metrics in manufacturing

The 10 metrics in manufacturing that really matter

Bulwark Acquisition Uncategorized Leave a Comment

Reliable access to metrics and data has given manufacturing enterprises and line of business managers a wealth of information – after all, you can’t manage it if you can’t measure it. But knowing which of these metrics are truly important and which need to be addressed when faced with all this data is just as important as having access to it in the first place.

Let’s take a look at the ten metrics that really matter.

1. Throughput:
One of the simplest manufacturing metrics of all – how much volume is being produced per business unit, on a particular production line or over a length of time – throughput is also one of the most vital, and one of the easiest to measure. Having systems in place which can immediately flag when throughput is decreasing is the quickest way to identify a problem on a production line, especially with automated equipment.

2. Capacity utilization:
Essentially, this metric gives you an insight into where there are slack areas in your facility by showing to what degree potential output is being met at a given time. When you’re running at full capacity, there is 100% capacity utilization, which is of course exactly what operations staff want to hear! If you’re not at 100%, you need to figure out which area is holding the system back and how this can be improved.

3. Total manufacturing cost per unit – excluding cost of materials
While you may not be able to control the prices your suppliers charge for the materials they supply you with, it’s important to focus on data that shows where you actually can make beneficial changes. This is why knowing your total manufacturing cost per unit, item or volume is so important. This metric will include costs like labor and overhead expenses – in other words the costs which you have influence and control over, and can use to make beneficial operational decisions.

4. Manufacturing cycle time
Essentially, this is the time which it takes to manufacture a product or volume from start to finish, passing through all machines, processes and cycles, and to come out the other end as a finished item. Finding areas where there is lag time, machines are waiting or time can be trimmed off is an invaluable tool in finding those areas where you can increase productivity, reduce manufacturing time, and ultimately deliver more reliable service to your customers.

5. Overall equipment effectiveness – OEE:
While this metric is a bit trickier to measure, it’s a vital indicator of the overall effectiveness of a production line or piece of equipment, and is justly recognized as a best practice measure in a range of industries. It is calculated as availability x performance x quality, and the closer this number is to 100%, the more cost effective and profitable your business is.

6. On-time delivery to customers:
This metric is a percentage of time in which manufacturing is able to deliver the completed product or volume to your end customer. Of course, you’re aiming for 100%, but in an imperfect world this isn’t always the case. While problems will always arise, this metric is invaluable for making sure that the failsafe’s and improvements you implement are actually having an effect on the most important component in the system – the satisfaction of your customers. If this rate is not improving, then conversely it’s also a good indication that you may not be targeting the right problem areas.

7. Average unit contribution margin:
This metric is vital in calculating an accurate product cost, and is calculated as a ratio of the profit margin which is generated by each business unit or each manufacturing plant divided into a given production unit or volume.

Items which are only contributing a very small ratio towards your overall profits warrant further investigation, but they’re difficult to isolate and pinpoint without having this metric available to raise a flag. Once you know an item isn’t contributing (or even losing) profit, you can analyze whether it’s due to inefficient processes or whether it simply makes more sense to cease production of that unit entirely.

8. Time to make changeovers:
A changeover is the process of switching a line or particular machine from running one product to another, in other words, how quickly a machine can swap from product X to product Y. Depending on your equipment and what you’re manufacturing, this process may be a few minutes or several hours – but without tracking it it’s difficult to see where improvements could be made. If one machine is holding the entire process back, simply investing in software or a user interface which is simpler to configure can result in dramatic improvements across the entire manufacturing cycle time.

9. Productivity in revenue per employee
A simple equation – revenue generated by business unit divided by the number of employees – can give great insight as to which areas are the least profitable and where there may be potential improvements that can be implemented. If a particular business unit is substantially less profitable than the rest, it merits further investigation as to how processes can be streamlined or labor costs reduced.

10. Energy cost per unit:
The cost of the energy required to produce a specific unit or volume. This measure is useful in helping to determine the overall profitability of each item you manufacture and flagging lines which may benefit from energy efficiency measures or hardware upgrades. If you are weighing the costs of investing in more energy efficient machinery for example, it is vital to have this metric available for comparison.

With these ten metrics under your belt – you have all the information you need to set about making your production facilities run as efficiently as possible!


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