There is no doubt that the improvement of business processes requires the application of the Deming cycle (Plan-Do-Check-Act). Without appropriate indicators, however, it is not possible to apply the PDCA and therefore to monitor whether or not there is an improvement.

The indicators are a series of critical, synthetic, significant and priority information that allows the measurement of the company trend in all its aspects (cost / time / quality); a good system of indicators allows the timely detection of critical issues that could otherwise be detected too late. The indicators used to measure the performance of the processes are called Key Performance Indicator (KPI).

First of all… SMART goals

There can not be KPIs if the objectives are not defined first. The word SMART is an acronym introduced in the early 80s to define the characteristics that each objective must have.

  1. Specific: it must not be generic, it must be clearly referred to a well-defined process.
  2. Measurable: it must be measurable because having reference metrics makes it easier to evaluate progress.
  3. Achievable: reachable through the resources made available.
  4. Relevant: defined so that it is justified to allocate resources for its achievement and that all the interested parties perceive it as really useful and necessary.
  5. Time-based: must have a deadline and the frequency of intermediate checks must be established.

Then ... appropriate KPIs

KPIs that are defined on the basis of objectives must be:

  • Simple to understand and to measure: all the people involved must understand what a KPI measures, how it is calculated and what the levers on which to intervene to influence it.
  • Measurable to be compared with the reference objectives.
  • Timely and then calculated and communicated with the right periodicity to allow the immediate definition of any corrective actions to ensure the achievement of the objective.

 

Which are the right industrial indicators to monitor?  Find out the main ones in our glossary of industrial KPIs!

 

5 KPIs of production that can help improve industrial productivity

The KPIs that can be monitored are innumerable; here we have selected five, particularly relevant and sometimes underestimated.

1. Direct vs indirect production hours

The distribution between direct hours and indirect hours (overhead) directly impacts on productivity. Excessive incidence of indirect hours can highlight superstructures, critical planning, redundancy or inadequate allocation of resources. In general, each sector has its own benchmarks of reference but, in general, in a manufacturing production area, the goal is to achieve at least a 3: 1 ratio.

2. Punctuality (level of service)

In today's markets, we tend to postpone every decision as far as possible. It is therefore essential that the company is able to respond to market demands according to the timing that it expects. The evaluation of punctuality at all levels of the supply chain leads to the revision of processes in a lean perspective, with a positive impact on productivity too.

3. Machine Overall Equipment Effectiveness (OEE)

It is a fundamental indicator that takes into account availability (failures, setup times and startup times), performance (downtime, reduced processing speed) and quality (waste and rework) giving a real assessment of the efficiency of a line and its components.

4. Costs of "non-quality”

"Non-quality" costs directly affect all production KPIs. It is very difficult to define a market benchmark: each company must set a goal for continuous improvement.

5. Accident index rate

The health and safety of workers are often excluded from production KPIs focused on the assessment of productivity. The incidence of accidents impacts directly on productivity; monitoring indicators to this effect encourages the adoption of appropriate measures to reduce risks allowing the maintenance of expected levels of productivity.

Conclusions

Within the KPI of production field there are many schools of thought and many indicators that depending on the context and the parties involved can be more or less effective. Certainly in this context the sharing of experiences and solutions, as well as the definition of market benchmarks that can give references to companies, is desirable and of a great importance.

Many KPIs are only monitored if at the base there are data taken from the field to be analyzed and rationalized. Nowadays, industry 4.0 provides technologies that can simplify the collection of plant data, check the progress and as a result react quickly.

Download our glossary of the main industrial KPIs