Speed, efficiency, and quality are ongoing goals for manufacturers in today’s marketplace. Unfortunately, savvy competitors, a disorganized supply chain, an unfriendly economy, and other manufacturing issues such as talent shortages and global unrest pose seemingly insurmountable obstacles. The good news is that manufacturers tracking key performance indicators (KPIs) are likelier to reach their goals.
Manufacturing metrics and key performance indicators, or KPIs, help manufacturers measure the efficiency of their business processes and workflows. The data provided by the KPIs provides specific insights they can use to improve operations, including increased efficiency and reduced costs.
To establish KPIs, you must first determine their objectives. Do you want to increase revenue and employee engagement? Are you looking for new products and additional revenue streams? According to Indeed, KPIs should be specific, measurable, achievable, relevant, and time-bound. They must also be evaluated regularly and be adjustable based on your goals.
This is the “SMARTER framework” described by Indeed, and it ensures that you get accurate and timely data while avoiding common metric errors. A good example of a metric mistake is focusing on lagging indicators instead of leading indicators.
Leading indicators look at what may happen while lagging indicators look at what has already happened. Even though lagging indicators can offer insights into past challenges, it’s crucial to understand potential issues before they arise, allowing you to avert potentially large, expensive catastrophes.
Toyota Group is one manufacturing company that has mastered the art of achieving organizational goals. Toyota has created a production system that eliminates waste while producing quality products quickly and efficiently. The system is called the Toyota Production System (TPS) and is also known as a “lean manufacturing system” or a “Just-in-Time (JIT) system.”
According to Toyota’s website, TPS evolved over many years based on the Just-in-Time concept to improve efficiency. They established it to make the vehicles ordered by customers in the quickest and most efficient manner so that they can be delivered as soon as possible.
Although Toyota hasn’t specifically stated it, we can assume it has set clear, concise business goals and metrics to assess its progress. There are differing opinions on which metrics to track, but the following eight KPIs are essential for every manufacturer.
- Throughput: How quickly a manufacturer produces a product.
- Work in Process: Determining how efficiently a manufacturer produces a finished product over a specific period.
- Standard Operating Efficiency: A measure of how much it costs to produce a product in a certain amount of time.
- Production Volume: Estimating the number of units manufactured in a period of time and comparing it to similar periods.
- Production Costs: Assessing manufacturing costs (materials, labor, energy, rent, etc.) so manufacturers can avoid excessive expenses.
- On-Time Delivery: Comparing the number of products delivered on time with the total number of delivered products to determine the level of customer satisfaction.
- First Time Right: Making products correctly the first time is the goal; however, manufacturers can identify the problems when mistakes are made.
- Revenue Per Employee: Calculating each employee’s productivity and efficiency based on how much money they make for a manufacturer.
Developing KPIs within the SMARTER framework and obtaining KPI data are essential to becoming a lean, profitable business. In order to translate the KPI data into strategic, actionable decisions, sophisticated technology is needed, such as the Acumatica cloud ERP solution.
Keeping track of essential manufacturing metrics and key performance indicators is crucial to enhancing performance and profitability, and our advanced cloud ERP software helps you meet those demands head-on. Acumatica’s Playbook, “Manufacturing Metrics Made Easy,” notes that it is difficult to present metrics and KPIs meaningfully and explains how Acumatica simplifies the process.
Manufacturers can use modern cloud ERP applications such as Acumatica to combine data from multiple systems with configurable inquiries, tailored reports, actionable role-based dashboards, and dimensional data analysis to ensure data integrity. It can also be used to create custom workflows to facilitate organizational change across business units and departments.
Acumatica has the features and functionality you need to track and utilize your unique metrics and KPIs, including:
- Improved data accuracy through automated data collection.
- Streamlining business processes with artificial intelligence and machine learning.
- Personalized dashboards with real-time reports.
- Notifications of potential issues via push notifications.
The Acumatica ERP system allows you to set, measure, monitor, and analyze your KPI data for a more productive future.
Contact our experts today to learn more about tracking key manufacturing metrics and KPIs with Acumatica.