Key Performance Indicators and How They are Used in Manufacturing
If, like me, you work in manufacturing, you may have a lot of questions about BPM, or business process management. To learn more about performance analytics in manufacturing, keep reading.
Performance Analytics in Manufacturing
It may go without saying, but performance analytics are extremely important in manufacturing. While analytics may be important for any serious business, especially ones dealing with large quantities, they are arguably the most important in manufacturing circles, as having a large amount of data is essentially a requirement for manufacturing businesses, especially those that don’t want to go bankrupt. Poor analytics can result in a loss of profits, or worse- so it’s fairly important for manufacturers to perform thorough business process management in order to stay on top in their business.
A key part of proper business process management (BPM) can be found in using KPIs, or key performance indicators.
A KPI, or key performance indicator, is a term used in business process management to describe how well a business is accomplishing its objectives. KPIs can factor into multiple parts of the business, and there are hundreds of popular models to use for them- in general, however, it’s important for businesses to actually use the analytics available and take actions based on them.
Different KPIs work for different types of businesses, and too many businesses are working with the wrong KPI, or simply not taking action with the data that KPIs should be giving them. This is poor business process management. In order to help you avoid this, I’ll identify popular, key KPIs and what they mean.
Examples of KPIs
- Cycle Time. Cycle time is the time from the beginning to the end of a business process. This can apply to an entire operation, or simply one cycle of one- cycle time is used to separate the duration of a process from the run time of a process.
- Yield. Yield is the income made from an investment. In manufacturing, this is referred to as Throughput Yield, which is the number of units coming from a process divided by the number of units going into it. In short, your yield is what you’re getting from putting in your time, money or resources into something- is it worth it?
- Throughput. Throughput deals with the productivity of a person, machine, process, etc over a certain period of time. Throughput can be measured however you like, but popular measures are usually hours or days, as opposed to larger periods of time, which can be harder to pin down.
- Uptime and Downtime. Uptime is when your equipment is working optimally and as expected. Downtime is when this equipment does not work- whether for maintenance or due to failure. In general, downtime is something you want to avoid if possible, but it’s also an inevitable part of business- it’s important to factor in downtime when measuring the productivity of your business and its employees.
- Cost per Unit. Cost per Unit measures the total cost per unit, and is measured by adding the fixed and variable costs, then dividing those costs by the total units produced. Measuring costs per unit is a vital KPI for most businesses.
All of these KPIs, and more, are used in manufacturing, as well as many other businesses being run all over the world. To get the best out of your business, you too should be using KPIs and other performance analytics in order to measure your business’ productivity- failure to do this can be disastrous, especially in today’s fast-paced economy.