KPIs in manufacturing are quantifiable metrics that offer insight into business performance. KPI stands for Key Performance Indicator and they do just as the name suggests - they indicate successful performance.
One commonly-used manufacturing KPI is “overall equipment efficiency”(OEE) which is measured by calculating the factory’s performance, availability, and quality. While an effective measure of performance, especially at the factory floor, machine-specific level, OEE should ideally be used alongside other KPIs to gain greater clarity on performance from multiple angles. Manufacturing businesses can, and should, choose several KPIs to focus on in order to help guide decision-making.
KPIs are important for manufacturers because they are defined, measurable metrics that help businesses focus on what’s most important, so they can track, analyze, and optimize performance over a period of time.
KPIs let manufacturers know whether they are on course for success, if they are growing, and where issues may be present within their businesses. Having a KPI dashboard readily available can make company goals and priorities stay in focus and ensure the organization is moving forward as a whole.
With the right manufacturing analytics solution, manufacturers can quickly analyze production data and key metrics in pre-built reports so all stakeholders can make fast, effective decisions.
Below we cover over 50 manufacturing KPIs, providing both their definitions as well as how to calculate each of them. There are hundreds of manufacturing metrics in existence, but we have created a simple way to browse through the most important production KPIs. You can skip to any manufacturing metric by selecting it in the table below.
You can also jump directly to the "Manufacturing KPI Dashboards, Reports, and Templates" section. Manufacturing dashboards are important for visibility on various levels of the organization, including shop managers, operators on the shop floor, as well as corporate. Within that section, we show off some of the simple, useful production dashboards available from MachineMetrics.
Asset Turnover is the value of sales or revenues generated. It measures the efficiency with which a manufacturer uses its equipment and other assets to drive revenue. Companies with a high turnover ratio are more efficient than those with a lower turnover.
Asset Turnover = Net Sales / Average Total Assets
Asset Utilization is the total revenue earned for every dollar of assets owned. It measures how well you are using your installed capacity.
Asset Utilization = (Actual Output / Maximum Capacity) *100
Availability is the run time compared to planned production time. It is similar to overall availability, but uses planned production time, rather than total calendar time.
Availability = Uptime / (Uptime + Downtime)
Avoided Costs are expenses that will not be incurred by the manufacturers if the associated activity is no longer done. For example, a manufacturer may discontinue a product line, which means they will have a variety of avoided costs in the form of labor and equipment usage.
Avoided Cost = Sum of expenses avoided from foregoing a particular activity
Capacity Utilization is the rate at which potential output levels are being met or used. It essentially tracks how much of a manufacturer’s production capacity is currently being utilized.
Capacity Utilization = (Actual output/Maximum possible output)*100
Also known as the cash-conversion cycle, Cash To Cash Cycle Time is the the number of days between paying for raw materials and components and getting paid for a product.
Cash To Cash Cycle Time = (Days Inventory Outstanding) + (Days Sales Outstanding) - (Days Payables Outstanding)
Changeover Time is the time elapsed from the last good part of the previous run, to the first good part of the following run.
Changeover Time = T∆ = total changeover time, typically in minutes or seconds
T∆e = external changeover time, in the same unit of measure as T∆
T∆i = internal changeover time, in the same unit of measure as T∆"
Customer Return Rate is the percentage of customers who come back to place another order. It is essential for retaining business and building customer loyalty.
Customer Return Rate = (return customers / total customers) * 100
Cycle Time is how long it takes to make a part or how long it takes the machine to complete a cycle. For a comparison between takt time and lead time, read this article.
Cycle Time = total parts produced / production run time
Demand Forecasting works to predict customer demand to optimize supply choices.
There are a variety of variables to consider when calculating future demand, including historical sales, forecasts from suppliers, seasonal and economic changes, as well as unique business challenges and constraints. Here is a good resource on demand forecasting for manufacturers.
Direct Material Usage Variance is the difference between the standard quantity of materials that should have been used for the number of units actually produced, and the actual quantity of materials used, valued at the standard cost per unit of material
Direct Material Usage Variance = (standard quantity of material allowed for production – actual quantity used) × standard price per unit of material. (standard quantity of material allowed for production – actual quantity used) × standard price per unit of material
Employee Turnover is the number or percentage of workers who leave an organization and are replaced by new employees.
Employee Turnover = (Total number of leavers in a month / average number of employees in a month ) * 100
Energy Cost Per Unit is a measure of the cost of energy (electricity, steam, oil, gas, etc.) required to produce a specific unit or volume of production.
