Global Shop Solutions: Key Metrics to Measure the Success of Your Manufacturing Operations
There’s an old saying in business that you can’t manage what you don’t measure. That is certainly true in the manufacturing industry regarding performance, productivity, and efficiency. These three represent some of the most important metrics in your business as they provide a reliable measure of the company’s overall success. They also help identify areas for improvement if your success isn’t where you want it to be.
In the old days, tracking these three metrics was a cumbersome manual process, mainly because the production data used to measure performance, productivity and efficiency was also tracked manually. Metric measurement improved significantly with the advent of digital spreadsheets and ERP software, but it still left a lot to be desired.
Over the last decade, the functionalities and capabilities of ERP software have grown by leaps and bounds – especially in providing access to the data that informs strategies and decisions for improving underperforming metrics. In this blog we identify five metrics that play a vital role in the success of your business and how ERP software simplifies the process of measuring and managing them.
1. Quality Metrics
Measuring quality is a complex processes for any manufacturing business. Trying to do it without an ERP Quality application is an open invitation to incorrect data tracking, working off the wrong change revisions, and other errors that result in excessive rework, scrap and costs.
A Quality application simplifies the process by isolating and measuring the quality of manufactured and purchased parts by cost, department, employee, workcenter, scrap trends, and more. It tracks non-conformance, RNAs and change orders, and lets you enter non-conforming parts into the ERP system in real time so you always know what is happening and why. It automatically creates quality records for every job so you never have to hunt for lost or misplaced data files, and allows you to create customized records to meet internal and external QC requirements with electronic sign-off.
With a Quality application you can control each step of part revisions, including sign off, department communications, tracking, and more. You can also review vendor on-time delivery and quality performance data; create tables of discrepancy and reject reason codes; and make it easier to qualify for and maintain ISO and QS-9000 certifications.
Most important, a Quality application identifies your true quality costs by part, by the job and as a whole. It helps lower costs by tracking every part with 100% accuracy. It reduces wasted material and shipping costs by identifying bad parts as they are made rather than after they are shipped. It minimizes rework by ensuring engineers and machinists always work off the correct document. With ERP Quality management, you know the total cost of quality for your shop – a significant advantage over competitors who don’t.
2. Production Metrics
The primary goal with production metrics is to provide the data needed to run a highly efficient shop floor, finish jobs on time and on budget, and ship a quality product every time. Basic production metrics, such as cycle time, lead time, and machine uptime, provide detailed information about specific areas of your shop floor. High-level metrics, such as labor performance, workcenter capacity, and WIP reports, provide a complete picture of what is happening on your shop floor and why.
As with quality, manually tracking production processes is a recipe for mistakes. It can result in anything from excessive labor and material costs to unsatisfactory quality, late deliveries, dissatisfied customers and more. Having ERP Shop Floor Management and Shop Floor Data Collection applications brings your business into the 21st century by greatly simplifying the production management process.
Shop Floor Management monitors and reports on all aspects of production. With it you can view job costing, material review, variance reports, and performance management in real time. You can manage and measure labor performance by employee, department, workcenter and more. And you can access all your load details, efficiency reports, backlogs, work order schedule, and more.
Shop Floor Data Collection helps control your jobs, workcenters and inventory by focusing on more detailed metrics. It digitally tracks labor and production data when employees clock in and out of jobs, sequences, and machines. Live dispatch lists inform employees on what’s coming up next so they work on the right jobs at the right time. You can also balance labor costs by shift, work order, project, or department.
Tracking and managing metrics with these two applications puts you in control of your shop floor.
3. Inventory Metrics
It’s ironic that pieces of metal, wood, plastic or other materials sitting on the shelf can have such a big impact on production and efficiency. When there is sufficient material in inventory, jobs can start on time. When the right materials are lacking, jobs fall behind or require rescheduling, which then impacts every other job on the schedule. That alone should be reason enough to track important inventory metrics. However, there are many more reasons to measure what’s happening with your inventory process.
