Home Create Account Log in

28 Manufacturing Metrics that Actually Matter (The Ones We Rely On)

Posted by Mark Davidson on Wed, Oct 09, 2013 @ 06:00 AM

Tweet Share 258 Like 31 Share

When it comes to metrics, it’s often said that what gets

measured gets done. Part of this is human nature.
Everyone has more piled on their plate than ever, and
many workers find themselves constantly re-prioritizing
their work activities. Therefore, metrics that have the
attention of business and manufacturing leaders tend to
be those that get measured and improved upon by their
employee teams.

Follow @LNSResearch

Effectively measuring, analyzing, and improving manufacturing metrics is not as simple as it may appear. While
there are certain metrics that work well for specific job roles, it’s often the case that there are multiple combinations
of metric indicators needed to ensure that a larger business objective is being met.

For this reason, metrics need to be aligned to larger goals and objectives. Think “SMART” goals—Specific,
Measurable, Actionable, Realistic, Time-Based. This mnemonic contains some key concepts.

It’s important to understand the interrelationships between high-level goals and objectives as well as what actions or
methods are required for an organization to achieve them—this falls under Specific. Measurable and Actionable
are when metrics come into play—any desired result must have a set of defined measurements, targets, and actions
that can be taken in order to “move the needle” on the metrics that are leading or lagging indicators of results.
In manufacturing, each major goal typically requires
multiple metrics. The list of 28 metrics that appear in this
post are grouped together relating to specific higher-level
goals and objectives (e.g. increase quality). The Realistic
component of the acronym can present a significant area of
challenge. Leaders want teams to stretch and achieve
more than what is individually perceived as possible.
However, if goals are too lofty, and workers don’t believe
they can be achieved, they may give up and disengage.
Since every goal needs to be driven by some type of
deadline or period to achieve the target, a Time-Based
aspect is important to keeping everyone focused.

Sustainable metrics improvements require a continuous

improvement methodology—a cycle that is never fully
complete. As can be seen, measurement and metrics is a
central pillar of this continuous improvement cycle.

Which Metrics Matter Most?

The MESA (Manufacturing Enterprise Solutions Association) organization has sponsored research over the past
years to help the manufacturing marketplace identify the most important metrics, and help decision makers
understand metrics improvements and their relationships to metrics programs and the use of software solutions. As
part of the most recent metrics survey, 28 manufacturing metrics were identified as being the most utilized by
discrete, process, and hybrid/batch manufacturers.

Below, we’ve grouped these metrics with the associated top-level area of improvement/goal for each.

Improving Customer Experience & Responsiveness

1. On-Time Delivery to Commit – This metric is the percentage of time that manufacturing delivers a completed
product on the schedule that was committed to customers.

2. Manufacturing Cycle Time – Measures the speed or time it takes for manufacturing to produce a given product
from the time the order is released to production, to finished goods.

3. Time to Make Changeovers – Measures the speed or time it takes to switch a manufacturing line or plant from
making one product over to making a different product.

Improving Quality

4. Yield – Indicates a percentage of products that are manufactured correctly and to specifications the first time
through the manufacturing process without scrap or rework.
5. Customer Rejects/Return Material Authorizations/Returns – A measure of how many times customers reject
products or request returns of products based on receipt of a bad or out of specification product.

6. Supplier’s Quality Incoming – A measure of the percentage of good quality materials coming into the
manufacturing process from a given supplier.

Improving Efficiency

7. Throughput – Measures how much product is being produced on a machine, line, unit, or plant over a specified
period of time.

8. Capacity Utilization – Indicates how much of the total manufacturing output capacity is being utilized at a given
point in time.

9. Overall Equipment Effectiveness (OEE) – This multi-dimensional metric is a multiplier of Availability x

Performance x Quality, and it can be used to indicate the overall effectiveness of a piece of production equipment,
or an entire production line.

10. Schedule or Production Attainment – A measure of what percentage of time a target level of production is
attained within a specified schedule of time.

Reducing Inventory

11. WIP Inventory/Turns – A commonly used ratio calculation to measure the efficient use of inventory materials. It
is calculated by dividing the cost of goods sold by the average inventory used to produce those goods.

Ensuring Compliance

12. Reportable Health and Safety Incidents – A measure of the number of health and safety incidents that were
either actual incidents or near misses that were recorded as occurring over a period of time.

13. Reportable Environmental Incidents – A measure of the number of health and safety incidents that were
recorded as occurring over a period of time.

14. Number of Non-Compliance Events / Year – A measure of the number of times a plant or facility operated
outside the guidelines of normal regulatory compliance rules over a one-year period. These non-compliances need
to be fully documented as to the specific non-compliance time, reasons, and resolutions.

