Production KPIs

Novalon Polymers Effective Date: 01-Jan-20
Document Title: Production KPIs Issue No: 01

Document To: NP-HRS-JD-10 Page 1 of 1
What Are Manufacturing Metrics?
Manufacturing metrics measure and compare the performance of production processes. They provide
useful data to manage production activities over time. Use these metrics to support KPIs.
 Manufacturing metrics and KPIs demonstrate challenges and success across manufacturing
operations.
 Industrial transformation is necessary to compete across all manufacturing verticals.
 Consider using SMART (specific, measurable, actionable, realistic, and time-based) goals when
defining metrics and KPIs.
What Are Manufacturing Key Performance Indicators?
Use KPIs to compare, analyze and optimize performance of your plant operations over time. How do you
measure manufacturing performance? Manufacturing key performance indicators provide a quantitative
measure of strengths and weaknesses. KPIs offer insight into how production contributes to company
goals.
Why Use Manufacturing Specific Key Performance Indicators?
World-class manufacturing companies use KPIs to improve speed and quality while reducing costs.
Using digital technologies to focus on incremental changes is a best practice to improve operations and is
sometimes referred to as industrial transformation.
A key enabler of today's digital manufacturing metamorphosis is the use of enterprise manufacturing
intelligence (EMI). ERP platforms with advanced manufacturing features automate and unify disparate
manufacturing and enterprise data that you can use for real-time analysis displayed with interactive
dashboards.
By taking a data-driven approach to operations through real-time KPIs and dashboards, manufacturers
can focus on quality, flexibility and efficiency.
Guidelines for Manufacturing Key Performance Indicators
Using metrics that measure, analyze and track performance based on business goals have the most
impact. Focus on KPIs that encourage your business to improve process speed and quality, enhance
customer experience and do more with less.
Consider the following guidelines when identifying and defining manufacturing metrics:
 Clearly defined goals: What is your organization trying to accomplish? Align manufacturing

goals with overall business objectives, such as improving the quality of product provided or
boosting output. Choose metrics that demonstrate when you achieve these goals.
 Accurate way to measure progress: Is the metric actionable? Follow the SMART (specific,
measurable, actionable, realistic and time-based) guidelines for setting goals, and collect data and
track progress toward those objectives.
 Clearly defined data source: What data are accessible? Once you define your SMART metrics,
use your ERP solution to capture the information you need in real-time. Having the most accurate,
dependable data will give management the reporting and metrics they need to make informed
decisions.
 Efficient reporting method: Consolidated and configurable dashboards that are easy to access
are ideal for providing the right information at the right time for the management team and
stakeholders.
Manufacturing Key Performance Indicators

What are KPIs in manufacturing? Manufacturing KPIs help you assess productivity, quality, customer
satisfaction and profit. You can use varying KPIs to analyze improve operations across your production
lines.
1. Production Volume
Production volume measures how many units are manufactured during a specified time frame. Production
volume is fundamental for benchmarking manufacturing efficiency. Use this KPI to understand the total
output your factory is capable of producing.
Production volume = Total # of products manufactured during a specified time frame
2. Production Downtime
Production downtime measures how long a factory's production lines are not operating. It covers both
planned and unplanned downtime. Minimize and control the amount of time production lines are not
operational to boost productivity.
Production downtime = Sum of all downtime during a specified time frame
3. Production Costs
Production costs include all the expenses incurred from manufacturing a product. They include both
direct costs, such as raw materials and labor and indirect costs, such as rent and overhead.
Production costs = Direct labor cost + direct material cost + overhead costs
Per-unit product cost = Production cost/number of units manufactured
4. Overall Equipment Effectiveness (OEE)
What is OEE in manufacturing? It is the percentage of time your plant is productive, or manufacturing
high quality products as quickly as possible with no down time.
Overall equipment effectiveness (OEE) = Performance x quality x availability
Express OEE as a percentage and calculate it with the following dimensions:
 Availability: the actual production time as a percentage of scheduled time to operate.

