Lean manufacturing focuses on eliminating sources of waste and continuously looking for ways to improve the organization. In order to assess and measure the processes, organizations often use Key Performance Indicators (KPIs). KPIs are so useful that they are used in a plethora of businesses and in combination with a variety of business philosophies, from Lean to Six Sigma to Total Quality Management.
Key Performance Indicators are factors that are tracked by organizations to analyze their manufacturing processes. These criteria are used to measure success relative to a set of predetermined goals or objectives. Visual management is a system in which KPIs are displayed on a factory floor to provide clear, visible objectives to the front line employees. Criteria relating to production output, quality, and efficiency clearly displayed in order to encourage higher performance by employees. In addition, it provides actionable information so that performance can be easily monitored and improvements can be made quickly. Visual management strives to improve efficiency as a whole.
7 Key Performance Indicators for Production
KPIs vary from one organization to the next, but there are seven common KPIs that are used in production.
- Count – A standard KPI for a factory floor is the count, which refers to the amount of product created. This could refer to the total production for a shift, a week, or since the last machine changeover. In many cases, the individual employee or shift output is compared in order to encourage competition amongst employees.
- Reject Ratio – The reject ratio measures produce scrap. The goal is to minimize the amount of scrap created in order to reach profitability goals. Therefore, the reject ratio is used to keep scrap within acceptable limits.
- Rate – Rate measures the speed at which goods are produced. Slower rates mean decreased profits, and faster rates can affect the quality of the product. The goal is for operating speeds to remain at a set, consistent rate.
- Target – Target values are set for output, rate, and quality. This encourages employees to reach the set targets for each of these categories.
- Takt Time – The amount of time that it takes to complete a task is known as takt time. It can refer to the time it takes to produce a product or the cycle time for a specific operation. Tracking and displaying this information helps a manufacturer to identify where bottlenecks are occurring in a process.
- Overall Equipment Effectiveness (OEE) – The OEE is a measurement of whether resources, such as personnel and machinery, are being used efficiently. A higher OEE value means more efficient use of resources.
- Downtime – Tracking downtime is considered to be one of the most essential KPIs. Reducing downtime is a major goal, because downtime means lost profits. In many cases, operators must enter a reason code to justify downtime so that the explanations for downtime can be tracked and reviewed.
Key performance indicators help to ensure that processes are efficient and that the goals set by an organization are being monitored and reached. The cost for these visual management systems is low, and the potential return on investment is quite high.
If you would like to learn more about how your organization can implement key performance indicators to make your operations more efficient, get in touch with the Leading Edge Group. We offer a variety of Lean programs to suit your needs.
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