Manufacturing Key Metrics

In manufacturing, several key metrics are commonly used to assess production performance. Here
are some important production metrics, along with formulas to compute them in Excel, and
suggestions for graphs to highlight improvements:

1. Cycle Time:
𝑇𝑜𝑡𝑎𝑙 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑇𝑖𝑚𝑒
𝐶𝑦𝑐𝑙𝑒 𝑇𝑖𝑚𝑒 =
𝑇𝑜𝑡𝑎𝑙 𝑈𝑛𝑖𝑡𝑠 𝑃𝑟𝑜𝑑𝑢𝑐𝑒𝑑
Excel Formula Example:=TotalProductionTime / TotalUnitsProduced

- Graph: Use a line chart to track cycle time over time. A downward trend indicates improvement.

2. Overall Equipment Efficiency (OEE):

𝑂𝐸𝐸 = 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑖𝑙𝑖𝑡𝑦 × 𝑃𝑒𝑟𝑓𝑜𝑚𝑎𝑛𝑐𝑒 × 𝑄𝑢𝑎𝑙𝑖𝑡𝑦
Excel Formula Example:=Availability * Performance * Quality

- Graph: A stacked bar chart can represent the three components of OEE (Availability,
Performance, Quality) for easy comparison and identification of areas for improvement.

3. First Pass Yield (FPY):

(𝑇𝑜𝑡𝑎𝑙 𝑈𝑛𝑖𝑡𝑠 𝑃𝑟𝑜𝑑𝑢𝑐𝑒𝑑 − 𝑅𝑒𝑤𝑜𝑟𝑘𝑒𝑑 𝑈𝑛𝑖𝑡𝑠)
𝐹𝑃𝑌 =
𝑇𝑜𝑡𝑎𝑙 𝑈𝑛𝑖𝑡𝑠 𝑃𝑟𝑜𝑑𝑢𝑐𝑒𝑑
Excel Formula Example:=(TotalUnitsProduced - ReworkedUnits) / TotalUnitsProduced

- Graph: Use a pie chart to visually represent the proportion of first-pass yield versus reworked
units.

4. Utilization:
𝐴𝑐𝑡𝑢𝑎𝑙 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑇𝑖𝑚𝑒
𝑈𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 = ( ) × 100%
𝑃𝑙𝑎𝑛𝑛𝑒𝑑 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑇𝑖𝑚𝑒
Excel Formula Example:=(ActualProductionTime / PlannedProductionTime) * 100

Durabuilt Windows Daniel R. Ramirez Rebollo

Continuous Improvement Automation Specialist
 - Graph: A bar chart comparing actual production time to planned production time can visualize
utilization.

5. Downtime Percentage:
𝐷𝑜𝑤𝑛𝑡𝑖𝑚𝑒
𝐷𝑜𝑤𝑛𝑡𝑖𝑚𝑒 𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 = ( ) × 100%
𝑇𝑜𝑡𝑎𝑙 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑇𝑖𝑚𝑒
Excel Formula Example:=(Downtime / TotalProductionTime) * 100

- Graph: Use a stacked bar chart to show downtime as a percentage of total production time.

6. Scrap Rate:
𝑆𝑐𝑟𝑎𝑝𝑝𝑒𝑑 𝑈𝑛𝑖𝑡𝑠
𝑆𝑐𝑟𝑎𝑝 𝑅𝑎𝑡𝑒 = ( ) × 100%
𝑇𝑜𝑡𝑎𝑙 𝑈𝑛𝑖𝑡𝑠 𝑃𝑟𝑜𝑑𝑢𝑐𝑒𝑑
Excel Formula Example:=(ScrappedUnits / TotalUnitsProduced) * 100

- Graph: A line chart can help visualize changes in scrap rates over time.

7. Lead Time:
𝐿𝑒𝑎𝑑 𝑇𝑖𝑚𝑒 = 𝑃𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝑇𝑖𝑚𝑒 + 𝑄𝑢𝑒𝑢𝑒 𝑇𝑖𝑚𝑒 + 𝑊𝑎𝑖𝑡 𝑇𝑖𝑚𝑒
Excel Formula Example:=ProcessingTime + QueueTime + WaitTime

- Graph: Use a waterfall chart to illustrate each component of lead time.

8. Work-In-Progress (WIP):
𝑊𝐼𝑃 = 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑊𝐼𝑃 + 𝑈𝑛𝑖𝑡𝑠 𝑆𝑡𝑎𝑟𝑡𝑒𝑑 − 𝑈𝑛𝑖𝑡𝑠 𝐶𝑜𝑚𝑝𝑙𝑒𝑡𝑒𝑑
Excel Formula Example:=InitialWIP + UnitsStarted - UnitsCompleted

- Graph: A bar chart can help track changes in work-in-progress levels.

Durabuilt Windows Daniel R. Ramirez Rebollo

Continuous Improvement Automation Specialist
 Automation projects
Return of Investment

Formulas
Quantifying Return on Investment (ROI) for automation in Excel involves comparing the benefits
gained from the investment against the costs incurred. Here are formulas and techniques to help
you calculate and quantify ROI:

1. Basic ROI Formula:

Formula:
𝑁𝑒𝑡 𝐺𝑎𝑖𝑛 𝑓𝑟𝑜𝑚 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
𝑅𝑂𝐼 = ( ) × 100%
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
Excel Formula Example: = (NetGain / CostOfInvestment) * 100

2. Cost of Investment:
Include all costs associated with the automation project, including initial setup costs,
software/hardware expenses, training costs, and ongoing maintenance costs.