An ERP Inventory application allows you to see the effectiveness (or lack of) your inventory management by monitoring material levels, stock turnover, obsolete stock, lead times and other relevant information. These factors all contribute to making smart pricing and quoting decisions to ensure a job is profitable. Precise inventory management can also help lower inventory carrying costs by eliminating over-buying and expedited shipping charges due to stockouts.
An Inventory application tracks every aspect of material needs, including detailed inventory data, to achieve accurate physical inventory while managing costs. If you have never used ERP or have an old, outdated ERP system, you will be amazed at the features and capabilities of this powerful application, including:
- Precise inventory and vendor material tracking
- Bin, lot, heat and serial number tracking
- Cycle counting and physical inventory
- Material certification tracking
- Wireless data entry and barcode scanning
- Purchase history
- Forecasting for manufactured and purchased parts
- Inventory status of multi-level BOMs
- Inventory history/usage reports for all inventory parts
- Automated purchasing for inventory stock
If you have hundreds or thousands of parts in inventory, it can be hard to locate and view the status of a part needed for an upcoming job. ERP’s Supply & Demand screen provides quick access to the part and displays everything you need to know about the part from a single screen.
Keeping on top of your inventory metrics will enable jobs to flow smoothly and products to be shipped on time.
4. Efficiency Metrics
Efficiency metrics measure how logically you utilize your resources. Tracking metrics such as setup times, labor productivity, machine utilization, material usage, and overall equipment effectiveness helps effectively determine utilization levels while unlocking information to drive the continuous improvement of your processes.
Measuring efficiency levels in other areas, such as scheduling, can impact all areas of production. Efficient scheduling gets jobs started on the right foot and maximizes resource usage. Inefficient scheduling can cause significant problems, such as missed deadlines, understaffing, over-or-underproduction, and the inability to meet customer demand.
ERP software that includes the Advanced Planning & Scheduling (APS) application turns scheduling into an accurate, efficient and effortless task with real-time data on all your jobs. You can view and schedule employees, workcenters, materials, and outside processes to accurately estimate lead times. APS also makes it easy to reschedule or reroute jobs and see how moving jobs around affects the entire schedule.
Another efficiency metric that often doesn’t get the attention it deserves is the routing process, which creates a roadmap for the rest of the production process. The ERP Routing application optimizes production sequencing to route parts through your shop with precision and quality. They also enable you to create accurate estimates and quotes by helping to determine the cost of parts, materials and labor. All of which plays a critical role in delivering jobs on time.
Another ERP tool for linking efficiency with performance are Key Performance Indicators (KPIs). ERP software that offer this feature typically include numerous standard KPIs, such as employee and workcenter productivity. You get real-time data at your fingertips and can use in-depth charts, graphs, and traditional reports to analyze the data and make decisions that improve efficiency.
5. Delivery Metrics
Delivering finished goods may be the last step in the production process, but it is certainly one of the most important. Even if every step leading up to the shipping phase is completed on time, all it takes is one glitch in the shipping phase to end up with a late shipment and a dissatisfied customer.
The ERP Shipping application keeps your deliveries on time with hassle-free staging, packing and shipping. Integrating directly with your third-party shipping software reduces double data entry and human error. Integrating with a Label Printing application enables fast barcoding and labeling, while the Shipping Dashboard keeps you up to the minute on the status of all shipments.
Other features include the ability to track shipments using only the tracking number, easily integrating with FedEx, UPS and other shippers, and using “Assembly Lookup” to ensure material certs accuracy. With instant access to job status, you can quickly answer customer inquiries on open shipments, ship status, and other shipping information.
Shipping products on time every time earns the trust of your customers and their repeat business. ERP makes it happen.
Track, Review, Analyze, Improve
While there are many different ways to measure the success of your manufacturing operations, these five metrics cover the most important ways to deliver a quality part on time every time. Tracking these metrics can help identify where improvements can be made and allow you to make informed and proactive decisions about your operations. By regularly monitoring and analyzing these metrics, you will be well-positioned to increase your profits, reduce waste, improve quality, and deliver more value to your customers.
To learn more about Global Shop Solutions, visit globalshopsolutions.com.
