What is a KPI?

Definition

What are KPIs?

KPI is an abbreviation for Key Performance Indicator.

KPIs are measurable variables that evaluate the success or performance of a company in important areas. In industrial production they may be used to measure the efficiency of a plant or process.

Companies in a wide range of industries use KPIs to make processes more transparent, uncover optimization potential and make more informed decisions.

KPIs vs. Metrics

Differences between KPIs and metrics

KPIs are metrics of particular importance to a company. They measure the achievement of strategic goals and assess key business areas or processes.

In industrial production there are countless production metrics for measuring efficiency, quality, productivity, and resource utilization. However, not all of them are equally relevant to every company. Additionally, collecting too many metrics can cause decision-makers to lose track, pushing the detailed analysis of individual metrics into the background.

For this reason, companies use KPIs to define the metrics that provide them with the greatest benefit – whether by monitoring critical processes to enable rapid intervention or in areas where potential cost and resource savings are most likely.

Production KPIs

Examples for typical production KPIs

In industrial production, KPIs are commonly used to monitor individual machines (e.g. OEE) and to analyze complex processes (e.g. lead time).

These KPIs and their sub-factors are often complex enough to identify the causes of productivity, efficiency, or quality losses. Additionally, KPIs can be used to compare individual machines, production lines, or even locations with one another.

1. Overall Equipment Effectiveness (OEE)

Overall Equipment Effectiveness (OEE) measures the effectiveness of machines. It takes three factors into account:

• Availability: Measures time losses due to unplanned downtimes and setup times.
• Performance: Measures productivity losses caused by slowdowns and stoppages.
• Quality: Measures quality losses due to material defects, wear, or similar issues.

OEE is a crucial KPI, especially for asset-intensive companies.

2. Lead time

Lead time indicates how long it takes for a product to pass through the entire production process.

It highlights time spent on setup processes, waiting times, or transport times. Time losses due to disruptions or stoppages also become evident.

3. Scrap rate

The scrap rate or reject rate indicates the proportion of defective products in the total production volume. High scrap rates can point to material defects, machine issues, or other causes.

Reducing scrap is one of the most common goals in the optimization of production processes.

4. Delivery reliability

Delivery reliability (also known as On Time In Full) indicates the extent to which a company meets delivery deadlines and quantities.

On Time in Full is an important KPI for production controlling with significant impacts on a company’s reputation. If delivery deadlines are not met, the underlying causes need be identified.

Implementation

Effective use of KPIs

By continuously monitoring the right KPIs, companies can identify weaknesses earlier and gain a data-driven foundation for optimizations.

However, to use KPIs effectively, several prerequisites must be met:

1. The company must identify the right KPIs.

2. The underlying data must be recorded comprehensively.

3. The relevant KPIs must be presented with sufficient detail and made available to the right people.

This requires not only strategic considerations but also data collection on the production floor, data processing for KPI calculations, and (real-time) visualization of the results.

KPIs, if continuously calculated, recorded, and visualized, support the continuous improvement process (CIP). They enable the quick identification of deviations and changes, provide a clear basis for improvement measures, and make their effectiveness immediately visible. This creates a continuous cycle of analysis, optimization, and control.

Effective Production Monitoring with manubes

manubes allows manufacturers to record and visualize process parameters, metrics, KPIs and other production data in real-time. Utilizing intuitive design tools, end users are able to create custom dashboards for maximum transparency.