The 12 best performance indicators to track operational excellence

production indicators

The 12 best industrial performance indicators to track operational excellence

Throughout this article, we will explore the strategies and best practices that some of the most successful companies are using to build a culture of operational excellence in their manufacturing organizations.

Of course, being in the data business, we'll pay particular attention to the manufacturing KPIs they track to measure their progress and how manufacturing analytics can track them in real time.

In this article, we thought it would be useful to list the key performance indicators used by industry leaders to create sustainable operational excellence.

So, what are the key industrial performance indicators for tracking operational excellence?

1. On-time delivery

Work orders delivered to original program date ÷ Work orders from original program due

The on-time delivery indicator, measures the percentage of orders delivered on time. This indicator is often counted monthly for statistical relevance and the target should be a 100% achievement.

Indeed, it has been a favorite of ours ever since we learned that it was the number one business objective of one of our best customers; a large contract manufacturer. 

In the CEO's office; it was ranked number one among many other goals on the whiteboard and was circled for added emphasis.

When asked about this KPI, he replied:

"As long as we achieve this; we are less concerned about OEE; or even machine downtime"; he told us. "What good is a TRS at 100% if we have no customers to sell our product to?"

2. Plan the realization

Work orders delivered as of the original program date ÷ Original program work orders completed

Among the various industrial performance indicators, this indicator tracks the frequency with which the production team achieves the target production level and is an important means of setting performance benchmarks; adjusting work order delivery times; and ensuring that performance problems do not cause costly delays.

Indeed, if a manufacturer only tracks on-time delivery, for example, problems within the production process itself can often be obscured and the change not documented. 

therefore, one of the keys to ensuring on-time delivery (if tracked daily), target attainment keeps the production team's attention fixed on price and could eventually be modified to also track an early delivery performance level.

3. Total cycle time

Total cycle time measures the time it takes for a sales order to start and complete the entire production process up to shipping. It represents the entire time it takes to convert raw materials into finished products from one end of the line to the other.

Thus, the cycle time indicator is the average of all cycle times of all orders during a specific period and is usually calculated using the machine cycle time. Machine cycle time; defined in detail here; is at the heart of any plant performance measurement.

Therefore, this efficiency measure defines the efficiency bar of a machine and allows for real-time reporting of each machine's performance (per minute). Each machine should have an ideal cycle time based on the part being produced. 

Therefore, when considered as a set of multiple cycles; it can be measured as cell cycle time.

4. Production rate

Units produced / hour

Among the different industrial performance indicators, the rate of units produced on average by a machine, a cell or a line over time, for example 1200 units / minute.

While cycle time is a measure of the time it takes between two points, throughput must be monitored in real time because when throughput decreases, it usually indicates a problem on the line. 

Thus, throughput can be increased by eliminating downtime; calibrating machines to run at an ideal cycle time; reducing the number of steps in a cycle to reduce microstops; or changing the raw materials or tools needed to produce the product and improving machine maintenance.

5. Use of performance

Actual output / potential output x 100

If a machine produces goods at an ideal cycle time, it is said to be operating at 100% of its capacity.

During slower execution or whenever a machine is idle; this percentage decreases; indicating the available capacity and the gap in the system. This is an excellent performance indicator for understanding the facility's ability to scale production or implement more agile job scheduling.

6. Time to change series

Changeover time is the time required to unload/load, re-equip, calibrate and program a new job. 

Changeover is most relevant when there is a changeover from one type of part to another before a production run. Taken as an average, this indicator helps determine the types of jobs and parts that may require a reduction in setup time.

Thus, by tracking changeover time, manufacturers can define total cycle times per part, refine their estimates and recognize the need for increased operator training; better planning; and proactive preparation of required materials.

7. Quality rate

Good parts produced / total units produced

Quality rate is a measure of quality and performance and is central to production efficiency and profitability.

Therefore, the first-pass yield measurement will identify processes that require significant rework that affect throughput; influence total cycle times; and provide a yield target of 100% in which no defective parts were produced.

8. Reject rate

Total disposal / total execution of the product

Scrap is the material discarded or rejected from the manufacturing process, so it can be a measure of units or volume.

Indeed, some organizations track defective items as scrap; while others focus on the leftover raw material from a subtractive manufacturing process.

So however your organization defines scrap; tracking this performance indicator should be one of the first steps to reducing your material costs; possibly increasing cycle times and focusing on producing higher quality products.

9. Percentage of planned maintenance (PMP)

Planned maintenance time / Total maintenance time

This performance indicator is a combination of the calculation of the percentage of planned maintenance versus scheduled maintenance, plus any emergency maintenance required to resolve failures.

Thus, PMP is essential for manufacturers to appropriately allocate resources for preventive maintenance. A rule of thumb established by proponents of preventive maintenance is 85% PMP; in which an organization targets less than 15% of maintenance time to be spent on emergency work orders.

Since emergency fixes can cost an average of 3-9 times more than planned maintenance due to overtime; rushed parts; service calls or production scrap; this indicator should be stable for manufacturing seeking uptime and trying to reduce operating costs.

10. Availability

Uptime / availability + downtime

At the heart of most manufacturing reports is the uptime indicator - the measurement of machine uptime and downtime. Downtime is by far the biggest loss for most manufacturers today. Regardless of your industry, downtime costs money.

Ideally, availability should take into account all downtime; without distinguishing between planned and unplanned.

In addition, in order to solve the problems causing downtime and reduce it; manufacturers need to start tracking the reasons for downtime.Thus, when visualized on a Pareto chart; downtime can be analyzed in the context of the affected machine; by operator and shift; and by any other factor on the plant floor.

11. Customer return rate

Rejected goods / Total number of goods delivered

As a measure of performance; increased customer returns can indicate a flaw in the production process or a missing step in quality control. Customer return costs can quickly increase due to the rework required and the effort and cost of reverse logistics.

12. SRT/OEE - Synthetic Rate of Return

Availability * Performance * Quality

SRT/OEE is fine - and it has its place in the industry, but we firmly believe that many manufacturers follow SRT as a guarantee, believing that if they achieve a high enough SRT; they are operating at a level of manufacturing excellence. In fact, we strongly believe that SRT is a powerful indicator; but it is not sufficient on its own.

Note: There are many key performance indicators; phrases and abbreviations used in the industry. We will cover them as we go along in future articles.

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Author: NAJI Faouzi