6 key KPIs to monitor for manufacturing
For manufacturers, efficiency, agility, and foresight are not merely desirable traits – they are prerequisites for sustainable success. In the face of cutthroat competition and rapid technological advancements, businesses cannot afford to rely solely on intuition or outdated methodologies when planning for the future. However, a well-implemented ERP can deliver the business intelligence (BI) that you need to stay ahead of the game. Here we highlight six Key Performance Indicators (KPIs) that you can track from ERP.
On Time In Full (OTIF)
OTIF is a potent gauge that can be applied to both you and your suppliers. It allows you to keep a finger on the pulse of your supply chain, revealing potential weak spots. It also helps you to keep your own house in order and allows you to demonstrate to your customers that you are measurably meeting their demands. This data-backed dynamic approach will undoubtedly enable you to exceed your customer expectations whilst optimising your sourcing efforts. This is especially important where supply chains can be volatile.
Planned Versus Actual Costs
Static cost analyses are as impractical as they are outdated. BI tools offer the flexibility to compare planned costs against actual costs, providing invaluable insights for both manufactured and purchased products. Garnering this concrete data allows you to streamline operational inefficiencies, identify cost-saving opportunities, and ultimately enhance profit margins.
Margins – Cost of Sales versus Revenue
In manufacturing, an up-close assessment of the difference between the cost of sales and revenue is crucial. BI tools shed invaluable light on this aspect, going beyond merely crunching the numbers and delivering actionable insights that can fuel your profit-boosting strategy.
Every instance of scrap in your manufacturing process is not just material waste; it's a drain on profits. BI tools can comprehensively track scrap percentages – the reasons behind them, personnel involved, and machine failures. Such detailed insights do not just help in addressing immediate issues but also in defining long-term strategies for waste reduction and efficiency augmentation.
When dealing with complex and multiple manufacturing processes against any given order, being able to accurate cost the time required to manufacture parts is paramount. By comparing planned time against actual time for each task, this helps identify bottlenecks, inefficient practices, and potential areas of improvement, such as training. As this is intrinsically linked with margins, having clear visibility of this data can quickly make a very real and tangible difference to your profitability.
Whether it's slow-moving stock, stock errors, or JIT (Just In Time) methodology glitches, BI tools help to quickly identify problem areas or trends so that you can take appropriate action. Better stock control will result in fewer stock outages, faster and more accurate stock checks, and even a reduced footprint that can free up valuable space.
Here are just a few examples of companies that made effective use of business intelligence data:
- Being able to make decisions around meaningful data can have positive knock-on effects. An electronics manufacturer consolidated both their inbound supplier delivers and those bound for customers. They now have one delivery van arriving, delivering goods and collecting shipments. This not only saves time and resources within the business, but also has a significant environmental impact.
- Business Intelligence data helps to keep everyone informed. A manufacturer of electronic hearing measurement devices linked their 123Insight ERP with Shop Floor Data Collection system to their Intranet via the SDK. This allowed live KPI information to be displayed across the shop floor, also providing management and staff with instant notifications of any issues such as machines down.
- Visibility and business intelligence allows you to diversify your product range. A furniture manufacturer originally had a limited, fixed range of products, most of which were made from stock. After implementing 123Insight they increased their product range by 500%, all of which are made to order rather than keeping stock.
- Turning digital information into a real-world space saving. An electronics manufacturer working from a small premises was not only able to reduce purchasing costs by placing contract orders with call-offs, but also reduced their warehouse requirements to such an extent that they repurposed around 1/3rd to increase space for their design department.
Summary: Making manufacturing KPIs work for you
Obtaining and managing these KPIs might seem daunting at first, but having a well-implemented ERP system in place will provide the framework to deliver them without any additional effort. Leveraging the data can subsequently set you apart from your competitors, giving you comprehensive tools and confidence to make strategic decisions for your business and provide a better service to your customers.