8 Essential Metrics and KPIs Manufacturers Should Be Tracking Now
By Jeb Buddecke, Director of Enterprise Applications at Sphere Partners
It is important for companies, especially manufacturers, to have KPIs to monitor the health of their operation. Acumatica is an excellent system and the manufacturing metrics identified in this article are appropriate for many companies.
In addition to KPIs, it is also important to consider your operations and how you use your ERP. Specifically thinking of manufacturing, Acumatica can track and report on labor, materials, job cost information, and as much detail as a manufacturing manager or controller would want to see. However, the question is not “How much can I capture?” but “what should I capture?”
As an example, it is technically possible to capture labor activity for every small step in a manufacturing process. But is that wise? If someone spends a few minutes on a task, it is not efficient to spend another minute or two tracking labor for that task. Either capture a larger chunk of time for doing a batch process or estimate the time spent and add that cost in a different manner. The estimate may be imperfect, but I’ve found that managers can estimate very well, and it is sufficient for costing in many cases. Project and accounting managers can check these assumptions with tools like labor allocation management.
Another consideration is whether to track labor and material moves/issues or backflush operations. Tracking takes much more effort but may be more accurate. Backflushing assumes a specific amount of labor, material, and possibly scrap, are required to build a finished good.
A third option to consider is comparing a system’s manufacturing tracking capability versus how it manages kitting. Kitting is appropriate when a bill of material is very simple and there is no significant labor. Many items are sold this way. Think about the purchase of a TV. There is at minimum a TV, a manual, cables, and a large box. This must be assembled before shipping but isn’t really manufacturing. There are several items packaged together to make the “finished good”.
While an excellent, modern ERP like Acumatica can manage any and all of these options, it is important to carefully consider how it should be used and how your company should operate. Your ERP is another tool that your company uses to operate efficiently and it is only as good as the strategy and design behind it.
All businesses should have SMART goals in place, manufacturing companies are no exception. The KPIs should be specific, measurable, achievable, relevant and timebound. Acumatica identified Toyota as a manufacturing company that has mastered setting and achieving organizational goals. Toyota created a production system that eliminates waste while quickly and efficiently producing high quality products.
The eight essential KPIs and manufacturing metrics Acumatica listed are throughput, work in process, standard operating efficiency, production volume, production costs, on-time delivery, first time right and revenue per employee. To better understand these KPIs and manufacturing metrics in detail, check out Acumatica’s article on 8 Essential Metrics and KPIs Manufacturers Should Be Tracking Now. Learn what manufacturing companies should be tracking and how these KPIs can be measured with Acumatica Cloud ERP. If you’d like to receive support with tracking your KPIs with Acumatica, or are looking for any other ERP support, reach out to us here and we’d be more than happy to help.