 Performance: the percentage of time your machine or plant is working at full capacity.
 Quality: the quality units produced as a percentage of all the units started.
OEE only considers how long a line operates compared to its theoretical maximum potential. However, in
your calculations, account for maintenance. If the equipment is down and not scheduled for work, ignore
this time in the availability. Plant managers commonly use this KPI as a benchmark to compare similar
production assets' overall performance to see if plant operations are running effectively. OEE is also used
as a standard baseline to track progress in eliminating waste as part of continuous process improvement
initiatives.
5. Overall Operations Effectiveness (OOE)
This measure is similar to the OEE. Where it differs is when considering availability. With the previous
measure — equipment effectiveness calculations — time for machine maintenance is not included in the
availability calculation. But this measure — overall operations effectiveness — maintenance
time is included in the availability calculation.
Overall operations effectiveness (OOE) = Performance x quality x availability
Again, these are expressed in percentages.
 Availability: the actual production time as a percentage of the total possible operation time,
including maintenance.
6. Total Effective Equipment Performance (TEEP)
Use this metric to gauge utilization. How is your plant performing in relation to the output it would
achieve if it were running 24/7 for 365 days a year and always producing quality products?
Total effective equipment performance (TEEP) = Performance x quality x availability
Again, these are expressed in percentages.

 Availability: the actual production time as a percentage of total time if the plant were running for
24 hours a day, 365 days a year.
7. Capacity Utilization
Capacity utilization measures how much of a plant's total available capacity is in use. You can use this
KPI to assess efficiency and as an indicator of future growth opportunities.
Capacity utilization = (Total capacity used during a specific time frame / total available production
capacity) X 100
8. Defect Density
Defect density is a quality metric that tracks the number of defective products compared to the total
volume of manufactured products. Defects can negatively impact profitability and cause customer
satisfaction problems.
Defect density = # of defective units / total units produced
9. Rate of Return (ROR)
Rate of return is a financial measure of how well a capital expenditure or investment performs over time.
Expressed as a percentage, ROR accounts for the profit or loss realized from an investment over a period.
Rate of return (ROR) = (Current value – initial value / initial value) X 100
10. On-Time Delivery
On-time delivery quantifies the percentage of products delivered on time to customers compared to the
total volume of delivered products. Use this to determine how well you're meeting customer demand, a
bellwether of customer satisfaction.
On-time delivery = On-time units delivered / total delivered units
11. First Time Right (FTR)

