6 Manufacturing Key Performance Indicators for Business growth of your Organization
Running a manufacturing business means you have to keep track of a lot of different things. Using a key performance indicator (KPIs) will remove a lot of stress from your day to day process. These performance indicators will allow you, for example, to achieve your business goals, acquire your desired sales growth, and accomplish your business objectives.
What is a KPI?
A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the business, while low-level KPIs may focus on processes in departments such as sales, marketing, HR, support, and others.
What makes a KPI effective?
The value of a KPI is only as good as the actions it inspires. Too often, organizations blindly adopt industry-recognized KPIs and then wonder why that KPI doesn't reflect their own business and fails to affect any positive change. The most important, but often overlooked aspect of KPIs is that they are a form of communication. As such, they abide by the same rules and best practices as any other form of communication. Succinct, clear, and informative information is much more likely to be absorbed and acted upon.
If you want to start developing Key Performance Indicators for your company, the team should start with the basics and have a better understanding of what organizational objectives are, how they can be achieved, and who is acting on this information. This should be an iterative process that involves feedback from analysts, department heads, and managers. As this fact-finding mission unfolds, you will gain a better understanding of which business processes need to be measured with a KPI dashboard and with whom that information should be shared.
Here are our top picks for manufacturing KPIs for businesses:
When operating a business, you need highly skilled professionals to keep your orders going out to customers, reach business objectives and continue business growth including product development. Measuring this KPI will give you a solid understanding of relevant data points and how taking on new staff will impact your bottom line.
This process helps you maintain customer satisfaction and brand loyalty. Any order you cannot fulfill (perhaps due to a lack of stock or staff sickness) will be measured here. These key performance indicators will directly correlate with customer retention to your business too – if you wish to obtain a loyal customer base, make sure your backorders don’t mount up.
If you measure these KPIs, you’ll be able to identify the issues causing imperfect products. Is this an issue with staff, or is a machine not working to its optimum? Once you’ve identified the issue at hand from the data points, you can make changes to minimize the chances of the problem arising again.
Labour Cost as a KPI
The process of keeping track of this metric is important in order to ensure that your profitability per item is not being compromised. You’ll need to measure this against the price of materials and staff wages to ensure you’re correctly pricing out your products.
Check out our KPI Library to find out more about which metrics you should be measuring. Set up a forecast in Futrli to track training time. Find out more about calculating your backorder percentage here. Track scrap in your forecast.
These business metrics will allow the company to add value to its service and ensure start ups success. Following this kpi, your business will achieve success.
Customer Lifetime Value (CLV)
What is customer lifetime value?
Customer Lifetime Value (LTV) is a single customer's lifetime spending with your company. This is an important measure to keep track of because it shows how well you're operating as a business in the long term. For retail businesses, customer lifetime value and average purchase values are each critical performance indicators that will tell you if you have any problems in
How to calculate:
The average transaction amount multiplied by the number of repeat sales and the average retention time.
Example: If your average customer spends $30 a week, then they are spending $1,560 per year (30 x 52). If they tend to stick around for two years, then your average customer lifetime value is $3,120.
Landing page conversion rates
So just what should your website conversion rates be? According to Search Engine Land, the average landing page conversion rate is 2.35%. If you aren't meeting this benchmark when compared with other websites (2.35% → 6%), there are likely some problems in the process that need to be fixed.