Key Performance Indicators

One of the most useful tools in any business is Key Performance Indicators (acronym KPI). To find the effectiveness of any process, some criteria needs to be identified to check how successful the process is. In this article we are going to have a brief look on what is key performance indicators, its benefits, how to setup and how to present it.

Key performance indicator is a business tool used to help businesses to understand to what extent their performance is acting out in reference to their strategic and financial objectives. In a widespread sense, KPI delivers the most central performance data to stakeholders to recognize if the business is on the right track or not. Furthermore, it assists to simplify the complex performance data of a business into a handy number of indicators that will help to make the right decision. The hint behind KPI is summarizing and presenting meaningful technical data using appropriate language that can be understood by ordinary stakeholders. Worthy key performance indicators are clear, obtainable, generate opportunities and initiate actions.

The importance of key performance indicators comes from the ability to show business leaders where are they compared to where they want to be. KPI can help to,

·         Assessment of the current position and how far it is from the desired one.

·         Cutting through existing oceans of data and providing simple and vital piece of information to support decision making.

·         Accurately measuring current performance and continuous learning from it to improve future results.

·         Ensuring compliance with internal and external regulations and requests.

Key performance indicators setup is a simple process, but we need to consider it first as a SMART indicator which means to be a specific, easy to be measured, easy to be achieved, real, and definite a time period. The smart KPI might be either an average of a quantitative data, i.e. average order value per month, and average production quantity per month, or a rate of qualitative data based on a selected criteria, i.e. rate of on-time deliveries, and rate of rejected purchase orders. The process itself starts with defining what is needed to be measured and find realistic, timely, and logical ways to measure it. They result needs to be compared to a preset standard which might be based on old performance or a near reality random value if KPI culture is adopted for the first time.

For more illustration, if we need to setup a KPI for measuring shipping capacity in a distribution center, the KPI used here for example is “number of trucks loaded per day”. This indicator is blind since there is several kinds of trucks which will have different time lapse to load. So we need to make sub KPIs related to the main one for every truck type to reflect the actual performance   

The presentation of the key performance indicators need to be easy to understand. The hint behind that is to choose the appropriate chart type to display, i.e. pie charts for percentages, bar charts for comparison, and line charts for trends. Also, it can just a number screen to display a single value which changes dynamically when new data is added.

Manufacturing Environments and Processes (2)

In our previous article, we have described different forms of manufacturing environment and listed its characteristics. In this article we will discuss the other part of this topic which is manufacturing processes. This will help us to have an extensive synopsis about how manufacturing firms are doing their business.

Recalling manufacturing process is the sequences of activities accomplished to transform the raw materials into final product. Every manufacturing environment has its matching manufacturing process type and layout that will help to achieve the business objective. There’s some factors that determine the manufacturing process type and layout which is linked with manufacturing environment such as customer lead time, frequency of the final product, and nature of tasks performed. 

We have 3 main manufacturing process types, i.e. project, intermittent, and flow; and each type has its corresponding process layout.

·         Project Process Type: this process type always suitable for Engineered-To-Order (ETO) manufacturing environment. Since the movement of a unique deliverable final product is too costly, all raw materials and services are moved into a fixed position layout while some other parts are assembled off site then moved back to the base production site. The project process type has a very long customer lead time and complex tasks to go through using project management techniques.

·         Intermittent process type: this process type is most suitable with Make-To-Order (MTO) and Assembled-To-Order (ATO) manufacturing environments where the final product is requiring different requirements and uneven workflow between work hubs. In this process type, general purpose resources, i.e. equipment and human, are required to be more flexible to execute different sized orders.  The intermittent process type has a medium to long customer lead time and specialized tasks to go through using functional layout,

o   Batch: a form of functional layout where there is a high production volume and all tasks need to be organized in a way that reduces motions with long production runs and less changeovers.

o   Work Center: a form of functional layout where similar tasks are grouped within production area such as cutting, sewing, knitting, and packing. This will help to have fast, flexible, and planned changeovers. 

·         Flow process type: this process type is common with Make-To-Stock (MTS) manufacturing environment where the standardized final product is requiring a specialized equipment, human, and direct and smooth flow between work cells forming a cellular layout using a repeated tasks. The flow process type has very low customer lead time because of large economies of scales and high level of inventory.

o   Line: a form of cellular layout where a discrete units of final product is produced through repetitive flow.

o   Continuous: a form of cellular layout where a specific type of final product, i.e. liquid, or solids, is produced.

Manufacturing Environments and processes (1)

Every manufacturing business has its own environment and processes that might be shared with other business and therefore classified together based on it. Manufacturing environments and processes are the core to understand how the business’s supply chain is working. In this article we are going to discuss what are the different types of manufacturing environments and processes and the various features for every type.

When planning new manufacturing business, we need to identify which manufacturing environment and process will be chosen. Every environment has its own process type and layout that fits its nature. The manufacturing environment can be defined as the outline in which different manufacturing strategies, i.e. corporate, business unit, functional, and product / process selection and design, are established and executed. The manufacturing process can be defined as the series of actions performed to transform the raw materials into final product. The manufacturing process type and layout is selected based on the selected environment, as well as use and location of inventories.

The most common manufacturing environments are,

·      Engineered-To-Order (ETO): using project manufacturing process which necessitates high customer direction over design, features, and specifications for a unique and exclusive final product. As the final product is big in size, all resources are moving to a fixed location to finalize it. This will require a very long lead time to deliver. Airbus and Boeing are known for such manufacturing environment.

·      Make-To-Order (MTO): waiting for customer’s order to start production a low to medium volume of either standard product or custom designed one using intermittent manufacturing processes, like work center and batch, which require functional layout. The lead time vary from long to medium which depends on the availability of the raw materials for the custom request. This environment can be found in various industries like fashion, food and beverages, and furniture.

·      Assemble-To-Order (ATO): keeping a stock of semi-finished products that are awaiting for simple processing through cellular process layout to reflect the customer’s needs. This will help to diminish the lead time to be medium to short. Common example for this environment is metal can processing, i.e. the manufacturer keeps high volume from the standard designed cans and after receiving the customer order, the cans is been transferred to the process line to make the final assembly which differs from customer to another.

·      Make-To-Stock (MTS): using a product based layout with continuous flow process toward nonstop availability of the final product. This will help to get the lead time to be very short as the manufacturer keeps high volume of stock in warehouses. This will lead to high inventory value on the company’s balance sheet. For example, manufacturing of juice concentrates and purees from fruits when production time is limited to fruit season.  

From the above points, we can note that manufacturing process types vary from project to continuous passing by intermittent and flow types. Every type has its own layout that can fit with. Knowing what the business is going to produce and determining the suitable manufacturing environment and processes, will help to determine possible hitches that might show up and how to deal with them. We will have manufacturing processes in more details in another article.