Article | December 23, 2021
Every manufacturing company aims to be as efficient as possible to maximize profit. However, it's difficult to determine where you stand and what targets to establish unless you can precisely measure your efficiency. Manufacturing KPIsplay an important role in this process.
Keeping track of many indicators without considering their commercial worth is a waste of time.
“Not everything that can be counted counts and not everything that counts can be counted”
- Albert Einstein
But connecting goals to measurements is a certain way to track progress and improve processes. So let's get started with how to choose the most appropriate key performance indicators(KPIs) for your business.
Manufacturing KPI 2022: How to Choose the Right One?
Why are KPIs called “Key” Performance Indicators? While any statistic can be used to assess performance, KPIs are the most critical. Hence they are called key performance indicators. Companies' priorities while selecting their company KPIs may differ substantially depending on the industry in which they operate.
“Strategic-operational KPIs alignment gives the organization a powerful tool to use when implementing change.”
― Pearl Zhu
A corporation should not track more than ten manufacturing KPIs to avoid overblowing processes. So, manufacturing efficiency, customer satisfaction, lead times, etc., should all be included.
Depending on your business nature, you must select your KPIs. However, each of those indicators must meet a set of criteria before being considered meaningful.
So, what is a decent KPI for manufacturing?
It gives objective and clear data on progress toward a certain goal
It measures efficiency, quality, punctuality, and performance
It allows for tracking performance over time
It helps in decision making
It should be the one that matches the company's long-term objectives
It has to be measurable and quantifiable
It must be realistic and actionable
Following that, let's have a look at the most important manufacturing KPIs for 2022, which will assist you in better understanding your manufacturing business and formulating a growth strategy in line with that understanding.
Most Critical Manufacturing KPIs in Order of Priority
Despite the fact that manufacturers should also monitor general key performance indicators (KPIs) such as sales revenue, net profit margin, and so on, the manufacturing business demands the tracking of specific manufacturing metrics. Below are some of the most important manufacturing key performance indicators (KPIs).
Using this manufacturing KPI metric, you can see how much value there is in products still in progress. It assists manufacturing organizations in determining how much of their working capital is locked up in incomplete products and can aid in identifying supply chain managementdifficulties.
You can compute the Work-In-Progress (WIP) by using the formula provided below.
Return on Assets
This manufacturing KPIseems to be more about financing than manufacturing. Yes, it does. However, financial measurements are just as vital as production ones. A firm cannot exist unless it generates revenue, and this indicator measures how efficiently your company uses its assets and generates revenues.
The Return on Assets (ROA) of your company can be calculated using the formula below.
Cost Per Unit
It is critical to understand the overall manufacturing cost per unit. You can't appropriately price a product without it. This manufacturing KPIdivides total manufacturing costs by the number of units produced. Materials, overhead, depreciation, and labor are standard costs.
Companies utilize this manufacturing statisticto forecast future raw material needs to satisfy client demand. Unfortunately, this statistic is more challenging to employ because it is mainly dependent on unpredictable external circumstances. The basic formula is:
The seasonal factors are distinct
Average demand is calculated as:
A company's lead time, also known as order cycle time, is an important KPI. It shows how swiftly your organization processes orders and meets client requests. It is time it takes to complete an order from confirmation to delivery.
Long lead times can imply process inefficiencies that produce bottlenecks and excessive expenses. Conversely, short lead times are important since they allow you to respond to consumer needs swiftly and efficiently.
The total lead time can be divided into smaller segments as follows:
The time it takes to manufacture a product from start to finish
The time it takes to deliver a product from stockto a client
The time it takes suppliers to deliver products to manufacturers
By segmenting the lead time, you may more precisely identify the areas where inefficiencies in the process occur.
Toyota’s Four Key Performance Metrics
As a company, Toyota places a high focus on environmental protection. Toyota's vehicles are designed to use less fuel and produce less waste.
Regardless of the company's size, Toyota is committed to protecting the environment. Toyota's 'Earth Charter' was created in 1992 as part of the company's Global Policy initiative. It was Toyota's first overseas facility and the UK's first ISO14001-certified car manufacturer. Waterborne paints were utilized for the first time and zero waste was sent to landfills. In 2009, Toyota Manufacturing UK did not use any incinerators.