Reducing Maintenance

15. Percentage Planned vs. Emergency Maintenance Work Orders – This ratio metric is an indicator of how often
scheduled maintenance takes place, versus more disruptive/un-planned maintenance.

16. Downtime in Proportion to Operating Time – This ratio of downtime to operating time is a direct indicator of
asset availability for production.
Increasing Flexibility & Innovation

17. Rate of New Product Introduction – Indicates how rapidly new products can be introduced to the marketplace
and typically includes a combination of design, development and manufacturing ramp up times.

18. Engineering Change Order Cycle Time – A measure of how rapidly design changes or modifications to existing
products can be implemented all the way through documentation processes and volume production.

Reducing Costs & Increasing Profitability

19. Total Manufacturing Cost per Unit Excluding Materials – This is a measure of all potentially controllable
manufacturing costs that go into the production of a given manufactured unit, item or volume.

20. Manufacturing Cost as a Percentage of Revenue – A ratio of total manufacturing costs to the overall revenues
produced by a manufacturing plant or business unit.

21. Net Operating Profit – Measures the financial profitability for all investors/shareholders/debt holders, either
before or after taxes, for a manufacturing plant or business unit.

22. Productivity in Revenue per Employee – This is a measure of how much revenue is generated by a plant,
business unit or company, divided by the number of employees.

23. Average Unit Contribution Margin – This metric is calculated as a ratio of the profit margin that is generated by
a manufacturing plant or business unit, divided into a given unit or volume of production.

24. Return on Assets/Return on Net Assets - A measure of financial performance calculated by dividing the net
income from a manufacturing plant or business unit by the value of fixed assets and working capital deployed.

25. Energy Cost per Unit – A measure of the cost of energy (electricity, steam, oil, gas, etc.) required to produce a
specific unit or volume of production.

26. Cash-to-Cash Cycle Time – This metric is the duration between the purchase of a manufacturing plant or
business unit’s inventory, and the collection of payments/accounts receivable for the sale of products that utilize that
inventory – typically measured in days.

27. EBITDA – This metric acronym stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a
calculation of a business unit or company's earnings, prior to having any interest payments, tax, depreciation, and
amortization subtracted for any final accounting of income and expenses. EBITDA is typically used as top-level
indication of the current operational profitability of a business.

28. Customer Fill Rate/On-Time delivery/Perfect Order Percentage - This metric is the percentage of times that
customers receive the entirety of their ordered manufactured goods, to the correct specifications, and delivered at
the expected time.
LNS Research and MESA International Bring You the Biennial 'Metrics that
Matter' Research Survey

In order to continue to uncover valuable industry trends of manufacturing metrics, in partnership with MESA
International, LNS Research has re-launched the biennial ‘Metrics that Matter’ research survey. The 2015-2016
survey and research report is focusing on the trends and correlations between specific operational metric
improvements, the use of Manufacturing Operations Management (MOM) software applications, role-based metrics
reporting, and the effect of emerging technologies such as mobility, big data, and cloud-computing on metrics
programs.

Access this brand NEW EQMS Solution Selection Guide to get a closer look at 18 key EQMS vendors with a
side-by-side comparison!

Tags: Manufacturing Metrics, Manufacturing Operations Management

Marty Etzel
10/9/2013 7:31:57 AM

Nice summary.

Reply to Marty Etzel

Marty Etzel
10/9/2013 7:31:57 AM

Nice summary.

Reply to Marty Etzel

Michael McClellan
10/9/2013 12:44:28 PM
Mark

This is an excellent recap of metrics concepts. Nice job.

Reply to Michael McClellan

Dave
10/9/2013 3:35:56 PM

While a good summary and most items are reflected in our current metrics, Item #13 is a LOT
more than "health and safety incidents"

Reply to Dave

Mark Davidson
10/9/2013 4:16:18 PM

To dmsmith@transformauto.com

Thank you for your comment - and fair enough, there is a lot more that goes into health & safety
metrics that our simple summary did not indicate. Feel free to post further, your thoughts and
explanation on this.

Reply to Mark Davidson

Mark Davidson
10/9/2013 4:16:18 PM

To dmsmith@transformauto.com

Thank you for your comment - and fair enough, there is a lot more that goes into health & safety
metrics that our simple summary did not indicate. Feel free to post further, your thoughts and
explanation on this.

Reply to Mark Davidson

Paul Goodstadt
10/10/2013 5:10:12 AM

Hi. Many thanks. Excellent summary.