First time right is measure of a Six Sigma goal to complete processes right the first time, every time. This
simple, albeit important, metric helps plant managers work toward efficient and lean production
operations.
First time right (FTR) = Total # of good units / total number of units in process
12. Inventory Turns
A key inventory management metric, this KPI examines the usage and replacement rate of stock during a
given period. Plant managers running lean manufacturing programs want to minimize inventories.
Inventory turns = Cost of goods sold (COGS) / average inventory during a specified time frame
13. Asset Turnover
Asset turnover measures the use of equipment and other assets to drive revenue. A high asset turnover
ratio can be an indicator of efficiency. Ideal turnover rates will vary by industry. For example, KPIs for
the food and beverage industry making perishable items will be different from other manufacturers
making durable goods.
Asset turnover = Net sales / average total asset value
14. Unit Costs
Unit costs, otherwise known as cost of goods sold (COGS), is how much on average it costs to
manufacture one product unit. Use this KPI to discern if your company produces goods efficiently.
Unit Costs = Variable costs + fixed costs / total units produced
15. Return on Assets (ROA)
Return on assets measures your company's profitability in relation to its available assets. This KPI
indicates the ability to use assets to drive revenue.
Return on assets (ROA) = Net income / average value of total assets
16. Maintenance Costs
Maintenance costs include all the expenses incurred (both preventive and corrective) to maintain and
repair production equipment. Use this KPI to monitor a machine's performance over time. The goal is to
optimize equipment availability at minimal cost.
Maintenance cost per unit = Total maintenance costs in a specific time frame / # of products produced
during the same time frame
Maintenance unit cost is the total maintenance expenses required to produce one product unit during a
specified timeframe.
17. Revenue per Employee
Revenue per employee measures how much revenue on average is generated per employee. Use this KPI
to benchmark over time and against similar companies.
Revenue per employee = Total revenue in a given period / (# of full-time employee equivalents at
beginning of period + # of full-time employee equivalents at end of period/2)
18. Profit per employee
Similar to revenue per employee, this KPI looks at the amount of profit generated on average per
employee. It's a good measure of your organization's bottom-line profitability.
Profit per employee = Net income for a given period / (#of full-time employee equivalents at beginning
of period + # of full-time employee equivalents at end of period/2)
Efficiency Manufacturing Metrics
Manufacturing efficiency is a focus on resource maximization and cost minimization. The goal is to
produce as much high-quality product at the lowest cost. Efficiency manufacturing KPIs focus on doing
things the right way, without waste.
19. Throughput
Throughput measures the volume of product made over a specified time frame. Use this KPI to analyze
and compare similar equipment, production lines or manufacturing plants.
Throughput rate = Total number of good units produced / specified time frame
For example, if 450 units were started and 400 good units were produced in an eight-hour shift, the
throughput rate would be 400 units per eight hours, or 50 units per hour.
20. Work in Process
Work in process refers to goods that are in mid-production or waiting to be completed and sold. Work in
process includes the raw materials, labor and overhead costs associated with unfinished goods. This KPI
can give you insight into how efficiently you're using materials and the value of partially finished goods.
Work in process (WIP) = (Beginning WIP + manufacturing costs) – cost of goods manufactured
21. Schedule or Production Attainment
Schedule attainment compares the number of manufactured goods to planned output.
Schedule attainment = (Actual production output in units / target production output in units) x 100
22. Scrap Material Value
Scrap material represents the excess material left over after a product is complete. Scrap material is
typically unusable but often sold as is.
Scrap material value = Amount earned on disposing scrap material – disposal cost
23. On Standard Operating Efficiency
If you use a piece rate or incentive system, measuring actual performance against your estimated labor
costs you used to cost your products is called the on standard operating efficiency. This can help you
keep an eye on labor costs and adjust product pricing or look for more efficient processes to lower
production costs.
On standard operating efficiency rate = # of products produced at or below estimated costs in a given
period / total # of products produced in the same time frame
24. Asset Utilization
Also known as the average return on assets, asset utilization looks at the how efficiently you're using your
assets in production.
Asset utilization = Revenue in a given period / (value of assets at beginning of period + value of assets at
the end of period/2) X 100
Cost & Profitability Manufacturing Metrics
Financial and profitability KPIs help you to better understand product costs.
25. Total Manufacturing Cost per Unit Excluding Materials
Aside from sourcing materials at a lower price, improve efficiency by digging into and tracking labor and
overhead costs.
Total manufacturing cost per unit excluding materials = (Total manufacturing costs – cost of
materials) / total number of units manufactured
26. Manufacturing Cost as a Percentage of Revenue
Manufacturing cost as a percentage of revenue compares the total production costs to revenue. Use this
KPI to compare similar production assets and identify areas of possible cost savings.
Manufacturing cost as a percentage of revenue = Total manufacturing costs / overall revenue
27. Net Operating Profit
Net operating profit measures profitability and can apply to a plant, business unit or company. Subtract
the cost of goods sold, operating expenses, interest and taxes to obtain the net operating profit.
Net operating profit = (Revenue – operating expenses) – interest and taxes
28. Productivity in Revenue per Employee
Revenue can be an important measure of productivity. Use this KPI for a specific plant, business unit or
for a company-wide metric.
Productivity in revenue per employee = Total revenue / total employees
29. Average Unit Contribution Margin

