Production KPIs – Production Processes and their Optimization Potential

What are Production KPIs?

Production KPIs are key figures that can be used to monitor, analyze and evaluate production processes. Often referred to as production KPIs, production KPIs are suitable for optimizing the production processes that are transparently depicted and made comparable.

Production Indicators - Overview of Relevant Indicators for ProductionI

There are many key performance indicators that provide insights into the processes within production. We have summarized the most important Production KPIs for you below:

Fall-Off-Rate

The fall-off rate indicates how high the number of failures is in relation to the quantity produced in a certain period of time. The fall-off rate is calculated by dividing the number of failed products by the number of products that were faultless at the beginning of the period under consideration. The failure rate is usually comparatively high for new products, particularly due to production errors and so-called start-up stress. 

Degree of Scrap

The scrap rate indicates the ratio between the scrap - i.e. the defective products that are not sold - and the total quantity. The terms scrap rate, reject rate and production error rate are used as optional terms for the scrap rate as key production figures. 

Occupancy Rate

The occupancy rate describes the share of the occupancy times of all workstations involved in the total throughput time of the orders. The occupancy rate can be used to evaluate throughput times and the density of processes in production as well as waiting and idle times. The occupancy rate is also suitable for measuring process chains and, in connection with this, for determining the level of work in progress.

Defect Density

The defect density provides information on how many products have production defects in relation to total production. A production defect occurs when the quality of a product deviates from the standard of production. Production indicators such as defect density can be used to monitor the occurrence of production defects over a longer period.

Throughput

In manufacturing, throughput is an index for the performance of a process. It answers the question: What quantity is produced per unit of time? Accordingly, throughput can be expressed in pieces per hour, but volume, weight, etc. are also common units. Common units range from cubic meters per hour (m³/h) to tons per hour (t/h) to hectoliters per hour (hl/h). 

Maintenance Costs

Maintenance costs include the costs for all measures to restore the functionality of machines and systems used for production. According to DIN 31051:2019-06 - Basics of maintenance, maintenance includes the following segments:

• Repair Costs
• Service Costs
• Overhaul
• Improvement Costs

Accordingly, maintenance costs include all costs incurred when carrying out these four measures.

Capital Turnover

The capital turnover represents how much turnover is generated from the same monetary unit of total capital. This contrasts with the return on assets, in which the net profit is included in the calculation instead of the turnover. Especially for production facilities for which high-quality machines or systems have been purchased, the capital turnover is one of the key production indicators.

Degree of Utilization

In production, the degree of utilization (or utilization rate) refers to the proportion of the main utilization time in the total utilization time of a machine or system. The main utilization time comprises the period of time in which the machine or system performs its function - for example, sawing in the case of a saw, but not changing the workpiece or saw blade. The degree of utilization is therefore an important measure of the productivity of a production facility.

Employee Productivity

Employee productivity provides information about the ratio of employees' order-related working time to the total time spent by employees. Employee productivity can be increased by technical factors - such as high-performance work equipment and user-friendly software - but psychological aspects also play a role, including the working atmosphere and employee motivation.

Overall Equipment Effectiveness

Overall Equipment Effectiveness (OEE) is a percentage of how productive a machine or system is. The OEE includes:

• Availability
• Performance
• Quality

This makes OEE one of the more complex production indicators, but it can be calculated using the following formula:

OEE = (operating time : planned operation time) × (produced quantity : specified quantity) × (good quantity : produced quantity) 

Production Downtime

Production downtime is a loss of production, for example due to wear and tear on machines or systems, incorrect operation or employee illness. As production downtime results in a loss of profit, its duration should be limited as far as possible. Some forms of production downtime can be prevented before they occur. For example, regular employee training can prevent possible incorrect operation of machines and systems in advance.

Production Costs

Production costs include the costs of production factors (including materials, operating resources and labor). Production costs are often divided into fixed and variable costs: 

• Fixed production costs: e.g. rent, electricity costs, wages/salaries
• Variable production costs: e.g. raw material costs, costs for auxiliary/operating materials

Production costs can be used to determine the ideal pricing for the products.

Production Volume

The production volume or production quantity reflects the production output in a certain period. The optimum production volume is one that corresponds to the demand for the product and does not lead to overstocking or excess inventory.

Process Efficiency

Process efficiency is an index for the profitability and efficiency of production. The process efficiency is determined by dividing the value-adding time by the total throughput time.

Quality Rate

The quality rate is the ratio of the quantity of goods to the quantity produced. The good quantity reflects the number of products that have no production defects and can therefore be delivered to retailers or customers.

Right First Time

The right first time (defect-free production at the first attempt) indicates the percentage of those products that pass the first internal quality control of the total quantity of products. As a key production figure, Right First Time therefore primarily provides information about the quality of the production processes.

Return Rate

The return rate is the ratio of the number of returned products to the total number of products sold. The main difference to the defect density lies in the reasons for the return or defect: while the defect density is determined exclusively according to objective factors (primarily production defects), subjective reasons are also included in the calculation of the return rate, for example dislike.

Availability

Availability indicates the extent to which the capacity of a machine or system is utilized for the value-adding functions in relation to the planned availability (minus, for example, planned maintenance time). Reasons for an availability below 100% or a machine/system failure can be faults on the machine/system, delays in its maintenance or waiting for materials or employees.

The Importance of Production KPIs for the Manufacturing Process

Production KPIs can be used to identify weaknesses in production processes and to tap into potential for optimizing them:

• Identify bottlenecks: In the event of production bottlenecks, subsequent steps such as the delivery of goods are slowed down considerably or even come to a standstill. Production indicators can be used to analyze bottlenecks and countermeasures can be taken to ensure an uninterrupted flow of goods. Monitoring capacity utilization and availability are among the relevant factors here.
• Minimize production downtime: Production downtimes can be caused by unforeseen events such as accidents, damage (for example due to fire) or even errors in production. As a result, further processing is not possible. Production indicators can be used to determine solutions for these cases and to keep the duration of production downtimes as short as possible.
• Improve product quality: Demonstrably improved products are a strong selling point and a decisive competitive advantage. This measure can also be defined by continuously analyzing the relevant key figures and using them to adjust; for example, by reducing the rate of production defects and increasing the quality rate and Right First Time in return.

How can MES be Used to Record, Analyze and Use Production KPIs?

Production KPIs can be defined and continuously recorded in a Manufacturing Execution System (MES). The central MES component for this is systematic machine data acquisition, which brings transparency to production and all relevant processes. 

Based on the data collected and a production-oriented KPI system, meaningful KPIs can be made available and analysed - for example in the MES dashboard of our GFOS.Smart Manufacturing software solution, which offers bundled visualization with smart real-time evaluations. In this way, causes and interdependencies within production can be identified and processes can be optimized.

Using Production KPIs as Success Factors - With GFOS

Our professional IT solutions for processing key figures from production include useful tools that you can customize to your production processes. All parameters that are relevant to your production are reliably recorded, processed and visualized.

With the help of our IT experts' know-how, you can analyse, monitor and control your production - and digitize entire manufacturing processes in the process. Use the process and production key figures, secure your long-term success and guide your company unerringly towards Industry 4.0.

Let us advise you comprehensively and convince you of the advantages of digital production control - GFOS will be happy to assist you!