1.

Throughput – This is probably one of the most fundamental KPIs for the manufacturing
industry while also arguably one of the most important. The Throughput KPI measures
the production capabilities of a machine, line, or plant; also known as how much they
can produce over a specified time period.Throughput = # of Units Produced / Time (hour
or day)

2. Cycle Time – The cycle time KPI is very simple in nature, but that doesn’t mean it can’t
be manipulated to be a very powerful tool. In the manufacturing industry, cycle time is
the average amount of time it takes to produce a product. Simple, right? Maybe not as
simple as you think. The cycle time metric can be used to measure the time it takes to
manufacture a completed product, each individual component of the final product, or
even go as far as to include delivery to the end user. Thus, cycle time can be used to
analyse overall efficiency of a manufacturing process on the macro scale, as well as
determine inefficiencies on a micro scale.Cycle time = Process End Time – Process
Start Time

3. Demand Forecasting – This manufacturing metric is used by companies to estimate

the amount of raw materials they will require to meet future customer demand. This
metric can be a little bit trickier for companies to fully utilize, as it is highly dependent on
uncontrollable external factors. The basic formula is as follows:Projected Customer
Demand = Raw Materials * Production Rate

4. Inventory Turns – This is a measure of how many times inventory is sold over a
specific time period and helps indicate resource effectiveness. Low ratio numbers
indicate poor sales and excessive inventory, while high ratio numbers represent strong
sales or insufficient inventory.Inventory Turns = Cost of Goods Sold / Avg. Inventory

5. Production Attainment – This production performance metric measures production

levels over a specific time period and calculates what percentage of the time a target
production level is achieved.Production Attainment = # of Periods Production Target
Met / Total Time Periods

6. Cash to Cash Cycle Time – This is a time-based manufacturing KPI metric. It

measures the amount of time it takes from an initial cash outlay for raw materials,
inventory, or a manufacturing plant until the company receives cash from its customers
 for its products. This KPI is typically measured in days.Cash to Cash Cycle Time =
Inventory Sale Date – Inventory Purchase Date

7. Avoided Cost – This doesn’t mean you can just avoid paying bills and keep all the
profits. The avoided cost manufacturing metric is an estimate of how much money you
saved by spending money. Seems strange, right? The most common example is how
much money is spent on machine maintenance vs. repair cost if a machine were to
break down, plus the lost production value associated with the repair downtime.
Avoided Cost = Assumed Repair Cost + Production Losses – Preventative Maintenance
Cost

8. Changeover Time – At the most basic level, changeover time represents the amount of
time required to switch from one task to another. Typically, in manufacturing, it
represents the amount of time lost from switching a production line from one product to
another. However, it can also represent the amount of time lost during a shift
change.Changeover Time = Net Available Time – Production Time

9. Takt Time – This is a very useful manufacturing KPI when scheduling production orders
or deciding whether to take an order from a client. Takt time is the maximum
permissible amount of time that can be spent manufacturing a product while still
meeting a client’s deadline. For those who are curious, Takt stands for “taktzeit,” a
German word meaning “cycle time.” While very similar in nature, this is not to be
confused with the cycle time KPI.Takt Time = Net Available Time / Customer’s Daily
Demand

10. Return on Assets (ROA) – You might be thinking, this seems like it has less to do with
manufacturing and more to do with finance. That is because it does. However, financial
metrics are just as important as manufacturing metrics. You can’t have a business if you
aren’t making money. This metric evaluates how well your business is making use of its
assets (money). It is the annual net income divided by total assets (fixed assets +
working capital).ROA = Net Income / Avg. Total Assets

It is key to note that these are just the basic KPIs used in the manufacturing industry. A
company should look beyond these for more insight into their production practices.
 There is a plethora of manufacturing KPIs considered to be standard practice
throughout the industry. However, that doesn’t mean that they should all be applied to
any company that produces a product. While many of them are applicable, some are
not. There might even be the possibility that a standard manufacturing metric doesn’t
even exist for what you want to measure. If you are going to create your own production
metric, there are the things you should take into consideration.

 Every KPI needs a clearly defined goal. What are you trying to achieve? Is it even
something that can be achieved? What is the time period that you wish to achieve this
goal? Be specific and set up parameters that clearly define your goal. This goal needs
to be something that can be numerically defined (quantitative not qualitative).
 It is very important that you are able to objectively measure your progress toward the
goal. This means collecting and interpreting data. Which bring us to the next criteria.
 Data, data, data. There must be a clearly defined data source with a strict procedure of
how the data are measured or collected. There should be nothing left to interpretation
here.
 Reporting your data is just as important as collecting it. Different manufacturing KPIs
will have different reporting frequencies. Typically, reporting should happen on a weekly
or monthly basis, and will often make use of a manufacturing reporting software
solution.