Can translate straight from Manufacturing to Construction.
Will be useful at a Board Strategy Meeting this coming week.
Keep up good work. Regards

Reply to Paul Goodstadt

Stuart Rosenberg
10/11/2013 12:29:10 PM

Interesting and very informative how the 28 metrics are divided into specific areas of
measurement.

Reply to Stuart Rosenberg

Stuart Rosenberg
10/11/2013 12:29:10 PM

Interesting and very informative how the 28 metrics are divided into specific areas of
measurement.

Reply to Stuart Rosenberg

A H B NARAYANA REDDY
10/12/2013 4:03:48 AM

Good summary.It is useful.

Reply to A H B NARAYANA REDDY

A H B NARAYANA REDDY
10/12/2013 4:03:48 AM

Good summary.It is useful.

Reply to A H B NARAYANA REDDY

Jason
10/13/2013 9:54:34 PM

This summary has some fundamental flaws and I think it is dangerous.

You are missing Sales! It is the fundamental metric.

Measure #24 Return on Assets is misleading as ROI/ROA has to be assessed at an

organisational level not a business unit level. If it is assessed locally you are vulnerable to
distortions due to your transfer pricing arrangements and how you allocate inventory.

The other measures have their place but to omit sales and miscalulate how to define ROI will
drive incorrect decisions.
 Reply to Jason

Andrew Kay
10/14/2013 12:15:04 AM

Beware the measurement nightmare.

Comments below to be taken as supportive of Marks' paper above - just with a different
perspective and a couple of suggestions

All the measures above are useful when used at the right time in the right context. The question
is which ones when. And equally importantly can some of these actually become counter
productive.

I make a bold claim: The sum of local efficiencies does not add up to good global (systemwide)
result. It simply is not mathematically possible. And yet we pursue this with a vengeance leaving
so much money on the table. How so?

The reason: For most manufactured product we have dependencies and potential variability and
uncertainty in each step/process/operation in the workflow. Nothing is perfectly deterministic, nor
perfectly predictable.

We operate as if every link in the chain must be optimised. Surely, if everything is perfectly
efficient then the global outcome must be equally so. It just ain't.

E.g. 10 step process each step highly efficient each step dependent on the prior step: Multiply
95% x 95% ten times = 59.8% thats the global result whilst the local efficiency is 95%. I would
rather have a business with 95% efficiency than one where very operation was 95% efficient yet
the global result only 59.8% efficient!

So, rather than think of local efficiency and measuring and driving behaviours to be so, consider
the efficiency of the whole system. Try to maximise that. When you do you will see some
measures do act counterproductively.

If business was like a chain, then it is worthwhile considering the strength of the chain rather
than the individual links as cost (efficiency). When you do hopefully you will see that the strength
is determined by the weakest link. If you want the right behaviours you need to measure what is
going on there. And just spending more $ to add more capacity to strengthen the weakest link is
not the answer.

We need to identify and focus on this weakest link in the flow and leverage that to the max. You
won't get more out of your system till you focus there. Most of the above measures turn positive
immediately when you do this. The core problem is we measure, but we do not understand what
we are measuring from the context of an entire system.
When we measure system throughput (as measured by money) the volume and speed of money
first and foremost and learn a simple 5 step process to know where to focus and implement a
few simple changes (and measure) system output can virtually double in a matter of days or
weeks with virtually all other parameters (measures) pointing in the right direction. Some others
will go south and for good reason.

You will find much more on this under the subject of Throughput Accounting and books on
Theory of Constraints.

Haystack Sydnrome: Eli Goldratt, The Goal: Eli Goldratt, Measurement Nightmare: Debra Smith,
The Race: Goldratt, Throughput Accounting: Corbett,

Reply to Andrew Kay

Mark Davidson
10/14/2013 3:53:24 PM

Thank you Jason for your comments.

I do agree that sales is the engine that drives businesses forward, however most people in
manufacturing and production facilities have no control over incoming sales. All they can do is
produce to orders with great agility, efficiency and schedule.

Admittedly, these metrics are the top controllable metrics used within manufacturing
organizations, and do not look at all of the bigger picture business impacts. However, these have
been proven (by survey) to be the top ones used to manage the operational side. I don't believe
these are dangerous within this context.

Reply to Mark Davidson

Mark Davidson
10/14/2013 4:02:25 PM

Thanks Andrew for these additional perspectives.

I too am a believer in linked, holistic goals and metrics across the business and manufacturing
enterpriise. The potential for additive errors and losses exist, however that is no excuse for not
doing the best job possible on the key metrics that matter within the scope of manufacturing's
control.

