Key performance indicators, or KPIs, are critical measurement tools in the push for improved performance, but many manufacturers fail to implement them.
According to a recent online survey of Automation World subscribers and Web site visitors (www.automationworld.com), only about 52 percent of manufacturing organizations are using KPIs in their daily operations. Topping the list of indicators that are measured are throughput and productivity, at 79 percent each, and downtime, at 76 percent. Other leading indicators monitored by the 77 survey respondents include: inventory levels, at 68 percent; raw material costs, at 61 percent; and labor costs, at 58 percent.
ARC Advisory Group, manufacturing consultants based in Dedham, Mass., groups manufacturing KPIs in the following broad categories:
• Production and inventory
• Asset utilization
• Quality
• Revenue and profits
• Costs
• Customer service
• Health, safety and environmental.
Says Vice President Dick Hill, “In order to maximize performance, these targets must be prioritized for the operator. You can’t just present 12 different targets and expect good results.”
Real-time Rules
Another key factor in improving manufacturing performance is using real-time information, and linking that to the business decision systems. Survey respondents use several methods for collecting manufacturing data to measure operational and financial metrics. Real-time data from the automation systems is used by 58 percent of the respondents, while 57 percent use historical data to monitor metrics. (Multiple answers were allowed.) Thirty-five percent use a separate data collection system.
About one-third of the respondents use a formal real-time performance management (RPM) system in their operations, and another one-third plan to implement an RPM system within the next three years.
Show Them the Money
The old adage, “You get what you reward,” seems to apply to how a manufacturing organization compensates its employees. While 52 percent of organizations use KPIs in daily operations, that same percentage applies to employees who have some portion of their compensation tied to performance metrics. Thirty-seven percent of respondents say that up to 10 percent of their compensation—salary, benefits and bonus—is tied to operational and/or financial metrics, while 10 percent of respondents claim 10 to 50 percent is tied to performance metrics and 5 percent say more than one-half of their compensation is tied to metrics.
One of the overlooked areas for performance monitoring is in asset deployment—only 21 percent of respondents who use KPIs include asset utilization as a metric. Read the articles throughout this issue for guidance on how to improve return on automation assets by linking real-time manufacturing data with the enterprise business systems.
Jane Gerold
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