Now that we have gone over some of the basic KPIs for the manufacturing industry and
have a grasp of what makes a good KPI, we can dig a bit deeper into the world of
manufacturing KPIs and explore lean manufacturing KPIs.

Lean Manufacturing KPIs

Lean manufacturing is a practice of Japanese origin (name drop: Toyota) whereby
companies attempt to minimize the amount of “waste” without sacrificing productivity.
“Waste” in this situation doesn’t mean garbage or refuge from the production process. It
actually represents any activity that does not add value from a customer’s perspective.
Listed below are 10 examples of lean manufacturing KPIs:

11. Machine Downtime Rate – While this is commonly used as a manufacturing metric to
give a general snapshot of how operation is going, it doesn’t paint a full picture.
Machine downtime is a combination of both scheduled downtime and unscheduled
 downtime.Machine Downtime Rate = Downtime Hours / (Downtime Hours + Operational
Hours)

12. Percentage Planned Maintenance – This production metric is used to analyze the
ratio of scheduled maintenance against the unscheduled maintenance. This KPI is
useful in identifying when more preventative maintenance is required for certain
assets.PPM = (# Planned Maintenance Hours * 100) / # Total Maintenance Hours

13. Downtime to Operating Time – This manufacturing metric can be used to measure the
effectiveness of machinery maintenance and the machine itself. With effective
preventative maintenance, the amount of downtime can be reduced, creating a more
optimal manufacturing process. Companies aspire to reduce this ratio as much as
possible.Downtime to Operating Time = Downtime / Operating Time

14. Capacity Utilization – This production KPI measures the amount of capacity being
utilized as a function of total capacity available. Ideally, companies want this number to
be as high as possible, as it indicates they are making better use of their production
capabilities and maximizing return on their assets. This metric can also be used by
management when deciding whether to take on new orders or quoting lead time, as it
gives a snapshot of available resources.Capacity Utilization = Actual Factory Utilization /
Total Productive Capacity

15. First Pass Yield – This is one of the most fundamental production KPIs. It calculates
the percentage of products manufactured to specification the first time through the
process. This means that they do not require any rework or become scrap. A higher
FPY rate is very desirable for any company.First Pass Yield Rate = Quality Units / Total
Units Produced

16. Overall Equipment Effectiveness (OEE) – This key performance indicator is

considered the gold standard for measuring manufacturing productivity. The higher your
OEE, the more effective your equipment is. A score of 100 percent means that you are
manufacturing 100 percent of the time, at 100 percent capacity, at a 100 percent yield
(no defective parts).OEE = Availability * Performance * Quality

17. Manufacturing Cost Per Unit – It is very important that you know the total cost
associated with manufacturing a product on a per unit basis. Without it, you wouldn’t be
able to price a product properly. This KPI takes into account all costs associated with
 production and divides the cost by the number of units manufactured. Typical costs
include materials, overhead, depreciation, labor, etc.Manufacturing Cost Per Unit =
Total Manufacturing Cost / # of Units Produced

18. Material Yield Variance – This lean manufacturing KPI takes the estimated amount of
material required for a product and compares it against the amount of material actually
used.Material Yield Variance = Actual Material Use / Expected Material Use

19. Maintenance Cost Per Unit – This production metric is often overlooked as people
tend to consider maintenance cost to be an overhead item. However, it is an important
lean manufacturing KPI to take into consideration when trying to optimize efficiency.
This calculation takes the total cost of maintenance (both preventative and emergency)
and divides it by the number of units produced for a specified time period.Maintenance
Cost Per Unit = Total Maintenance Cost / # of Units Produced

20. Overtime Rate – This metric compares the amount of overtime worked by employees
to the amount of standard hours. It helps to identify inefficiencies in scheduling and/or
staffing.Overtime Rate (Percentage) = (Overtime Hours * 100) / Regular Hours

We have covered 20 different manufacturing KPI examples at this point, as well as what
it takes to make your own. Now it is time to look at some data management best
practices.

