Manufacturing companies generate a lot of data that needs to be converted into actionable intelligence for senior management to make the right decisions at the right time. This intelligence is important for decision makers to:
- understand the current health of the business.
- ascertain if an investment can be made in the future.
- determine which products are selling profitably.
- make various other strategic business decisions.
In this age of information overload, each manufacturing company has a set of Key Performance Indicators (KPIs) that need to be monitored for the overall health of the business. KPIs are usually provided on an executive dashboard display for senior executives to get a quick glance at the current opportunities and challenges. KPIs also empower managers and employees to identify areas that can be made more productive.
Most ERP (Enterprise Requirements Planning) systems offer KPI dashboards with a variety of predefined KPIs to measure the different areas of the business. Let us look at four highly impactful KPIs that are important for manufacturing organizations.
1. Planned vs. Actual Time & Cost
This KPI indicates the effectiveness of overall manufacturing operations over a period of time. Managers can use statistical graphs on the planned vs actual operational hours to detect early signs of deteriorating performance. Planned vs actual costs incurred can be compared for different departments to know where the actual spending happens, or to detect wastage of raw materials. This KPI is also used when preparing the annual budget for finance and operations.
2. Production Schedule
This KPI is intended to offer insight at a granular level of production. It helps monitor daily production schedules and resource utilization at equipment and device level. Managers can view the work orders that have been released in the plant, and their statuses over a period of time. Maintenance personnel can get a top-level view of work center loads and schedule status across all departments. The insights gained from this KPI can help managers to plan and monitor production cycles for greater efficiency, uncover patterns that lead to downtime and minimize or eliminate them. They also help managers assess the cost of labor, raw materials, etc. and take steps to make them more cost-effective. These actionable insights lead to better inventory and asset management.
3. Capacity Utilization
This KPI is used to understand how much of a manufacturing plant’s capacity is utilized for the current production. It helps materials management teams to understand how resources are shared, and if any particular department is being over-serviced or under-serviced. Drill down analysis on this KPI can largely help reduce costs, reduce overtime, plan for balanced resource utilization, and improve delivery time.
Ascertaining the profitability percentage by customers, projects, and teams is a very important and useful KPI to understand how much revenue the company is generating from each category. It helps to segregate profitable customers from those who cost more than the revenue they generate.
In addition, it is also an important KPI that can be used along with capacity utilization values to plan for production levels on a granular level. It provides insight into the most profitable department, which can be used as an input when calculating yearly bonuses for the employees.
In manufacturing, the best practice is to use a small number of high-impact KPIs for each critical factor affecting the business and work towards achieving it. The above mentioned four high-impact KPIs are invaluable for a manufacturing organization to focus on those aspects of organizational performance that are critical for its current and future success.
As the business grows, manufacturers will observe greater volumes of data being generated, which must be used to drive decisions and actions. Manufacturers need an intelligent and flexible ERP system that can convert data into intelligence, and is capable of proper creation and utilization of KPIs. If you are searching for a best-in-class ERP solution that offers superior business intelligence, Infoways’s Infor LN has the capabilities to meet the unique requirements of your organization. Our solution can also be tailored for complex discrete manufacturing. If you would like to explore Infor LN’s features, contact us to schedule a call with our experts.