Production planning is a crucial aspect of any manufacturing operation, and the ability to measure and analyze key performance indicators (KPIs) is essential for success. But with so many metrics to choose from, it can be challenging to know which ones to focus on.
In this article, we'll take a look at the top 10 KPIs for production planning, explaining what they are, how to calculate them, and why they're important to measure the quality of your plan. Whether you're a production planner or a manufacturing executive, tracking these metrics can help you improve efficiency, reduce costs, and increase profitability.
🎯 Production cycle time is the amount of time it takes to go through one work step in the production process for one unit of a product. This metric is important because it can help identify bottlenecks in a specific production step and provide insight into how to improve efficiency.
💡 A company producing electronics used production cycle time to identify a bottleneck in their assembly process and reorganized the layout to reduce the cycle time by 20%.
📏 To calculate production cycle time for a production step, divide the total production time by the number of units produced.
🎯 Capacity utilization rate is the percentage of available capacity that is actually being used. This metric is important because it can help you determine whether you have enough capacity to meet demand, and whether you need to invest in additional equipment or resources.
💡A chemical company manufacturing fertilizers used capacity utilization rate to identify underutilized machines and increased production by 15%.
📏 To calculate capacity utilization rate, divide the actual output by the maximum output.
🎯 Throughput time is the amount of time it takes for a unit to move through the entire production process, from start to finish. This metric is important because it can help you identify areas of inefficiency and improve the overall flow of production.
💡A food company producing crips used throughput time to identify a bottleneck in their packaging process and reduced the throughput time by 30%.
📏 To calculate throughput time, add up the processing time, wait time, and any other delays.
🎯 Schedule attainment rate is the percentage of scheduled production that is actually completed on time. This metric is important because it can help you identify whether you're meeting customer demand and whether you need to adjust your production schedule.
💡A company manufacturing medical devices used schedule attainment rate to improve on-time delivery by 10%.
📏 To calculate schedule attainment rate, divide the actual production by the scheduled production.
🎯 Production cost per unit is the total cost of producing one unit of a product, including direct and indirect costs. This metric is important because it can help you identify areas of inefficiency and reduce costs.
💡 A company producing consumer goods used production cost per unit to identify cost-saving opportunities in their packaging process and reduced costs by 5%.
📏 To calculate production cost per unit, divide the total production costs by the number of units produced.
🎯 Inventory turnover ratio is the number of times inventory is sold and replaced in a given period. This metric is important because it can help you identify slow-moving or obsolete inventory and improve cash flow.
💡A company producing industrial equipment used inventory turnover ratio to reduce excess inventory and improve cash flow by 20%.
📏 To calculate inventory turnover ratio, divide the cost of goods sold by the average inventory.
🎯 Production yield rate is the percentage of units produced that meet quality standards. This metric is important because it can help you identify quality issues and reduce waste.
💡A company manufacturing pharmaceuticals used production yield rate to identify quality issues in their production process and reduced waste by 25%.
📏 To calculate production yield rate, divide the number of good units by the total number of units produced.
🎯 Changeover time is the amount of time it takes to switch from producing one product to another. This metric is important because it can help you reduce downtime and increase efficiency.
💡A company producing consumer goods used changeover time to reduce downtime between product runs and increased efficiency by 10%.
📏 To calculate changeover time, subtract the time it takes to produce the last unit of the previous product from the time it takes to produce the first unit of the new product.
🎯 Order lead time is the amount of time it takes to fulfill a customer order from the time it is received. This metric is important because it can help you meet customer demand and improve customer satisfaction.
💡 A company producing lubricants used order lead time to improve customer satisfaction by reducing lead times from six weeks to four weeks.
📏 To calculate order lead time, subtract the time the order was received from the time it was fulfilled.
🎯 Delivery reliability is the percentage of customer orders that are delivered on time and in full. This metric is important because it can help you build trust and loyalty with your customers.
💡 A company manufacturing glass bottles used delivery reliability to improve on-time delivery and reduce customer complaints by 30%.
📏 To calculate delivery reliability, you need to divide the number of orders that are delivered on time and in full by the total number of orders delivered, and then multiply the result by 100.
By tracking these top 10 KPIs for production planning, you can gain valuable insights into your manufacturing operations and make data-driven decisions to improve efficiency, reduce costs, and increase profitability. Don't forget to regularly review and update your KPIs to ensure they remain relevant and aligned with your business goals. Tools like Checkmate allow you to make KPI's an essential part of your production plan.