Energy Cost Per Unit = Sum of all energy costs / Units or Volume of Production
Also known as throughput yield, First Pass Yield is defined as the number of good units (that do not require rework) coming out of a process divided by the number of units going into that process over a specified period of time.
First Pass Yield = number of “good” units completed (excluding scrap/rework) / total number of units entering the process
Health and Safety Incident Rate, also known as the total case incident rate (TCIR), is the number of work-related injuries per 100 full-time workers during a one year period
Health And Safety Incident Rate = (Number of OSHA Recordable injuries and illnesses X 200,000) / Employee total hours worked = Total Case Incident Rate. (Provided by OSHA)
Inventory Accuracy measures the discrepancies that exist between electronic records that represent the inventory and the physical state of the inventory.
Inventory Accuracy = number of counted items that perfectly match every aspect of the record / total number of items counted
Inventory Carrying Costs are the total of all expenses related to storing unsold goods.
Inventory Carrying Cost = inventory holding sum / total value of inventory, then multiplied by 100
Inventory Turns is the ratio that measures the number of times inventory is sold or consumed in a given time period .
Inventory Turns = cost of goods sold (COGS) / average inventory during same period
Labor As A Percentage Of Cost is the percentage value of money spent on labor costs against the total revenue of the company during a specific period.
Labor As A Percentage Of Cost = Labor Costs / Gross Sales
Machine Downtime Rate is any time the equipment is not available for production, including planned and unplanned downtime. Downtime is considered the largest source of lost production time for manufacturing, which makes this an incredibly important metric.
Machine Downtime Rate = (total uptime) / (total uptime + total downtime)
Machine Set Up Time is the period of time that is required to prepare a machine for its next run after it has completed production of the last part of the previous run.
Machine Set Up Time = Time machine is prepared for next run - time completed last part of previous run
Maintenance Cost Per Unit is the total maintenance cost divided by the number of produced units in a given period of time.
Maintenance Cost Per Unit = total maintenance cost / number of produced units in measurement period
Manufacturing Cost As A Percentage Of Revenue is the ratio of total manufacturing costs to the overall revenue produced by the manufacturing plant or business unit.
Manufacturing Cost As A Percentage Of Revenue = total manufacturing costs / overall revenue
Manufacturing Cost Per Unit is the breakdown of all the fixed and variable costs that are encountered in the process of producing a single product
Manufacturing Cost Per Unit = manufacturing costs / total number of units produced during a given period
Manufacturing Lead Time is the time period between the placement of an order and the shipment of the completed order to the customer.
Manufacturing Lead Time = order delivery date - order received date
Material Yield Variance is the difference between the actual amount of material used and the standard amount expected to be used, multiplied by the standard cost of the materials.
Material Yield Variance = (Actual unit usage - Standard unit usage) x Standard cost per unit
Mean Time Between Failure is the predicted elapsed time between inherent failures of a mechanical or electronic system, during normal system operation.
Mean Time Between Failure = number of operational hours / number of failures
Mean Time To Repair is the basic measure of the maintainability of repairable items. It is essentially the average time it takes to repair either failed equipment or a failed part. It is most commonly represented in hours.
Mean Time To Repair = sum of unplanned maintenance time spent on repair / total number of failures
Non-compliance Events Per Year is a measure of the number of times a plant or facility operated outside the guidelines of normal regulatory compliance rules during a one-year period
Simply the number of non-compliance events within a given year.
On-time Delivery is the ratio of finished goods or shipments delivered on time to customers as a percentage of total units delivered or shipped. It is a good metric to use in ensuring customer satisfaction.
On-time Delivery = on time units / total units
Overall Equipment Effectiveness provides a means to measure the percentage of planned manufacturing time that is productive. OEE is calculated by multiplying availability, performance and quality and is represented by a percentage and only considers scheduled time. An OEE of 100% would mean that a manufacturer producing only good parts, as fast as possible, with no stop time.
Overall Equipment Effectiveness = Availability x Performance x Quality
Overall Operating Efficiency is similar to OEE except it takes unscheduled time into account, looking at Total Operations Time as the maximum.
Overall Operating Efficiency (OOE) = Availability (where Availability = Actual Production Time / Operating Time) x Performance x Quality
Percentage Planned Maintenance is the a maintenance metric that measures the number of planned maintenance tasks in comparison to all maintenance tasks.
Percentage Planned Maintenance = # of planned maintenance hours ÷ # of total maintenance hours × 100
Plant Downtime, also known as idle time, off line period or production downtime, is any time in which a manufacturing plant is off-line and not producing any products or adding value to the business and its customers.
Plant Downtime is simply the sum of all downtime for a plant within a given period.