How to Keep Track of Your KPI Data

Quality control and process management are not the most exciting things going on at a
manufacturing company, but they are the backbone of the operation. After companies
start to implement their newly created KPIs and metrics, they often keep track of the
collected data using Excel (hopefully no one is still compiling data using a ledger book).
However, there are a couple of things to take into consideration when managing your
data:

 Data protection and security are essential. Hackers stealing your KPI data is probably
not a huge concern. However, it is critical that your data are backed up and can’t be
deleted by accident.
 Reduce the amount of duplicate data. Don’t keep multiple working copies of the same
data. Have one working copy, and one unaltered backup.
 Ensure your KPI data are easily accessible to your team. There is nothing worse than
not being able to do your work because you don’t have access to information that you
need.

All of these concerns can actually be remedied through the use of a reporting solution.
Here at insightsoftware, we build industry leading reporting software solutions. Come
and see how our KPI dashboards can help your company get ahead of the curve.

More Examples of KPIs Used in

Manufacturing
Here are 10 additional manufacturing KPI metrics that might take you by surprise:

21. On-Time Delivery – This is less of a production performance metric, but a very
important KPI in the manufacturing sector nonetheless. You can have the most efficient
production line in the world, but if you can’t deliver on time, clients are not going to want
to work with you. This metric measures the percentage of products delivered on time to
clients.On-Time Delivery = (# Units Delivered On-Time * 100) / # Units Delivered

22. Health and Safety Incidence Rate – In an ideal world, this manufacturing metric would
not even exist because it would be zero. Unfortunately, the reality of the matter is that
workplace accidents and near misses do occur. This metric monitors the number of
incidents or near misses over a given period of time (normally per annum).Health and
Safety Incidence Rate = (Number of Incidences * 200,000) / # hours worked by all
employees

23. Employee Turnover – While this metric isn’t manufacturing specific, it is as equally
important as the other KPIs in this list. While employee turnover typically has a negative
connotation associated with it, not all turnover is bad. Some turnover may be required to
remove underperformers and replace them with higher performers. However, having too
high of a turnover can lead to lower moral.Employee Turnover Rate (%) = (Employees
who left * 100) / Avg. # of Employees
24. Non-Compliance Events / Year – Every country has regulatory compliance rules that
manufacturers must follow when producing their products, whether it be safety,
emissions, or something else. Not only is it important to record the number of times a
non-compliance event occurred, it is also good practice to document the reason why it
occurred, and what the resolution was.Non-Compliance Events = # of Non-Compliance
Events / Specified Period of Time (Annually)

25. Customer Returns (Rejects) – This is a classic example of a KPI used in

manufacturing, and it is still used to this day for a reason. Keeping track of returns is
imperative. This metric calculates the percentage of products that customers return
because they have received a bad product. Needless to say, a company should strive
for the lowest percent possible.Customer Return Rate = (# of Products Returned *
100) / Total # of Products Shipped

26. Total Manufacturing Cost Per Unit Excluding Materials – This is a performance
metric that attempts to pin down the fixed costs associated with operating a factory or
production line. These are arguably the costs that companies are able to control.TMC
Per Unit Ex Materials = TMC Per Unit – Material Cost Per Unit

27. Manufacturing Cost as a Percentage of Revenue – This manufacturing KPI will help
bring insight into how much your company is spending on manufacturing with respect to
total revenue. This is very useful data to compare against competitors in the same
sector.Manufacturing Cost as a Percentage of Revenue = Total Manufacturing Cost /
Total Revenue

28. Energy Cost Per Unit – This is a fairly nitty gritty manufacturing KPI that a lot of
companies tend to overlook. It only really comes into play when companies are fine-
tuning their operations and trying to become leaner. This KPI takes to total cost of
energy spent over a period of time and divides it by the number of units produced in that
time frame.Energy Cost Per Unit = Total Energy Cost / # of Units Produced

29. Work-in-Process – This manufacturing KPI metric measures the value of partially
completed products. It helps manufacturing companies understand how much of their
working capital is tied up in incomplete products, and can help identify supply chain
management issues.Ending Work-in-Process = Beginning WIP + Manufacturing Costs –
Cost of Goods Manufactured
30. Scrap Rate – This is a fairly straightforward manufacturing KPI. It keeps track of the
number of products that are deemed scrap due to manufacturing defects that can’t be
reworked. It gives companies insight into the ratio of products deemed scrap in a
production run, helping identify an inefficient process.Scrap Rate = # of Scrap Units /
Total # of Units

Congratulations! You have now learned the top 30 manufacturing KPIs to use in your
2021 reporting, how to create your own KPIs, the basics of KPI database management,
and how you can streamline your reporting processes with a manufacturing reporting
solution like the solutions we offer at insightsoftware. This might seem like a lot of
information to digest all at once. If you have any questions or are interested in speaking
with a reporting & KPI expert, contact us here.