I agree that not every metric is equal, and it is important to have the right business context and
to select the subset of metrics that drive excellence in the areas that matter the most. It's
impossible to optimize operational activities around too many different parameters and metrics.
So this advice is a helpful extension to the piece.
 Reply to Mark Davidson

Mark Davidson
10/14/2013 4:02:25 PM

Thanks Andrew for these additional perspectives.

I too am a believer in linked, holistic goals and metrics across the business and manufacturing
enterpriise. The potential for additive errors and losses exist, however that is no excuse for not
doing the best job possible on the key metrics that matter within the scope of manufacturing's
control.

I agree that not every metric is equal, and it is important to have the right business context and
to select the subset of metrics that drive excellence in the areas that matter the most. It's
impossible to optimize operational activities around too many different parameters and metrics.
So this advice is a helpful extension to the piece.

Reply to Mark Davidson

Jason
10/14/2013 9:29:34 PM

Mark,
The purpose of a factory (my opinion) is to make sales and marketing look good by giving them
such a compelling offer that the product sells itself. Short lead time etc are partof how a factory
does that.

Factories do influence sales. I don't know of a plant manager in my two decades who wasn't
acutely concerned or aware of the forward sales and was always looking with concern at any
drop. A drop in sales has a huge impact on many of the metrics in your list so we may as well
look at it.

I respect that you have published the survey results, I know that however many people believe
something doesn't make it the best solution.

The issues of manufacturings decline and outsourcing are directly linked to local optimum
approaches to measurement as Andrew writes in his post.

ROI for a business unit is a theoretical concept rather than a financial reality. Any venture
capitalist, bank financier, or prospective owner always looks at the whole of the operation, not a
sub section. Why would we then have the operational people Focus in improving a local area
when it can actually hurt the overall performance?

Reply to Jason
Mark Davidson
10/21/2013 1:43:24 PM

Thank you Jason for your continued engagement on this topic. Sorry it has taken me awhile to
approve your post and comment back.

I think that you are correct with your comment that just because a survey states what people are
doing, it doesn't mean that there cannot be some better practices available that people could or
should be doing.

As I stated earlier, the Sales metric is the fundamental engine, and you are also correct to point
out most plant managers watch this closely - given that when sales / volume drops, then many of
the other manufacturing metrics can go badly very rapidly.

On ROI, I can agree that total company 'see through' profitability and return on investments are
what matter the most across the value chains of business organizations, however I don't think
that measuring subsets of ROI are necessarily a bad thing when trying to compare the relative
merits of one manufacturing initiative versus another. It often times isn't the only determining
factor, but I do think it is an important comparative factor for projects / improvement programs
(based on my experiences).

Reply to Mark Davidson

Jason
10/22/2013 4:33:43 AM

Hi Mark,
No problem with using subsets for ROI if you are comparing A or B alternatives. The ROI subset
becomes a problem if it is used to assess an incomplete system.

For example, if I try and compare the ROI of a make vs buy option on a purchase cost basis and
omit to include the supply chain costs, expanded warehouses, etc. I think the comparison must
be of one complete alternative vs another.

I look forward to seeing the next data you publish.

Jason

Reply to Jason

Paul Munger
10/22/2013 6:20:23 PM
Things like capacity utilization are useful, but not in the sense that higher is necessarily better. If
processes are inefficient, then this number will be high, but output will be low. It can tag
bottlenecks.

Reply to Paul Munger

John Sprovieri
10/31/2013 2:37:27 PM

R&D; spending is a key metric. Manufacturing needs a steady stream of new products.
http://bit.ly/1aJ43EI

Capital spending is another key metric. http://bit.ly/1cqOHpA

Reply to John Sprovieri

Corry
3/3/2014 12:36:57 PM

Thanks for publishing this. It is a great summary, and useful for determining and increasing
value.

Reply to Corry

Manufacturing Accountant
10/24/2016 8:20:12 AM

Manufacturing accounting is another important metric that can really make difference in proper
reporting of your business transactions.

Reply to Manufacturing Accountant

Boom Lift
5/25/2017 7:54:35 AM

Awesome blog. Thanks for sharing and the best information of Manufacturing Metrics.

Reply to Boom Lift

jaya singh
5/30/2017 6:59:44 AM

Nice blog !
 Reply to jaya singh

First Name*

Last Name

Email*

Website

Comment*

Subscribe to follow-up comments for this post

Type the text

Privacy & Terms

Subscribe by Email
Email*

Notification Frequency*
Instant

Subscribe
Follow LNS Research

About LNS Research

LNS Research provides executives a platform for accessing unbiased research and benchmark data to
improve business performance

About The Blog

The LNS Research Blog provides an informal environment for analysts to share thoughts and insights directly
with our community on a range of technology and business topics

Latest Posts
◾ Quality 4.0: Powerful Innovation Enabler

◾ No Lazy Days During Summer for IIoT Solutions Co’s or Industrials [Roundup]

◾ The Missing Link: Connecting Operational Excellence to Strategic Objectives

◾ Arcadis Acquires EHS-IT Services Firm E2 Manage Tech, Market Shift Continues [MondayMusings]

◾ 5 Most Asked Questions from the IIoT Use Case Webcast

◾ What is Quality 4.0?