Toyota has developed a set of key performance indicators (KPIs) for each of its major production areas. There are four key performance metrics: energy, water, waste, and volatile organic compounds (VOCs).
Since its start in 1992, Toyota Manufacturing UK has attempted to mitigate its environmental impact. The figure below illustrates the environmental KPIsfor the Burnaston plant. Each year, Toyota sets new goals to improve its results.
79% reduction in vehicle energy consumption
62% reduction in waste per car
76% reduction in VOC emissions per car
79% reduction in water consumption per vehicle
You can use the aforementioned manufacturing KPIsto construct your manufacturing KPI template, but keep in mind that the manufacturing metricsyou need to track may differ from those listed here. The first prudent move any business can make while examining its operation is to identify and track the relevant KPIs. Also, in manufacturing, there are several different KPIs, phrases, and abbreviations need to be understood and used where it makes the most sense.
What is manufacturing KPI?
A manufacturing Key Performance Indicator (KPI) or metric is a well-defined and measurable indicator that the manufacturing sector uses to evaluate its performance over time and compare it to that of other industries.
What are the key KPIs for manufacturers?
On-Time Delivery, Production Schedule Attainment, Total Cycle Time, Throughput, Capacity Utilization, and Changeover Time are some of the key manufacturing KPIs.
Article | December 8, 2021
Why should warehouses be left behind as everything gets smarter in the manufacturing world? The future warehouse will be smarter and more innovative to speed up supply chain management procedures and assist businesses in intelligently segregating their raw materials and manufactured goods.
So, what does it mean to have "a smart warehouse"?
A smart warehouse is a big infrastructure that stores raw materials and manufactured goods and employs machines and computers to handle routine warehouse tasks that humans previously performed. Smart warehouses are inspired by smart factories and operate in a data-driven environment. It is the ability of the system in the warehouse to make it more efficient and productive by utilizing networked, automated technology.
“I advocate business leaders get to know more about what AI can do and then leverage AI in proofs of concept.”
– Michael Walton, Director, Industry Executive (Manufacturing) at Microsoft
According to EASYECOM, nine out of ten businesses intend to include commercial service robots into their operations in some form. By 2025, it is projected that there will be roughly 23,000 robotic warehouses in the United States alone, up from only 2,500 in 2018.
Furthermore, the global smart warehousing market is expected to grow at a CAGR of 11.5 percent from USD 14.8 billion in 2021 to USD 25.4 billion in 2026, according to GlobeNewswire. As can be seen, the current warehouse automation trends are scaling up the worldwide market for smart warehouses, and the value of the smart warehouse business has a long way to go in the future.
So, what are the technologies that are changing traditional warehouses into intelligent warehouses? Continue reading this article to get a better understanding of this.
Top 5 Warehouse Technologies to Take On
Numerous manufacturing and non-manufacturing organizations, including IKEA, NIKE, and WALMART, utilize smart warehouses to streamline their overall operations. The technologies listed below assist many of them in implementing the modern warehousing idea.
A Warehouse Management System
Warehouse Management Systems, or WMSs, are comprehensive software systems that consolidate all of your critical data onto a single platform that can be easily accessed by team members and selected supply chain partners. This data compartmentalization allows for lightning-fast reporting, which allows for super-efficient planning, even for unexpected events. Overall, the use of warehouse management systems complements the use of other automated aspects perfectly.
Automated Picking Tools
The days of error-prone picking are long gone; now, when picking automation elements are integrated into the flow, warehouses can profit from near-perfect picking rates. In addition, picking procedures can be aided by various techniques, including voice-automated order picking, pick-to-light, and robotic order picking. These technologies also use cutting-edge barcoding choices that easily interface with your selected management software to provide the quickest and most accurate automated reporting experiences.
Automated Guided Vehicles (AGVs)
AGVs, or automatic guided vehicles, are the best approach to speeding up storage and retrieval processes. AGVs are becoming more robust as technology advances, but older models have proven safer and more cost-effective than manual labor. Their functions include pallet, rack, and other container storage and controlling and automating the entire receiving process.
