In the second of our blogs on KPIs in specific industries we are going to looks at some that may be useful in a manufacturing company.
When we looked at KPIs that could be useful in a service industry we focussed on labour – because generally this will be the largest resource constraint. Manufacturing environments can be complex, and require a clear understanding of how efficiently the multiple resources available to the business are being used. Therefore it is likely that KPIs in a manufacturing company KPIs will need to focus on a wide range of resource requirements including labour, production capacity, assets (including finance) and storage space/cost. However it is still important to select and measure a manageable number of KPIs. We would suggest between 5 and 10. Therefore it is more important to be selective.
Examples of useful KPIs could be:
Throughput – provides a measure of the manufacturing capability of a machine/production line over a chosen time period.
Manufacturing cost per unit – indicates the cost of producing each unit over a chosen period of time, and allows you to monitor costs and set appropriate selling prices.
Capacity utilisation – measures the amount of capacity being used as a proportion of the total capacity available.
Storage or working capital usage
Stock turnover – shows how many times a certain level of stock is sold over a period of time. Holding too much stock can be inefficient, whereas not holding enough could be costing the business revenue.
Work in progress – is the value of partially completed goods, and provides an indication of how much working capital is tied up in incomplete products at any given point in time
Employee turnover rate – provides a measure of how stable your workforce is. Some employee turnover is unavoidable, and can be beneficial in managing efficiency. However too much turnover can be a hidden cost in the business.
Return on assets – helps to evaluate how well your business is making use of its assets.
What it means for the business
Running a business can be a very rewarding and fulfilling experience. However it can also sometimes feel like you need a helping hand. Well designed KPIs can summarise complex activities into one meaningful figure. They can focus the valuable time and effort of employees onto what is important, and they can provide a guide against which performance can be assessed. This will help your business to focus on what really matters.
If you think that it could be time for your business to take the next step and develop an easily understandable dashboard to monitor performance Artemis Clarke can help.
Employing the appropriate senior finance resource, either on a full time or part time basis, can help identify what really matters to your business, and ensure that this is appropriately measured and monitored.
Artemis Clarke helps rapidly expanding businesses find finance professionals that have the experience to support them. Not just to help them survive, but to help them thrive – and reach the potential they’re aiming for.
Speak to us about how the right financial help could make a difference to your business. Call 0117 244 1891 today.