Learn about the Top Ten Manufacturing (KPIs) Key Performance Indicators that every finance professional must know. In other words, these metrics are crucial for understanding your bottom line and projecting for the future.
Table of Contents
Top 10 Manufacturing KPIs
Here are the top ten manufacturing KPIs you need to learn in finance.
#1: Manufacturing KPIs – Production Activity (or Volume)
Description: Calculates the value of the production output in monetary value.
Formula: Sum of the monetary value of all finished goods produced within a defined period.
#2: Cycle Time
Description: Average amount of time to make one product, including process, inspection, move, and queue time.
Formula: Process time + Inspection time + Move time + Queue time
#3: Manufacturing KPIs – Takt time
Description: Rate at which you need to complete a product to meet customer demand.
Formula: Production available time / Customer demand
#4: Inventory Turnover
Description: Amount of time that passes from the day an item is purchased by a company until it is sold.
Formula: Cost of Goods Sold / Average Inventory (over a period of time)
#5: Manufacturing KPIs – Return on Assets (ROA)
Description: Measures how effectively a company is using its resources (machine and inventory) to make a profit.
Formula: Net Income / Average Total Assets
#6: First Pass Yield
Description: Measure of quality and performance and is at the heart of production efficiency and profitability.
Formula: Number of good products finished / Number of production orders started
#7: Manufacturing KPIs – Yield Factor
Description: Calculates the number of items to start to have a good finished product.
Formula: Number of production orders started / Number of good products finished
#8: Overall Equipment Effectiveness (OEE)
Description: Compares the performance of a machine to its relative capacity
Formula: Good Count × Ideal Cycle Time / Planned Production Time
#9: Manufacturing KPIs – On-Time Delivery
Description: Measures if an organization is meeting its goals in regard to promised delivery times
Formula: On-time units / Total units
#10: Avoided Costs
Description: How much money have you saved by using preventive maintenance?
Formula: Assumed Repair Cost + Production Losses – Preventative Maintenance Cost
The Bottom Line – The Manufacturing KPIs are The Key to Successful Manufacturing Operation
To sum up, in order to ensure the success of a Manufacturing Operation, it is important to monitor a variety of KPIs. By doing so, businesses can identify areas where improvements can be made in order to boost efficiency and productivity.
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