
Downtime
Production downtime = Sum of all downtime during a specified time frame

Production costs include all the expenses incurred from manufacturing a product.
Production They include both direct costs, such as raw materials and labor and indirect costs,
such as rent and overhead.
Costs
Production costs = Direct labor cost + direct material cost + overhead costs

It is the percentage of time your plant is productive, or manufacturing

high quality products as quickly as possible with no down time.

Overall Overall equipment effectiveness (OEE) =

Equipment Performance x quality x availability

Effectiveness
Express OEE as a percentage and calculate it with the following dimensions:
(OEE)
Availability: the actual production time as a percentage of scheduled time to
operate.
Performance: the percentage of time your machine or plant is working at full
capacity.
Quality: the quality units produced as a percentage of all the units started.

Use this metric to gauge utilization. How is your plant performing in relation to the
output it would achieve if it were running 24/7 for 365 days a year and always
 producing quality products?
Total
Effective Total effective equipment performance (TEEP) = Performance x
Equipment quality x availability

Performance Again, these are expressed in percentages.

(TEEP)
Availability: the actual production time as a percentage of total time if the
plant were running for 24 hours a day, 365 days a year.
Performance: the percentage of time your machine or plant is working at full
capacity.
Quality: the quality units produced as a percentage of all the units started.

Defect density is a quality metric that tracks the number of defective products
Defect compared to the total volume of manufactured products. Defects can negatively
impact profitability and cause customer satisfaction problems.
Density
Defect density = % of defective units / total units produced

Rate of Rate of return is a financial measure of how well a capital expenditure or

Return investment performs over time. Expressed as a percentage, ROR accounts for the
(ROR) profit or loss realized from an investment over a period.

Rate of return (ROR) = (Current value – initial value / initial value) X 100

On-time delivery quantifies the percentage of products delivered on time to

On-Time customers compared to the total volume of delivered products. Use this to
Delivery determine how well you're meeting customer demand, a bellwether of customer
satisfaction.

On-time delivery = On-time units delivered / total delivered units

First Time First time right is measure of a Six Sigma goal to complete processes right the first
Right (FTR) time, every time. This simple, albeit important, metric helps plant managers work
toward efficient and lean production operations.

First time right (FTR) = Total % of good units / total number of units in
process

Mean Time MTBF calculates the average time between equipment failures, such as an issue
Between with a conveyor belt or industrial valve. This metric gives insight into the
reliability of your production assets.
Failure
MTBF = Operating time in hours / % of failures
(MTBF)
Machine Set- Machine set-up time is how long it takes to get equipment ready for its next
Up Time production after completing a run.

Machine set-up time = Time required to prepare machine for next run

Lead time measures the total time it takes for customers to receive orders after
Lead Time they're placed.

Lead time = Order process time + production lead time + delivery lead time

One of the basic satisfaction metrics is gathered through a basic Likert scale asking
Customer customers how satisfied they are with your product.

Satisfaction Percentage of satisfied customers = (# of customers who said they

were either very or extremely satisfied / total # of surveys filled out) X
100

Yield is a measure of the overall volume of products manufactured compared to the

input of the raw materials. This does not account for process inefficiencies such as
Yield rework or scrap.

Yield = (Actual % of products manufactured / theoretical number of maximum

possible yield based off raw materials input) X 100

First time yield measures the level of product quality and represents the number of
First Time non-defective products that are released without requiring wasteful rework. Use
this KPI as a leading indicator of potential manufacturing issues such as material
Yield quality or equipment.

First time yield = % of non-defective or good units / total # of products

manufactured