Production Attainment is the number of units manufactured by the company divided by target production output over a certain period of time, as a percentage. It measures the extent to which a manufacturer reaches its targeted production output.
Production Attainment = total number of units manufactured by the company / target production output over a certain period of time
Production-to-Market Lead-time, also known simply as lead time, is the amount of time it takes to build and ship a product if all the materials are available. This includes all the manufacturing, sub-assembly, and assembly processes that impact the ability to process material into a product
Production-to-market Lead-time = order delivery date - order received date
Profit Per Employee is the measure of net Income for the past twelve months divided by the current number of full-time equivalent employees.
Profit Per Employee = net income for the past twelve months / current number of full-time equivalent employees
Return On Assets is a profitability ratio that provides how much profit a company is able to generate from its assets.
Return On Assets = net income / average total assets
Revenue Per Employee, similar to profit per employee, is a ratio that measures how much revenue each employee generates for the firm.
Revenue Per Employee = total revenue / current number of employees
Schedule Attainment is the the percentage of time a target level of production is attained within a specified schedule of time. It essentially measures the amount of output produced in relation to the plan.
Schedule Attainment = (actual production output in units / target production output in units) x 100
Scrap Rate is the percentage of failed assemblies or material that cannot be repaired or restored, and is therefore condemned and discarded, which represents a cost to the organization.
Scrap Rate = scrap material / total materials intake (amount of material put into the process)
Takt Time is the required product assembly duration that is needed to match the demand. It helps manufacturers ensure that their capacity matches the existing customer demand.
Takt Time = workable production hours / units required (customer demand)
Throughput is the amount of material or items passing through a system or process.
Throughput Rate = total good units produced / time
Time To Productivity is how long it takes a new hire to contribute to an organization.
Time To Productivity = date that new hire achieves productivity - start date of new hire
Total Cycle Time is the total time from when an operation begins to when the operation ends.
Total Cycle Time = end time of operation – start time of operation
Total Manufacturing Cost Per Unit Excluding Materials is a measure of all potentially controllable manufacturing costs that go into the production of a given manufactured unit, item, or volume
Total Manufacturing Cost Per Unit Excluding Materials = (total manufacturing costs - cost of materials) / total number of units produced
Unscheduled Downtime is any period in which a system is unavailable that was not previously planned.
Unscheduled Downtime is simply the sum of all unscheduled downtime within a given period
Unused Capacity Expenditures measures how much available capacity from machines and people was supported but went unused.
Unused Capacity Expenditures is simply the sum of any unused capacity within a given period.
Utilization is the proportion of time that manufacturing equipment is used. It essentially measures how much of a manufacturing operation’s potential output is being met.
Utilization = (plant output in a given time period x 100) / maximum output in a given time period
Work-in-process is a company's partially finished goods waiting for completion and eventual sale. It includes raw materials, labor, and overhead costs associated with products that are in mid-production.
Work-in-Process (Wip) = WIP inventory at beginning of period + WIP purchased during period - WIP inventory at end of period + labor costs + manufacturing overhead
Manufacturing Cycle Efficiency is the proportion of production time spent on value-added activities. To reduce costs, manufacturers can identify activities that are not adding value to the operation.
Manufacturing Cycle Efficiency = value-added production time / total cycle time
Rolling Throughput Yield is the probability that a process with more than one step will produce a defect free unit. It is a similar manufacturing KPI to that of first pass yield, but takes into consideration rework. You can calculate Rolling Throughput Yield by multiplying the First Pass Yield of each process.
Rolling Throughput Yield = (First Pass Yield of Process A)*(First Pass Yield of Process B)*(First Pass Yield of Process C)
Unplanned Capacity Expenditure is simply the unplanned expenses.
Unplanned Capacity Expenditure = total capacity expenditures - planned capacity expenditures
Below we provide a large variety of example KPI reports and dashboards from MachineMetrics. We offer these so you can get an idea of the data MachineMetrics can provide and run reports on, as well as for general inspiration if you are building reports and templates for your organization. You'll also get a good idea of manufacturing KPI examples in the form of clean, useful, and action-oriented dashboards and reports.
Key performance indicators allow manufacturers to understand where they currently stand as well as the direction they are trying to go. Data analytics provide insight into overall business performance, the extent of unused capacity, how to continue reducing costs, and so much more.
If you have made it this far, you may be interested in our guide on the manufacturing analytics journey, which documents how manufacturers can progress in their analytical maturity and drive more advanced manufacturing programs. Learn how you can move from descriptive to prescriptive analytics as you adopt advanced manufacturing strategies.
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