How much profit is each unit generating? A product's contribution is how much money remains to cover
fixed costs after accounting for all unit variable costs. Use this business performance metric to identify
poorly performing product lines.
Average unit contribution margin = (Total revenues – total variable costs) / total volume of production
For example, if total revenue minus total variable costs was $100,000, and 10,000 units were produced in
that time, the average profit contribution margin would be $10 per unit.
30. Return on Net Assets (RONA)
Return on net assets (RONA) calculates the percentage of net income generated by your company's
assets. It will help you evaluate how well your organization leverages its available assets to create
profitable operations.
Return on net assets (RONA) = Net income / (value of fixed assets + net working capital)
RONA highlights how an organization employs its fixed assets — including equipment and raw materials
— to grow revenue.
31. Energy Cost per Unit
Energy cost per unit measures how much energy it takes to manufacture each unit. The cost of energy
impacts the profitability of product lines.
Energy cost per unit = Sum of all energy costs / number of units manufactured
32. Cash-to-Cash Cycle Time
How long does it take to convert your investments in inventory to cash flow from receiving payment for
selling your product?
Cash-to-cash cycle time = (Days inventory outstanding) + (days sales outstanding) – (days payables
outstanding)
33. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
EBITDA is a popular measurement investors use to compare companies. An alternative to net

earnings, EBITDA can help you gauge operational profitability.
EBITDA = Net income + interest + taxes + depreciation + amortization
34. Projected Customer Demand
Projected customer demand is a forecasting method that accounts for historical data, current market
conditions and makes predictions about future demand. Use data to inform the estimates and optimize
your supply chain. Forecasting inventory and finding the right amount to have on hand to meet customer
demand without paying high storage costs can be tricky. The right ERP tools can help you move beyond
guesswork with historical trends, automated re-order points and managing safety stock and cycle counts.
An important factor for projected customer demand is understanding reorder points.
Reorder point = (# units used daily x # days lead time) + # units safety stock
35. Employee Turnover
A high attrition rate can impact your bottom line. Recruiting, onboarding and training new employees can
be timely and expensive. Keep an eye on your employee turnover to see if adjustments need to be made
to encourage employees to stay with your company, such as improving company culture and other
offerings, such as trainings and career development that boost employee engagement.
Employee Turnover = (Turnover Rate = # of separations in a given period / (# of employees at start of

period + # of employees at end of period/2)) × 100
Manufacturing Compliance Metrics

These KPIs monitor business, financial, legal and reputational risks. They also account for employment
law with health, safety and environment metrics, as well as product safety and consumer data privacy.
36. Reported Health and Safety Incidents
Reported health and safety incidents metric records the number of safety and hazard incidents you must
report to the Occupational Safety and Health Administration (OSHA) over time.
Reported health and safety incidents = # of health and safety incidents reported to OSHA during a
specified time frame
37. Health and Safety Incidence Rate
Health and safety incident rate is the number of work-related injuries per 100 full-time workers during a
12-month time frame. It's also referred to as the total case incident rate (TCIR).
Health and safety incidence rate = (# of OSHA-recorded injuries and illnesses X 200,000*) / total
employee hours worked
*Note: 200,000 = 100 employees working 40 hours per week, 50 weeks per year
38. Reportable Environmental Incidents
Reportable environmental incidents record the number of issues your company must report to the
Environmental Protection Agency (EPA). These incidents may relate to air and water, recycling or other
issues.
Reportable environmental incidents = # of environmental incidents reported to the EPA during
specified time frame
39. Number of Non-Compliance Events per Year
Managers must document the time, reason and resolution of all non-compliance events, and this metric
tracks the number of times a manufacturing plant did not comply with guidelines during a 12-month
period.
Number of non-compliance events per year = # of non-compliance events during a 12-month period
40. Failed Audits
If you don't already, plan and execute regular safety audits for all areas of your manufacturing plants and
equipment. Track how often the operations are up to compliance standards.
Failed audit rate = # of failed audits in a given period / total # of audits conducted in the same period
Maintenance Manufacturing Metrics

