Manufacturing KPIs for Strategic Growth
The complexity of today’s manufacturing systems and processes has the potential to generate immeasurable amounts of data. Collecting that data is an important first step. More importantly, though, do you have a plan on how to use that data to help grow and improve your business? You have potentially hundreds of metrics to choose from, so here are our recommendations for strategic key performance indicators (KPIs) that successful manufacturers can use to grow strategically.
Top 3 Financial KPIs
- Revenue: Monitor your firm’s revenue in total sales of products and services. This lagging indicator is typically measured against sales targets. In some cases, this KPI will need to be adjusted for market fluctuations or seasonal impacts. Be sure to measure new revenue and recurring revenue separately. Recurring revenue is much easier to predict.
- Expenses: Monitor fixed costs separately from your variable costs. Direct variable costs such as materials and labor will have impacts on your costs of goods sold. In contrast, costs related to overhead, such as equipment and rent, should be tracked as indirect fixed costs, because they’re independent of sales and production volume.
- Cash Flow: This metric is one of the most vital KPIs for manufacturers who keep materials on hand in inventory, sometimes for months. It’s important to make sure there is enough cash coming in to keep up with expenses without running out of money or accumulating too much supply inventory. Operating cash flow metrics rely on accurate net income calculations, non-cash expenses, and working capital analysis.
Top 3 Operational KPIs
- Operating Margin: Sometimes referred to as Return on Sales or ROS, the operating margins KPI shows you profits remaining before interest and tax after paying your variable costs. This KPI is generally relied upon to monitor topline operational performance.
- Quote-to-Cash Cycle: This metric measures the span between a customer quote being issued to a final cash receipt. Another topline metric, it indicates the efficiency of order cycles, including fulfillment, invoicing, and payments.
- Staffing: Manufacturers monitor their team members’ availability and overall efficiency with staffing KPIs. Typical staff KPIs include attendance, performance, capacity, and utilization.
- Throughput: A critical metric for manufacturing businesses, this KPI measures your production volume by units produced. In some companies, throughput is measured as a percent of total production capacity.
- Schedule Attainment: You can compare completion dates to required dates to understand how your team performs compared to what customers request and require.
- Efficiency of Utilization: It’s essential to monitor the utilization of both factory machines as well as staff. You’ll be better able to spot issues that prevent schedule attainment. And, over time, analysis of this data will help you reduce costs by showing you where to take action to save time and money.
Real-time, Actionable Insights
Modern cloud applications such as Dynamics 365 and Acumatica empower manufacturing execs and departmental managers with real-time insights through role-based dashboards, live reports, and inquiries supported by drilldown capabilities to the source transactions. These modern manufacturing ERP systems provide dimensional business insights and intelligent workflows to empower leaders with tools to measure KPIs and achieve their business objectives more efficiently.
Modern manufacturing ERP systems are built on a future-proof, cloud platform with native artificial intelligence and machine learning. Modern manufacturing ERP software provides manufacturing depth with robust financials, native customer relationship management, and powerful business intelligence applications.
Boost sales, maximize resources, and improve profits with best-in-class applications for production, estimating, engineering, material planning, scheduling, product configuration, and manufacturing data collection. Modern manufacturing ERP software is designed for make-to-stock, make-to-order, configure-to-order, engineer-to-order, repetitive, and project-centric manufacturers.
Trust an Experienced Partner
We have experts ready to help guide you on your digital transformation journey and ensure your KPIs support your company’s growth. Nothing replaces a live presentation, so please reach out to us to schedule a demonstration for your business. Call us at 800.331.8382 or send us an email at info@cfbs-us.com today.