Transform to Industry 4.0 Part 6 Final

BizOne presents eight additional manufacturing key performance indicators (KPIs) that are of interest to the manufacturing industry, detailed below:

August 4, 2022

1.      Right First Time

Understand the performance of your production process

Having to work to fix defective products is costly and directly affects production potential, which means it's vital to track the quality of your final product. RFT measures the total number of products that emerge from your production line with no defects and no modifications needed to be made before the sale. The fewer defective items, the higher the RFT percentage.

Examples of measurements used

  • Right First-Time rate by target rate.
  • Right First-Time rate by machine.
  • Right First-Time rate by production line/cycle.

2.      Rate of Return

Tracks the quantity and proportion of returned products

Keeping track of the rate of returns helps in having good insight into your customer satisfaction, however, returns also need to be processed, refurbished, and re-shipped which can be costly and time-consuming. Tracking this information can also be used to segment the rate of return with the reason for the return, which can then be used to plan out a strategy to resolve issues, therefore increasing customer satisfaction and returning costs.

Examples of measurements used

  • Overall Return Rate.
  • Return Rate by Product.
  • Right First-Time Rate by Return Reason.

3.      On-time Delivery: Ensure your products are delivered on time

Track the rate of delivery on time according to customer requirements

One of the important production indicators because no matter how good your product is if it cannot be delivered on time according to the customer's needs, it can result in dissatisfaction with the product. This metric works in a straightforward way to show the percentage of products that are delivered on time and the reasons for late delivery. This can then be used to find ways to improve the delivery process to meet the needs of customers and approach the rate of 100%.

Examples of measurements used

  • On-time delivery rate on specific time compared to the target.
  • On-time delivery rate by Customer.
  • Reasons for late delivery.

4.      Asset Turnover

Acknowledge your assets in relation to your revenue

The asset turnover rate is more of a monetary factor than production but one of the most important factors in reflecting the ability to generate income on your assets. The manufacturing industry requires a lot of investment and assets to operate. The ability to generate income from those assets is a measure of the ability to compete in the market and indicates opportunities/risks for future business expansion by calculating from Asset Turnover = Revenue / Total Assets

Examples of measurements used

  • Asset Turnover rates at a specific time.
  • Asset Turnover rates by production line.

5.      Return on Assets

The revenue stream generated from your assets.

A return on assets (ROA) metric identifies how effective your profitability is from the capital you invest. It can be used as part of a return on investment (ROI) analysis, which is a good performance indicator used to manage income statements and assets to design appropriate business transaction patterns and shape competitiveness against other businesses.

Examples of measurements used

  • ·        Return on Assets rates at a specific time.
  • ·        Return on Assets rates by production line.

6.      Unit Costs

Track and optimize your units’ costs over time.

This metric provides an estimate of the total cost incurred per unit production item covering both fixed and variable costs such as labor, material, production process, inventory, transportation, and other expenses related to analyzing the factors that contribute to the main cost of production by the total cost value by the cost type. Also, we can do this using IoT technologies or sensors to be able to measure resource usage more accurately.

Examples of measurements used

  • Unit costs at a specific time.
  • Unit costs by product
  • Unit costs by cost category.

7.      Maintenance Costs

Estimate the long-term cost of maintaining your equipment.

After evaluating assets, tracking production capacity and the Return on Assets. Another important KPI would be how to the management of the maintenance of those assets to be able to operate more efficiently with reasonable costs. Such as focusing on maintenance of the machines that are the core revenue generators or machines that tend to incur more costs for preventive and corrective maintenance, in which case it could be worth considering purchasing a new machine.

Examples of measurements used

  • Maintenance cost at a specific time.
  • Maintenance costs by machine
  • Maintenance cost per specified maintenance cost target.

8.      Revenue Per Employee

Revenue generation efficiency per workforce.

In some industries, the number of employees directly affects productivity. This indicator assesses the ability to generate income per employee. The growth of the number of employees can identify if a business is growing in the right direction, such as how to find an optimal balance of the amount of human workforce and automation.

Examples of measurements used

  • Revenue Per Employee at a specific time.
  • Revenue Per Employee by product.
  • Revenue Per Employee by production line.

From the previous article, these are just a few examples of indicators used to assess performance and capability in the manufacturing industry, which each organization must analyze and determine its appropriate criteria or factors to engage in the analysis of benefits of technology adoption in your industrial management.

If you would like to learn more about the industry 4.0 concept or would like to see some examples of related technologies, contact BizOne for a free consultation today!