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Operational key performance indicators (KPIs in manufacturing)

The word ‘target’ is really open to discuss. How will we measure that we are successful or not and do we follow right criteria?

Target is meaningful when it makes you sleepless and interrupts you to achieve it. When Newton got tired during he was working, he had been sleeping with a dumb-bell on a chair. When the dumb-bell fell down, he would wake up and go on working. We should make effort in fun and sleeping time of others to be successful and different even we cannot do what Newton did.

Time management and using time effectively are serious problems for most of us. We always complain about not having enough time and not finishing jobs in time. Actually time is always enough but we do not realize that.

I have read a book called as ‘Only stupid people sleep for eight hours’. (Erdal Demirkıran). It was really a great book and it shows us that 8 hours sleeping and things which we learned are completely unconsidered. Like, we must sleep for eight hours in one day and work starts at 8 a.m. and finished 5 p.m. We always tried to arrange our training and improvement activities according to this time. Whereas, somebody got up early and went to bed late. Thus s/he changed the world or achieved her/his targets.

A person who sleeps for about eight hours spends %33 of his/her life while sleeping. In other words, a person who lives for 75 years spend his/her 25 years while sleeping. In fact, five or six hours sleeping is enough for a person. In order to live and achieve your targets, you can spend 18 years instead of 25 by sleeping less but it is up to you.

Let’s mention about our targets again. What should be indicators which define us as being successful or not?

In general, we follow our targets in production sector under eight main topics.

We define and measure as [SQDP- ME – M] & F

1-           Safety: The safety of our employees and customers should be priority for us. The workforce loss which results from occupational accidents and customer problems which spring from product insecurity are the most important subjects. If there is more important subject than quality, it is worker’s health and safety.

  1. Number of work accident
  2. Number of lost days due to work accident
  3. Customer satisfaction index. (VOC)

2-           Quality: All problems about quality which are experienced in the side of customers-process and suppliers. All parameters like product return, waste proportion of internal processes, re-work performances and suppliers’ performance assessment should be monitored.

  1. RMA. The number of defected products received from customer.
  2. Customer complaints and actions taken to correct  them. (RCA)
  3. The internal scrap rate (PPM)
  4. The rate of re-work (Yield)
  5. Process capability index. (Cp/Cpk)
  6. Cost of poor quality.(CoPQ)
  7. The defects received from suppliers. (PPM)

3-           Delivery: It is measurement of that customers have desired products as desired combination in desired time or not. They are parameters like delivery rate in time and the success of delivering desired combination with % 100 rates.

  1. On time delivery
  2. Fill rate
  3. Lead Time.
  4. Backorder duration.

4-      Performance: These indicators are used for monitoring how much successful our production or operational excellence is. They are parameters like direct efficiency, lead time and OEE.

  1. Direct efficiency.( Man hour for the produced products / Man hour used)
  2. Productions lead time.
  3. OEE. ( Overall equipment efficiency = Quality x Performance  x Availability)
  4. MTBF , MTTT
  5. C/O duration. (Change over time)
  6. Stock turn.  (RM ; WIP; FG)
  7. E&O. (Excess and obsolete materials.)
  8. Cash to cash cycle time. (C2C = Total account receivables + Total stock – Total account payables)

5-      Moral: These kinds of parameters are used to measure how human resources are effective on employees. It is measurement of parameters like training time for per person, offer number, personnel circulation and so on.

  1. Personal turnover
  2. Number of succession per employee
  3. Hour of training per employee
  4. The average number of absenteeism

6-      Environment: In today’s world which environmental subjects are important, it should be measured how much environment is damaged and it should be under control.

7-      Maturity level: They are probably the most important parameters which should be monitored in a strict way. They are used to measure how good our operational excellence is and how much it was improved. Especially about the subject of lean manufacturing, the excellence growth of  5S, visual management, stream, pull system, supermarket applications, TPM, SMED, Value stream mapping should be measured regularly.

8- Finance: In order to understand the effect of operational matrix on financial number, expenses should be measured as comparative with targets in the format of P&L.

'One Response to “Operational key performance indicators (KPIs in manufacturing)”'
  1. Frank Walsh diyor ki:

    Excellant spider graph depicting the KPIs for manufacturing. I have found as director of european ops that the wrong kpi drives the wrong beaviours. I drove a <2 LTA in a year (loss time accidents) and found that it wasnt really achieving what i required as these measurements were being massaged to achieve this KPI.;so i changed LTA to as many near misses as possible which gave me the desired effect on LTA .
    Are there any KPI's that create conflict or drive the wrong behaviours in your business? Stock Turn vs On time delivery? for instance?

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