These metrics look at the success of maintenance programs in improving equipment performance,
increasing uptime and reducing costs. They also account for availability of production line equipment.
41. Maintenance Unit Cost
Monitor the maintenance cost of equipment in relation to the number of units produced. The metric
includes all costs to maintain and repair equipment to ensure its reliable operation. Use this KPI to
monitor a machine's success over time.
Maintenance unit cost = Total maintenance costs in a specified time frame / # of products produced
during the same time frame
42. Mean Time Between Failure (MTBF)
MTBF calculates the average time between equipment failures, such as an issue with a conveyor belt or
industrial valve. This metric gives insight into the reliability of your production assets.
MTBF = Operating time in hours / # of failures
43. Mean Time to Failure (MTTF)
MTTF is a similar metric to MTBF. This metric considers non-repairable components, such as electronics
or circuit breakers that require replacement when they fail.
MTTF = Operating time in hours / # of failures
44. Percentage Maintenance Planned (PMP)
Compare the total number of hours your organization spends repairing and maintaining production
machinery with the time you expect will be needed.
Percentage planned maintenance = (# of planned maintenance hours / # of total maintenance hours) ×
100
45. Percentage Planned vs. Emergency Maintenance Work Orders

How much of your equipment maintenance is planned? And how much is it because of emergencies?
Unplanned maintenance is disruptive to workers and customers.
Percentage planned vs. emergency maintenance work orders = (# of planned maintenance hours / # of
unplanned maintenance hours) × 100
For non-critical equipment or components, plant managers often employ a corrective maintenance
strategy to repair equipment following an unplanned downtime event.
46. Unscheduled Downtime
Unscheduled downtime measures how long equipment is scheduled to perform but can't because of
reliability or equipment issues. Unscheduled downtime can result in lost customers and revenue. It's a
good way to scrutinize the success of your maintenance plans.
Unscheduled downtime = Sum of all unscheduled downtime during specified time frame
47. Downtime in Proportion to Operating Time
Expressed as a ratio, this metric looks at how much time equipment is not running for any reason in
relation to how much time equipment is in operation.
Downtime in proportion to operating time = Total time equipment is down : Total time equipment is in
operation
48. Avoided Costs
Avoided costs are realized savings due to preventive maintenance activities. By spending time and money
on maintaining your equipment, you stop costly repairs and prolonged unscheduled downtime from
occurring.
Avoided costs = (Assumed repair cost + production losses) – preventive maintenance cost
49. Machine Set-Up Time

Machine set-up time is how long it takes to get equipment ready for its next production after completing a
run.
Machine set-up time = Time required to prepare machine for next run
Customer Experience & Responsiveness Manufacturing Metrics

Keep an eye on these metrics as ways to gauge your ability to keep the customer experience top notch.
Manufacturing plays a pivotal role in on time delivery of high-quality products, which are key
components of an exceptional customer experience.
50. On-Time Delivery to Commit
On-time delivery to commit measures how often manufacturing can meet commitments for product
delivery. This KPI tracks the efficiency of production lines and the success rate of meeting product
schedules.
On-time delivery rate = # of products delivered on time / total number of products delivered
51. Lead Time
Lead time measures the total time it takes for customers to receive orders after they're placed.
Lead time = Order process time + production lead time + delivery lead time
52. Customer Fill Rate
Keep an eye on the fulfillment of customer demand through existing product inventory. This KPI
indicates how well the organization can meet consumer demand at any given time.
Customer fill rate = (# of orders delivered / # of orders placed) X 100
53. Customer Return Rate
How much of your business comes from repeat customers? This is a good way to monitor customer
retention and loyalty.
Customer return rate = (# of return customers / total # of customers) X 100
54. Customer Satisfaction

How can you know if customers are satisfied with the products you deliver? Start by asking them.
Customer satisfaction surveys can tell you if customers are satisfied with your products and customer
service, and if they'd recommend your company to others. One of the basic satisfaction metrics is
gathered through a basic Likert scale asking customers how satisfied they are with your product.
Percentage of satisfied customers = (# of customers who said they were either very or extremely
satisfied / total # of surveys filled out) X 100
Quality Manufacturing Metrics

