- Main production indicators
- To improve customer experience and response time
- Production cycle time
- Time to make changes
- To improve quality
- Quality performance
- Customer rejections or product returns
- Rejection rate
- To improve efficiency
- Production performance
- Capacity utilization
- Overall team effectiveness
- Production schedule or achievement
- For inventory reduction
- Inventory / shifts
- To ensure compliance with standards
- Health and safety incidents
- Number of non-compliance events in a year
- To reduce maintenance
- Percentage of preventive maintenance work orders vs. corrective
- Downtime vs. operation time
- To reduce costs and increase profitability
- Production cost as a percentage of revenue
- Net operating profit
- Average contribution margin per unit
- Energy cost per unit
- Examples
- Indicator formula Overall Equipment Effectiveness
- EGE indicator calculation example
- References
The production indicators are the different metrics that companies use to evaluate, analyze and monitor production processes. These performance measures are commonly used to evaluate success against specific strategic goals and objectives.
Measuring, analyzing and improving production indicators effectively is not as simple as it seems. While there are certain indicators that work well for specific job functions, it is often the case that various combinations of indicators are needed to ensure that a broader business objective is met.
In production, each area of improvement or strategic objective generally requires multiple indicators. These are grouped around your specific strategic objective.
The MESA (Manufacturing Enterprise Solutions Association) organization has sponsored research to help the manufacturing market identify the most important indicators.
By achieving this identification of indicators, the organization helps decision-makers to understand the importance of these indicators, as well as their relationship with measurement programs and the use of software solutions.
Main production indicators
According to the most recent survey of indicators, the following are the production indicators most used by batch, process and hybrid manufacturers:
To improve customer experience and response time
Production cycle time
Measures the time it takes to manufacture a given product, from when the production order is released until the finished products are delivered.
Time to make changes
It measures the time it takes to change a production line, from when a product is finished to begin manufacturing a different product.
To improve quality
Quality performance
Indicates the percentage of products that are manufactured correctly the first time during the production process, adjusted to specifications, without waste or rework.
Customer rejections or product returns
It measures how many times customers reject products and return them, based on receipts of defective or out-of-specification products.
Rejection rate
It is the percentage of units produced that are rejected, during a given period of time or lot.
To improve efficiency
Production performance
Measures the amount of product that is manufactured on a machine, line or plant during a specified period of time
Capacity utilization
Indicates how much of the total production capacity is being used at any given time.
Overall team effectiveness
This multidimensional indicator is a multiplier of availability x performance x quality, and is used to indicate the general effectiveness of the production centers or of a complete production line.
Production schedule or achievement
It measures in what percentage of time a desired production level is reached within a specified time schedule.
For inventory reduction
Inventory / shifts
Measure the efficient use of inventory materials. It is calculated by dividing the cost of the merchandise sold by the average inventory used to produce that merchandise.
To ensure compliance with standards
Health and safety incidents
Measures the number of health and safety incidents that were recorded as having occurred over a period of time.
Number of non-compliance events in a year
Measures the number of times a plant operated outside of normal regulatory compliance rules guidelines during a one-year period. These breaches must be fully documented in terms of the specific time of non-compliance, reasons, and resolutions.
To reduce maintenance
Percentage of preventive maintenance work orders vs. corrective
Indicator of the frequency with which preventive maintenance is carried out, compared to unplanned maintenance.
Downtime vs. operation time
This relationship between downtime and uptime is a direct indicator of the availability of manufacturing assets.
To reduce costs and increase profitability
Production cost as a percentage of revenue
Ratio of total production costs to total revenue generated by a production plant.
Net operating profit
Measures the financial returns to investors, either before or after taxes, for a manufacturing plant.
Average contribution margin per unit
It is calculated as a ratio of the profit margin generated by a production plant when producing a given unit or volume.
Energy cost per unit
Measures the cost of energy (electricity, steam, gas, etc.) required to produce a specific unit or volume.
Examples
Indicator formula Overall Equipment Effectiveness
Overall Equipment Effectiveness (EGE) is a widely accepted set of non-financial indicators that reflects the success of production.
EGE divides the effectiveness of a manufacturing facility into three separate but measurable components: availability, performance, and quality. Each component records an aspect of the process that can in turn be a target for improvement.
EGE = Availability x Performance x Quality
Being:
Availability = run time / total time
Percentage of machine operating actual production time by machine available production time.
Performance = total counter / standard counter
Percentage of the total parts produced by the machine between the standard production rate of the machine.
Quality = good units produced / total units produced
Percentage of good parts among the total parts produced by the machine.
EGE indicator calculation example
Let it be a production facility that is scheduled to operate on an 8 hour (480 minute) shift with a scheduled 30 minute break. During the shift, the center was inactive for 60 minutes due to machine breakdown (unplanned time).
Runtime = 480 scheduled minutes - 30 minutes scheduled break time - 60 minutes unscheduled downtime = 390 minutes.
So:
Availability = 390 minutes / 480 minutes = 81.25%
The production center manufactured a total of 242 units during this shift.
The standard counter for the piece produced is 40 units / hour. That is, a part should be produced every 1.5 minutes. It then has:
Total counter = total units produced / run time
Standard counter = 1 / standard time
So:
Performance = (units produced * standard time) / runtime
Performance = (242 units * 1.5 minutes) / 390 minutes = 93.08%
Of the 242 total units produced, 21 were defective.
Let the rejection rate be: (units defective / units produced) * 100
So the rejection rate was (21/242) * 100 = 8.68%
So:
Quality = (units produced - defective units) / units produced
Quality = (242 - 21) / 242 = 91.32%.
Finally, you have:
EGE = (Availability = 81.25%) * (Performance = 93.08%) * (Quality = 91.32%) = 69.06%
References
- Mark Davidson (2013). 28 Manufacturing Metrics that Actually Matter (The Ones We Rely On). LNS Research. blog.lnsresearch.com.
- Wikipedia, the free encyclopedia (2018). Performance indicator. Taken from: en.wikipedia.org.
- Wikipedia, the free encyclopedia (2018). Overall equipment effectiveness. Taken from: en.wikipedia.org.
- Pat Hennel (2014). Manufacturing Metrics that Matter Most: A Comprehensive Checklist. Cerasis. Taken from: cerasis.com.
- Matt Nichol (2015). The 12 most important metrics to measure in manufacturing. Matthews Australasia. Taken from: blog.matthews.com.au.