Key Performance Indicators In Manufacturing

Dec 08, 2015

I recently read an article on LinkedIn which focused on the overuse of key performance indicators, known as KPIs. I found this interesting as KPIs seem to be a very popular topic of conversation amongst business owners. It was intriguing to hear another side to the argument. I did not necessarily agree with all of the writers comments, but I can understand her point of view.

Business_KPIThe author stated that those organizations who establish KPIs do not fully understand what is being asked and how it impacts those roles with set expectation. Executives are out of touch with reality. Often times, they dream up standards which involve employees taking significant time to calculate. KPIs create frustration and are often viewed as pointless by staff.

Unfortunately, I have to imagine in some situations this is probably true. I believe there are some excellent KPIs which, if used in the correct situation, can be extremely valuable. Creating a dashboard to track and measure development can further add to the success of KPIs. Such a system can calculate these performance indicators for you.

KPIs evaluate the success of an organization or of a particular activity. KPIs can gauge any activity, but the more popular indicators found in manufacturing include labor, material usage, downtime, productivity, etc. Collecting the data correctly and in the right timeframe can prove to be  extremely useful. Quality business decisions about the future of an organization can be made from accurate KPI data. This can result in time and money saved based on evaluation.

What type of KPIs do you use? Do you think they are useful?

Do you know if your employees believe KPIs are not important because they are unable to understand the value. Certainly if they are held accountable to these indicators, they must be in control and understand the calculation. I wonder if the negativity associated with KPIs is due to the lack of knowledge.

Categories: Cost Accounting