These KPIs are leading indicators of production performance and measure defects across each stage of
the production cycle.
How do you measure manufacturing quality? Quality KPIs, such as yield, perfect order percentage and
customer reject rate assess how closely products meet their planned specs.
55. Yield
Yield is a measure of the overall volume of products manufactured compared to the input of the raw
materials. This does not account for process inefficiencies such as rework or scrap.
Yield = (Actual # of products manufactured / theoretical number of maximum possible yield based off
raw materials input) X 100
56. First Time Yield
First time yield measures the level of product quality and represents the number of non-defective
products that are released without requiring wasteful rework. Use this KPI as a leading indicator of
potential manufacturing issues such as material quality or equipment.
First time yield = # of non-defective or good units / total # of products manufactured
57. Perfect Order Percentage
How many complete orders are shipped on time as a percentage of all orders? This KPI tracks the volume
of orders shipped without incidents such as late delivery, damaged products or missing items.
Perfect order percentage = (Percent of orders delivered on time) X (percent of orders complete) X
(percent of damage-free orders) X (percent of orders with accurate documentation) X 100
Use this KPI to evaluate if order capture, order management, manufacturing and fulfillment processes are
aligned.
58. Return Merchandise Authorizations (RMA)
Measure how often customers are dissatisfied and request and receive a refund for returned goods.
Return merchandise authorizations = (# of RMAs / # of orders delivered) X 100
59. Customer Reject Rate
Customer reject rate measures how many parts delivered to customers are defective. Products can have
more than one part to them, and this drills down to look at how many specific parts are rejected by
customers.
Customer reject rate = (# of rejected parts / total #of parts in all products shipped) x 100
60. Supplier's Quality Incoming
An important KPI for your supply chain, this metric examines the quality of raw materials you receive.
Supplier's quality incoming = # of quality raw materials received / total # of incoming materials
61. Scrap Rate
Scrap rate measures the volume of discarded materials during manufacturing. Minimizing the amount of
scrap produced in your manufacturing can represent cost savings by being more efficient with your raw
materials. Additionally, scrap materials can be labor- and time-intensive to sell, recycle or dispose.
Scrap rate = Amount of scrap material produced during a manufacturing job / total materials intake or
put into the process
Lean Manufacturing Metrics

How do you measure manufacturing efficiency? Lean manufacturing KPIs are metrics that examine and
help you improve process efficiency. Use lean KPIs to identify opportunities where you can reduce waste
and increase speed.
62. Cycle Time
How long, on average, does it take to complete a customer order? Cycle time helps you understand how
prepared your business is to meet customer demand.
Cycle time = (Time customer received order – time customer placed order) / # total shipped orders
63. First Pass Yield
First pass yield is a vital product quality measurement that represents the number of non-defective
products that are built the first time without requiring rework. Use this KPI as a leading indicator of
issues in the manufacturing process.
First pass yield = # of non-defective products excluding rework and scrap / total # of products
manufactured
64. Capacity Utilization
Capacity utilization measures how much of a plant's production capacity is in use. Look to this KPI to
assess efficiency and future growth.
Capacity utilization = (Total capacity used during specific timeframe / total available production
capacity) X 100.
65. Machine Downtime Rate
Machine downtime is how long equipment is unavailable to manufacture products. Machine downtime
includes planned and unplanned downtime for scheduled maintenance for equipment failure.
Machine downtime rate = Total uptime / total uptime + total downtime

66. Downtime in Proportion to Operating Time
Monitor the availability of assets for production. Operating time is the time an asset is available for
production. Downtime is the time assets are not available for production due to scheduled and unplanned
maintenance. Use this KPI to gauge manufacturing equipment efficiency.
Downtime in proportion to operating time = Total available time to run – scheduled and unscheduled
stoppages
67. Material Yield Variance
Material yield variance is the delta between the amount of material used and the standard.
Material yield variance = (Actual unit usage – standard unit usage) x standard cost per unit
68. Overtime Rate
Overtime rate measures the excess hours’ employees work beyond normally scheduled working hours.
Overtime rate = (Overtime hours / total hours worked, including overtime) X 100
Performance Metrics
How do you calculate production KPIs? Manufacturing performance or production metrics track the
success of each step of production. These include production attainment, changeover time and takt time.
69. Production Attainment
Production attainment measures manufacturing's ability to meet its target production level. The higher the
score, the better the performance.
Production attainment = (Actual production / scheduled production) x 100
70. Changeover time
Changeover time is how long it takes to transition a production line from one product to another product.
Average changeover time = Total time to changeover production lines / # of changeovers
71. Takt Time
Takt time is how fast you need to complete a product to meet demand. Calculate this KPI by dividing
customer demand by available production time.
Takt time = Total available production time / average customer demand

