KPIs in production
Key performance indicators (KPIs) are essential factors in the successful management of manufacturing companies. They primarily serve to monitor, evaluate and optimize production processes, capacity utilization, downtime and capital turnover and thus represent important indicators for decision-makers.
The most important key figures are among others:
Downtimes – Production failures
Production failures are a classic example of a profit-reducing ratio. They result in lost contribution margins and often in costs due to quality problems. The ratio generally describes the frequency and duration of breakdowns, among other things due to incorrect operation of the machines, power failure, defects and wear or incorrect integration of the material to be processed.
Regular staff trainings, continuous machine maintenance and the ongoing analysis of potential process-oriented and mechanical weak points can avoid downtimes. The measurement of downtimes and cycle rates can be recorded on machines using appropriately programmed microcontrollers. The acquired data can then be stored in a database, e.g. SQL. A corresponding dashboard enables monitoring this data and to be informed at an early stage in the event of failures. Alternatively, modern machines are equipped with a barcode reader which the machine operators scan into the system when the machine is at a standstill.
The key performance indicator “Return Quote” specifies the proportion of returned production parts in relation to the total number of produced components. Reasons for return include lack of processing, unsatisfactory material quality, tolerance deviations or defective products. To avoid this, it is worthwhile to expand quality inspections during and after the production process. In this context, we also call the KPI “Right First Time”, which describes the quantity of produced components that delivers error-free results in the initial production round.
The production volume indicator is certainly the most important KPI for the manufacturing industry. It provides information on the utilization of machines and thus on the current and optimum production volume. If the production volume is compared with past months or years, the increase/decrease in production quantities can be determined. It also makes it possible to make forecasts for coming financial years and to plan free capacities for new projects. In this context, the Overall Equipment Effectiveness should also be mentioned. Multiplying availability by performance and quality yields a key figure for determining resource utilization. High values for this are an indication of efficient machine utilization.
Like the production volume, the production costs are of essential importance for manufacturing companies. Fixed and variable costs flow into this KPI and calculate the individual and total costs of a product or component. For follow-up or new orders, these ultimately serve to calculate quotations. The individual cost types can be precisely broken down via a cost breakdown. Numerous individual factors can be compared to optimize costs.
Return on Assets
This KPI takes all assets of a company as well as profits and losses into account. The calculation is based on the calculation (profit + interest on borrowed capital) / total capital employed. In practice, the term “ROI”, return on investment, is often used for the return on total capital. The higher the return on total capital achieved, the more efficiently the company’s capital is used.
Every manufacturing company incurs rejects that weaken a company’s profitability targets in a certain way. Here, too, visual inspections are worthwhile in order to analyse the causes and initiate countermeasures for reduction.
KPIs can be defined for all areas of a company and are the starting point for ongoing analyses and optimization measures. Especially in the age of Industry 4.0 the exact definition and evaluation of important KPIs is the basis for successful business. Corresponding software solutions or own constructions help to gain an overview of the own company.
The following procedure is generally recommended for the introduction of KPIs:
- Defining the objectives
- Organization of responsibilities and contact persons
- Identification of the relevant KPIs
- Identification of a suitable analysis software and implementation of the appropriate measurement techniques
- System introduction
- Training of the employees
- Creation of an appropriate reporting
If the relevant techniques are integrated and colleagues involved are informed, only the following aspects can be mentioned: continuous analysis and optimisation.
GRONBACH is a manufacturer and system supplier of mechanical components, OEM devices and complex components made of aluminum, stainless steel and plastic for various industries. We offer our customers high-quality services as a full-service supplier, from mechanical production and surface finishing to hybrid technology and toolmaking.