Excel Formula Example: Sum(InitialSetupCost, SoftwareCost, HardwareCost, TrainingCost,

MaintenanceCost)

3. Net Gain from Investment:

Calculate the net gain by subtracting the total costs from the benefits achieved. Benefits may
include cost savings, increased revenue, and efficiency gains.

Excel Formula Example:=TotalBenefits - CostOfInvestment

4. Payback Period:
Determine the time it takes for the investment to pay for itself.
𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡
𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑 =
𝑇𝑜𝑡𝑎𝑙 𝑈𝑛𝑖𝑡𝑠 𝑃𝑟𝑜𝑑𝑢𝑐𝑒𝑑

Durabuilt Windows Daniel R. Ramirez Rebollo

Continuous Improvement Automation Specialist
 Excel Formula Example:=InitialInvestment / AnnualNetCashInflow

5. Annual Savings:
Identify annual savings resulting from the automation project, including reduced labor costs,
decreased error rates, and other efficiency gains.

Excel Formula Example: =AnnualLaborSavings + AnnualErrorReductionSavings

6. Cost Per Unit Before and After Automation:

Compare the cost per unit before and after automation to quantify efficiency improvements.

𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 =
𝑇𝑜𝑡𝑎𝑙 𝑈𝑛𝑖𝑡𝑠 𝑃𝑟𝑜𝑑𝑢𝑐𝑒𝑑
Excel Formula Example:=TotalCostBeforeAutomation / TotalUnitsProducedBeforeAutomation

7. Labor Productivity Improvement:

Calculate the increase in labor productivity resulting from automation.
𝐿𝑎𝑏𝑜𝑟 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝐴𝑓𝑡𝑒𝑟 𝐴𝑢𝑡𝑜𝑚𝑎𝑡𝑖𝑜𝑛
𝐿𝑎𝑏𝑜𝑟 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝐼𝑚𝑝𝑟𝑜𝑣𝑒𝑚𝑒𝑛𝑡 =
𝐿𝑎𝑏𝑜𝑟 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝐵𝑒𝑓𝑜𝑟𝑒 𝐴𝑢𝑡𝑜𝑚𝑎𝑡𝑖𝑜𝑛
Excel Formula Example:=LaborProductivityAfter / LaborProductivityBefore

8. Error Rate Reduction:

Quantify the reduction in error rates resulting from automation.
𝐸𝑟𝑟𝑜𝑟 𝑅𝑎𝑡𝑒 𝐵𝑒𝑓𝑜𝑟𝑒 𝐴𝑢𝑡𝑜𝑚𝑎𝑡𝑖𝑜𝑛 − 𝐸𝑟𝑟𝑜𝑟 𝑅𝑎𝑡𝑒 𝐴𝑓𝑡𝑒𝑟 𝐴𝑢𝑡𝑜𝑚𝑎𝑡𝑖𝑜𝑛
𝐸𝑟𝑟𝑜𝑟 𝑅𝑎𝑡𝑒 𝑅𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛 =
𝐸𝑟𝑟𝑜𝑟 𝑅𝑎𝑡𝑒 𝐵𝑒𝑓𝑜𝑟𝑒 𝐴𝑢𝑡𝑜𝑚𝑎𝑡𝑖𝑜𝑛
Excel Formula Example:=(ErrorRateBefore - ErrorRateAfter) / ErrorRateBefore

9. Efficiency Gain:
Measure the overall efficiency gain achieved through automation.
𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 𝐴𝑓𝑡𝑒𝑟 𝐴𝑢𝑡𝑜𝑚𝑎𝑡𝑖𝑜𝑛 − 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 𝐵𝑒𝑓𝑜𝑟𝑒 𝐴𝑢𝑡𝑜𝑚𝑎𝑡𝑖𝑜𝑛
𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 𝐺𝑎𝑖𝑛 =
𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 𝐵𝑒𝑓𝑜𝑟𝑒 𝐴𝑢𝑡𝑜𝑚𝑎𝑡𝑖𝑜𝑛

Durabuilt Windows Daniel R. Ramirez Rebollo

Continuous Improvement Automation Specialist
 Excel Formula Example=(EfficiencyAfter - EfficiencyBefore) / EfficiencyBefore

10. Break-Even Analysis:

Conduct a break-even analysis to determine when the benefits equal the costs.
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
𝐵𝑟𝑒𝑎𝑘 𝐸𝑣𝑒𝑛 𝑃𝑜𝑖𝑛𝑡 =
𝑁𝑒𝑡 𝐵𝑒𝑛𝑒𝑓𝑖𝑡 𝑝𝑒𝑟 𝑃𝑒𝑟𝑖𝑜𝑑
Excel Formula Example=InitialInvestment / NetBenefitPerPeriod

11. Discounted Cash Flow (DCF):

Apply a discount rate to future cash flows to account for the time value of money.
𝑁𝑒𝑡 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤
𝐷𝐶𝐹 = ∑ ( )
(1 + 𝑟)𝑛
Excel Formula Example:=SUM(NetCashFlow / (1 + DiscountRate)^n)

Durabuilt Windows Daniel R. Ramirez Rebollo

Continuous Improvement Automation Specialist