Manufacturing Innovation Metrics
Monitor and share these metrics to encourage creativity. Innovations may include new or updated
products, and can leverage process improvement or even new technology, such as AI for manufacturing.
72. Rate of New Product Introduction (NPI)
The rate of new product introduction measures how often your company introduces new products. It is
best to consider NPI rate for new products taken to market.
New product introduction rate = # of new products / new product introduction goals
73. Engineering Change Order Cycle Time
Change order cycle time measures the time it takes to finish a product from change order receipt to
implementation. The measurement is most commonly based on the average number of days to achieve
the change.
Engineering change order cycle time = Engineering change order cycle time in days, weeks or months
30 Best Manufacturing KPIs
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.
5. Inventory 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
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
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

Production KPIs

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Production KPIs

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Novalon Polymers Effective Date: 01-Jan-20

Document Title: Production KPIs Issue No: 01

What Are Manufacturing Metrics?

What Are Manufacturing Key Performance Indicators?

Why Use Manufacturing Specific Key Performance Indicators?

Guidelines for Manufacturing Key Performance Indicators

 Clearly defined goals: What is your organization trying to accomplish? Align manufacturing

Manufacturing Key Performance Indicators

Production volume = Total # of products manufactured during a specified time frame

Production downtime = Sum of all downtime during a specified time frame

Per-unit product cost = Production cost/number of units manufactured

4. Overall Equipment Effectiveness (OEE)

Overall equipment effectiveness (OEE) = Performance x quality x availability

Express OEE as a percentage and calculate it with the following dimensions:

 Availability: the actual production time as a percentage of scheduled time to operate.

5. Overall Operations Effectiveness (OOE)

Overall operations effectiveness (OOE) = Performance x quality x availability

Again, these are expressed in percentages.

6. Total Effective Equipment Performance (TEEP)

Total effective equipment performance (TEEP) = Performance x quality x availability

Again, these are expressed in percentages.

Defect density = # of defective units / total units produced

9. Rate of Return (ROR)

10. On-Time Delivery

On-time delivery = On-time units delivered / total delivered units

11. First Time Right (FTR)

12. Inventory Turns

13. Asset Turnover

Asset turnover = Net sales / average total asset value

14. Unit Costs

Unit Costs = Variable costs + fixed costs / total units produced

15. Return on Assets (ROA)

Return on assets (ROA) = Net income / average value of total assets

16. Maintenance Costs

17. Revenue per Employee

18. Profit per employee

Efficiency Manufacturing Metrics

20. Work in Process

21. Schedule or Production Attainment

Schedule attainment compares the number of manufactured goods to planned output.

22. Scrap Material Value

23. On Standard Operating Efficiency

24. Asset Utilization

Cost & Profitability Manufacturing Metrics

25. Total Manufacturing Cost per Unit Excluding Materials

26. Manufacturing Cost as a Percentage of Revenue

Manufacturing cost as a percentage of revenue = Total manufacturing costs / overall revenue

27. Net Operating Profit

Net operating profit = (Revenue – operating expenses) – interest and taxes

28. Productivity in Revenue per Employee

Productivity in revenue per employee = Total revenue / total employees

29. Average Unit Contribution Margin

30. Return on Net Assets (RONA)

31. Energy Cost per Unit

32. Cash-to-Cash Cycle Time

33. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

EBITDA is a popular measurement investors use to compare companies. An alternative to net

EBITDA = Net income + interest + taxes + depreciation + amortization

34. Projected Customer Demand

35. Employee Turnover

Employee Turnover = (Turnover Rate = # of separations in a given period / (# of employees at start of

Manufacturing Compliance Metrics

36. Reported Health and Safety Incidents