Platforms for Automated Inventory Control
Automated inventory control platforms, when combined with a few other technological cornerstones, such as asset and inventory tags, may eliminate labor, guesswork, and unnecessary time from traditional inventory control. In addition, there are several advantages to using these platforms, including their ability to automatically count inventories and synthesize data for real-time reporting that can be viewed remotely.
The Internet of Things (IoT) is used by some of the world's most efficient smart warehouses, such as Amazon, as an entire concept rather than a specific technology. All of your automated and manual operations may be optimized when IoT is used to control all of your moving parts, both automated and manual. This innovative technology helps optimize a warehouse's inventory control systems, workforce planning, and, of course, the overall customer experience.
While implementing technology improves the notion of a smart warehouse, it isn't always possible for every warehouse to do so instantly, especially since implementing technology takes significant financial and infrastructure changes. That's why warehouses are adopting the concept of collaborative robots (cobots). These are the autonomous elements that work with existing human workers. Cobots allow warehouses to preserve many of their existing procedures and infrastructure while gaining the benefits of fully autonomous elements.
Amazon's Smart Warehouses Integrates Humans and Robots
Amazon acquired Kiva Systems for $775 million in 2012, highlighting its interest in warehouse robotics. Kiva Systems was the sole known producer of warehouse robots, serving many different logistics organizations.
Amazon bought Kiva Systems' machines, constructed and used them all. Amazon Robotics is a new business unit that the company has developed.
Amazon recently established a semi-automated warehouse with human workers and robots. As a result, simple chores like moving parcels and scanning barcodes are automated. However, organizing goods and carrying complex objects (like bottles) is still part of human work.
Amazon's automated warehouse employs over 400 robots and hundreds of human employees.
Amazon's rise in two crucial areas – online shopping and logistics – has been accelerated by warehouse robots.
Modern warehousing is a new trend in the manufacturing industry that automates numerous procedures required for keeping manufacturing materials and products organized. Technology trends in warehousing are making manufacturers' jobs easier and promoting the future warehouse model in 2022. Implement the cutting-edge technology outlined above to stay current with warehousing trends and boost productivity, efficiency, accuracy, and flexibility for your personnel and their operations.
What are the key benefits of a smart warehouse?
A smart warehouse improves the warehouse's productivity, efficiency, and accuracy. It also allows personnel and procedures to be flexible.
What exactly is WMS?
A warehouse management system (WMS) is a software solution that handles the supply chain from the distribution center to the retail shelf.
What is COBOT?
Cobots are designed to work with people rather than replace them. Cobots are also known as people-focused robots. They can help humans simplify and improve their work.
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Article | May 25, 2021
Additive manufacturing offers the potential to accelerate the pace of electronics manufacturing by creating a number of unique opportunities, such as the ability to combine multiple materials in single print jobs. The technology is also much more accessible than it previously was. Plus, it enables faster prototyping, which could speed the time to market and prevent costly mishaps that disrupt the production process. Here’s a look at some of the many benefits additive manufacturing brings to the electronics sector.
One Giant Leap
Adoption rates for electronics made with additive manufacturing will continue to climb as people realize its versatility. Thanks to a new project associated with students at Embry-Riddle Aeronautical University, we could see materials made with additive manufacturing are as well-suited for use in space as on Earth.
Article | December 14, 2021
The manufacturing industry has evolved to new heights of innovation, productivity, and excellence with digital transformation. Manufacturing digitalization has made operational procedures more skilled, accurate, and time-savvy.
“Many companies simply are not willing to change or think they are done once they make a change. But the truth is technology; consumer demands, the way we work, human needs and much more are constantly changing.”
Michael Walton, Director, Industry Executive (Manufacturing) at Microsoft
With a CAGR of 19.48 percent between 2021 and 2026, the digital transformation in the manufacturing market is expected to reach USD 263.93 billion by 2026. Manufacturing plants adopt digital technology to improve, automate, and modernize processes as part of Industry 4.0.
So, what are the key benefits of digitalization for manufacturers? This article will elaborate on the top five benefits of digital manufacturing transformation.
How to Define Digital Manufacturing?
Manufacturing digital transformation involves integrating digital technologies into processes and products to improve manufacturing efficiency and quality. Manufacturing's digital transformation aims to increase operational efficiency and reduce expenses. The digital transformation techniques ensure product quality. It also makes work more efficient, safe, and stress-free.
