There is a seeming endless supply of manufacturing performance metrics available to managers and process owners—so many that it can be hard to figure out which metrics matter and what they mean.
Unfortunately, organizations waste a lot of time, effort, and money on metrics that measure the wrong thing or aren’t used to effectively to promote goals. They key to avoiding that fate is to match performance metrics to your specific strategic and operational priorities—and then use the resulting data to guide your short- and long-term actions, says management consultant Duke Okes. Okes covers the different types of metrics and their purposes in a webinar for Audio Solutionz, “How to Select & Use the Right Performance Metrics: 2018 Virtual Boot Camp.”
Consider: Capacity, Utilization, Rejects
Performance metrics can measure everything from employee output to sales goals and can quantify financial, customer, internal process, and learning/growth perspectives, says business consultants Heflo. Focusing in on manufacturing-specific performance metrics will narrow the focus further.
“In manufacturing, each major goal typically requires multiple metrics,” says LNS Research.
And those strategic and operational goals, says Chron.com, should be “SMART”—that is: specific, meaningful, actionable, realistic, and time-based.
“Companies use metrics to change behavior and improve performance,” explains the Chron.com article. “They can only accomplish this if actions by the company can affect the measured quantity.”
According to LNS Research, the metrics to consider using are:
- On-time delivery
- Manufacturing cycle time
- Yield
- Customer rejects
- Throughput
- Capacity utilization
- Health and safety accidents
- Non-compliance events
- Rate of new product introduction
- Total manufacturing cost per unit
- Net operating profit
- Productivity in revenue per employee
- Energy cost per unit
Important: Whatever measurements you chose, they “should have over-time continuity and not change when there are new organizational charts, leaders, and/or strategies,” says consultants Smarter Solutions.
Gauge Output and Outcome on a Worksheet
Good performance metrics can be found on a performance metrics worksheet, such as this one supplied by the state of Michigan. That worksheet includes output, intermediate outcome, and end-outcome measures. Output measures just that, while intermediate outcome and end-outcome measure the changes that have occurred.
More: In addition to the above categories, consultants Red Lion suggest that your performance metrics worksheet include seven more: count, reject ration, rate, target, takt time (i.e., the amount of time or cycle time needed to complete a task), overall equipment effectiveness, and downtime.
“Even if an organization does not employ formal continuous improvement initiatives, efficiency gains can still be realized by borrowing lessons learned through the visual management techniques of those processes,” says Red Lion.
Not so fast: The Harvard Business Review adds a note of caution, however: “A performance appraisal is a formal record of a manger’s opinion of the quality of an employee’s work,” the site says. “The operant word, of course, is ‘opinion.’”
That means that to be effective, managers must be fair, unprejudiced, and objective.
“Your opinions, feelings, and judgements,” HBR explains, “are what the appraisal process demands.”
With such a broad selection of performance measures, adds Okes, finding the right one for your business is key.