◾ SAP Leonardo: Live and Kicking! [MondayMusings]

◾ Inforum 2017: A Showing of Progress & Visions [MondayMusings]

◾ 7 Reasons Your EHS Technology Project Won’t Happen

◾ Honeywell User Group 2017: Focusing on the Connected Plant [MondayMusings]

Posts by Category
◾ #MondayMusings (48)

◾ About LNS Research (14)

◾ apm (1)

◾ Architecture (4)

◾ Asset Performance Management (158)

◾ Benchmark Data (10)

◾ Benchmarking Research (7)

◾ Big Data (141)

◾ Business Process Management (3)

◾ Case Study (5)

◾ Closed Loop Quality Management (10)

◾ cloud (84)

◾ Cloud-Computing (52)

◾ Compliance Management (10)

◾ Continuous Improvement (10)

◾ Cost of Quality (19)

◾ Digital Revolution (2)

◾ Digital Transformation (128)

◾ EAM (14)

◾ EHS (71)

◾ Energy Management (14)

◾ Energy Metrics (4)

◾ Enterprise Architecture (12)

◾ Enterprise Quality Management Software (100)

◾ Environment Health and Safety (33)

◾ EQMS (114)

◾ ERP (38)

◾ ESM (8)

◾ Food Safety (4)

◾ HACCP Software (3)

◾ IEM (8)

◾ IIoT (225)

◾ Industrial Automation (7)

◾ Industrial Energy Management (21)

◾ Industrial Energy Management Software (1)

◾ Industrial Internet of Things (2)

◾ Industry 4.0 (2)

◾ Information Technology (10)

◾ Internet of Things (148)

◾ iot (7)

◾ ISO Standards (3)

◾ IT/OT Convergence (2)

◾ Lean Manufacturing (3)

◾ Machine Learning (8)

◾ Maintenance (18)

◾ Maintenance Metrics (4)

◾ Manufacturing (38)

◾ Manufacturing Culture (3)

◾ Manufacturing Execution System (2)

◾ Manufacturing Metrics (30)

◾ Manufacturing Operations (11)

◾ Manufacturing Operations Management (126)

◾ Manufacturing Operations Management Manufacturing (3)

◾ Manufacturing Software (100)

◾ MES (33)

◾ Mobility (45)

◾ MOM (73)

◾ MOM Software (14)

◾ OEE (14)

◾ Operational Excellence (124)

◾ Operational Risk Management (17)

◾ Performance Management (10)

◾ PLM (17)

◾ Predictive Maintenance (29)

◾ Product Lifecycle Management (9)

◾ Product Recall (5)

◾ Product Recalls (2)

◾ Product Traceability (13)

◾ Quality Culture (19)

◾ Quality Management (213)

◾ Quality Management System (15)

◾ Quality Metrics (10)

◾ Quality Risk Management (9)

◾ Quality Software (7)

◾ reliability (7)

◾ Risk Management (42)

◾ Robotics (2)

◾ SaaS (6)

◾ Smart Connected Assets (86)

◾ Smart Factory (1)

◾ Smart Manufacturing (8)

◾ Solution Selection Guide (18)

◾ SPC Software (4)

◾ Statistical Process Control (6)

◾ Supplier Quality Management (26)

◾ Supply Chain Management (18)

◾ Sustainability (57)

◾ Traceability (5)

◾ Vendor Spotlight (40)

◾ wearables (1)

◾ Weekly Roundup (117)

◾ Why You Need to Get Rid of Dead MRO Inventory (2)

Research Library

Basic Access

Quality Management Systems

Manufacturing Operations Management

Global Executive Council

Industrial Energy Management

Performance Management

Solutions

Global Executive Councils

Advisory Services

Strategy Workshops

Benchmarking Services

Custom Research

Technology Selection

Our Expertise

Research Methodology

Research Coverage Area

Research Agenda

Press

Blog

About

Meet the Team

Events
 Careers

Our Clients

Contact

Request An Analyst

Request A Topic

Request Partner Information

Terms & Conditions

C
o
n LNS Research 101 Main Street, 14th Floor Cambridge MA 02142

n © 2011 - 2017 All Rights Reserved

e
c
t
with us

• • • •