KPIs for Manufacturing and ERP Software
No matter what the industry, an organization relies on measurements that provide perspective on performance, including both successes and challenges, for insights that can drive improved decision making. By reviewing these key metrics, business leaders can shift focus to improve efficiencies and boost profits.
Manufacturers work with a wide array of measurements, such as profit and loss, cash flow, production schedule compliance, inventory turns, to name a few. There are so many areas to consider, that the task can become overwhelming — it’s easy for business leaders to become buried in weighty reports, there’s a greater likelihood of missing important issues, and the result can prove disastrous for the company. Without providing clarity around the data, it can be a real information overload!
To keep focus, industries rely on a handful of measures that reflect the overall stability of the business. By collecting Key Performance Indicators (KPIs), decision makers are able to critique matters much more quickly. Modern ERP systems can track these metrics and present them in easy-to-read dashboard displays with graphics that provide real-time views.
Types of KPIs
Most ERP solutions will provide general “out-of-the box,” pre-defined KPIs, which provide the basics for businesses across various industries. There are different types of KPIs; some are financial, historical, while others are predictive and give a glimpse into future expectations.
Ideally, manufacturers will want to identify approximately 8 to 10 that reflect the work their company does. Some of these will relate to the work the entire company is doing — such as Inventory Turnover Ratio and On-time Delivery. It makes sense that individual departments or functions will also benefit from measurement that speaks to their focus. Executive dashboards provide detailed performance views that can drill down for more granular results.
Let’s look at a couple of KPIs that are standard for manufacturers:
Plan vs. Actual Hours and Cost
Interested in knowing how the plant is functioning? This KPI pulls data from various areas of the organization, which can reveal how processes and products can create differing scenarios and impact the company’s health.
Utilization and Capacity
Planning for optimum utilization of available resources can benefit an organization, even though “lean manufacturing” doesn’t place emphasis on this area — it instead centers on the basis that having idle equipment is better than overproducing or early production. Finding the right balance can mean lower costs, as well as improved performance in an array of areas, including completions, overtime and expediting, and reliability. A key benefit of a Work Center Dispatch KPI is visibility into what each location is working on and where processes stand.
Scheduled Production
Workflow and resource utilization greatly impact production schedules; this is an area an ERP Manufacturing Dashboard can assist with, combined with the Work Center Dispatch KPI. It also helps for manufacturers to understand which clients and products bring in the most profit — looking at profitability by customer/items, category, and item will reflect the best results. These insights help the business create distribution plans and budgets that impact the overall company strategy.
Putting KPIs to work
Data is only as good as those who are reading it. It’s essential that a company train its employees in what KPIs mean and how they relate to the work they are doing on a daily basis. With this approach, the staff will build a personal connection — think ownership — of the KPIs that they need to be most effective. Management should use these measures to make key decisions.
This isn’t a one-time process; KPIs need maintenance to stay relevant. Working this into the overarching management process will ensure that updates are made to reflect shifts in the environment, such as customer preferences and market changes.
Don’t expect to tax the IT team; today’s KPI dashboards are limber enough to roll with developing needs. User-friendly tools make updates and new reports an easy process. The dashboards are truly designed to simplify employees’ tasks. Being cloud-based also means that information can be accessed anytime, anywhere, on any device as long as Internet or WiFi is available.
Read more about how technology can create powerful, flexibile KPI systems in Acumatica’s white paper Key Performance Indicators for Manufacturing.
Getting Started
The first step toward better measurement is implementing a cloud-based ERP, while the pivotal part of the journey is finding a partner that offers understanding and various capabilities. CCS Technology Group is experienced in cloud expertise and enterprise resource planning to develop, implement, monitor, and support effective solutions.
We understand that the easier working is, the more freedom a company will have to achieve its goals. Read our testimonials and contact us to learn more about how to implement an effective cloud-based ERP system — we’re here to improve processes and efficiencies that can drive growth.