What Is Included in Manufacturing Digitization (Industry 4.0)?
Industry 4.0 is the digitalization of manufacturing. Cyber-physical systems, IoT, and cloud computing are current trends in manufacturing automation and data exchange. Connected devices, cloud computing power, and the modern emphasis of lean, efficient operations enable Industry 4.0 to construct advanced and innovative smart factories.
Industry 4.0 includes design, sales, inventories, scheduling, quality, engineering, customer and field service.
Five Benefits of Digital Transformation in Manufacturing
Manufacturing organizations can benefit from digitalization in a variety of ways. It can help make the work more efficient, decentralized, and secure. It further creates new business opportunities and attracts new talent to the industry. Additionally, integrating products into a digital ecosystem increases their value and appeal. Let’s dig deeper into each of the five key benefits.
Technology is an invaluable companion in reducing the manufacturing company's expenses in the future. The incorporation of digital technology results in the transformation of procedures and the digitization of documents, resulting in overall process optimization. Therefore, a reduction in labor costs might be expected as a result of the elimination of unnecessary expenditures.
Additionally, digitization enables businesses to assess and estimate expenses considerably more precisely, ensuring that budgets stay on track. Additionally, it eliminates andsubstitutes inefficient jobs within processes, significantly increasing their efficiency. This efficiency is translated into time savings, which results in a substantially more cost-effective manufacturing process.
Manufacturing digital transformation allows organizations to supervise manufacturing remotely, allowing production to continue uninterrupted. In rare cases like Covid-19, digitalized businesses have not had to cease or even slow down production. These systems can work without interruptions for much longer than any worker.
Digitalization also boosts methodology flexibility and reactivity. For example, if a production plant has a problem, an automatic alert is generated, and the issue is resolved regardless of the day, time, or presence.
Improved Operational Efficiency
Smart product connectivity allows devices to connect and communicate with each other (M2M). This connectivity enables decentralized decision-making. Many duties no longer require an employee to be physically present. New manufacturing and production models minimize boring, risky activities while increasing accuracy, efficiency, and responsiveness.
Transforming businesses through digital means making better decisions based on real-time data. Training, changes, and repairs are no longer issues due to reduced frequency and automation.
New Business Opportunities
New digital technologies enable the manufacture of previously unviable products and services, generating new revenue streams. Also, new services (innovation or reorientation) are launched considerably faster. Companies may utilize big data and AI to experiment, anticipate trends, and predict about new advancements. These technologies can help organizations become more eco-friendly and create products that are less detrimental to our environment.
Attracts New Talent
Professionals with fundamental talents in this complicated and disruptive environment are drawn to digitalizedorganizations that are up-to-date with trends and processes. Also, if the change is managed well, it will lead to higher profitability, increasing employee satisfaction. Human motivation, along with excellent digital technologies, will reflect in the company's production and profitability.
Dusseldorf@Germany: The Deloitte Digital Factory
The digital factory in Dusseldorf provides a flexible setting for innovative workshops and training, bringing together the old and new worlds of supply chain and industrial operations to provide a seamless experience. Specific use case examples, as well as the digital solutions sector, will motivate and encourage businesses to get on their digital transformation journeys, making use of the most up-to-date technologies in the process.
Manufacturing digitalization has a lot to offer the industry, and many manufacturers are capitalizing on this new phase of the industrial revolution by incorporating cutting-edge technologies into manufacturing and business operations. As said previously, the benefits of digital transformation in the manufacturing business are increasing the importance of digitalization in the industry. Transform your traditional manufacturing operating processes with these new manufacturing trends and observe the results that other benefitting manufacturing businesses have achieved.
Why is digitalization vital in manufacturing?
Manufacturing process digitization improves overall business performance. But the results are seen across the factory. Digital transformation improves working conditions for employees and streamlines daily operations.
How are digitization and digitalization different?
Digitalization is a transformation of data and processes. Digitalization is the use of digital technologies to collect data, identify patterns, and make better business decisions.
How digital technologies are applied in manufacturing?
Digital manufacturing technologies enable the integration of systems and processes across all stages of production, from design to production and beyond.