Keeping an eye on your manufacturing KPIs is the backbone of success in the manufacturing world. You have to balance a huge – and growing! – number of inputs and interrelationships that all come together to drive your success forward.
It’s not surprising that, up until very recently, most people thought of the productive side of manufacturing as completely separate from their business metrics in marketing and sales. Now, however, silos are collapsing and successful leaders take a holistic view.
Cross-functional relationships are truly becoming clearer than ever.
After all, your marketing metrics – particularly the reach and effectiveness of your web presence – have a huge impact on the requirements, scope, and constraints of your manufacturing organization. As the sector moves away from a fixed calendar of annual events and toward a higher number of customer touch-points, the importance of marketing continues to grow.
With all these different metrics and different types of metrics, how do you stay focused?
Let’s look at some of the most important manufacturing KPIs around: In the sphere of pure productivity, health and safety, and marketing.
1. On-Time Delivery
On-time delivery is one of the most important customer-facing manufacturing KPIs. It measures how often the enterprise is able to deliver the completed product to the customer according to the agreed-upon schedule. High OTD generally leads to greater customer satisfaction. Low OTD can be tough to diagnose and resolve, since the issue can come from any link in the supply chain.
2. Manufacturing Cycle Time
Cycle time is the total time it takes to produce a product from the time the order is received to the completion. Although many factors can play into low OTD, manufacturing cycle time should be the first suspect. Streamlining manufacturing processes and making capital investments in higher levels of automation can reduce manufacturing cycle time and make brands more nimble.
When it comes to manufacturing KPIs, yield is probably the most basic and essential. Yield is the percentage of products manufactured correctly and to specifications the first time: When you lower your defect rate, you increase your yield. High yield is associated with greater efficiency in both materials and personnel time, as only products with zero scrap and rework should count.
4. Customer Rejects and Returns
Customer rejects and returns derive from the customers’ discovery of products that are defective or outside of specifications. A high customer reject rate can be indicative of a finicky customer or one who isn’t dealing fairly with you. Be sure to compare reject and return rates over time and across different customers to determine which step in a manufacturing process may be faulty.
Throughput is a measurement of the efficiency and effectiveness of a machine, line, unit, or plant – based on how much yield is produced within a given timeframe. Looking at throughput in the most granular way possible helps you determine which part of your enterprise might not be performing to your standards. Then, you can target that element for process improvements.
1. Website Traffic
We’ll admit it – a few months after your site goes live, website traffic becomes one of the least important metrics to worry about. As long as you are getting a healthy amount of baseline traffic, and it is increasing rather than decreasing, you don’t have much to worry about here. There’s no particular benchmark to aim for as long as your trends are moving in the right direction.
2. Conversion Rate
Conversion rate, on the other hand, is a window into the actual bottom line value each prospect offers your business. The conversion rate is gained by taking the total number of people who performed a desired action – typically, making a purchase – and dividing it by the total of your web traffic for a particular period. The higher your conversion rate, the healthier your business.
3. Cost Per Acquisition
Cost per acquisition is the total amount you pay, on average, to acquire a lead. In general, you should aim to reduce CPA using long-term strategies like organic SEO. Paid traffic usually has the highest cost per acquisition, with retargeting sitting somewhere in the middle. Paid traffic CPA can rise suddenly due to changes in competition, so be sure to watch it closely.
4. Average Profit Per Sale
Profit per sale comes from pitting your revenue per sale against your various costs, including cost per acquisition. Most manufacturers have a relatively low sales volume with a higher profit per sale. Certainly, your marketing can influence the perceived value of your product and thus, your profit – but leveraging efficiencies and reducing materials costs can help, too.
5. Lifetime Value
Lifetime (customer) value is a reflection of average profit per sale along with the volume of repeat business a customer tends to offer you over the span of years. Marketing can enhance LTV by supporting a rigorous follow-up process through CRM, automate emails, and more. That said, LTV can be difficult to measure accurately for large, ongoing concerns.
1. Reportable Health and Safety Incidents
Both actual safety events and serious “near misses” are recorded under reportable health and safety incidents – the lower, the better. Reducing reportable incidents is a long-term goal that often requires a complete change in workplace culture. The more incentive people feel to watch out for one another, the easier it will be to spot issues that one pair of eyes could overlook!
2. Reportable Environmental Incidents
Environmental incidents generally arise from unintentional release of hazardous substances. It’s important to note these incidents even if they do not result in any external pollution. Personnel who handle hazardous materials should receive periodic retraining to ensure compliance. Using an external auditor can motivate better day-to-day adherence, although it may be stressful for the team.
3. Number of Noncompliance Events Per Year
Like healthcare and finance, manufacturing is a compliance-driven industry. The consequences of noncompliance can include millions in fees and fines, so it’s important to document and act on noncompliance events. As plants and enterprises seek higher levels of regulatory certification, noncompliance events per year should decline steadily – usually a multi-year process.
If You Care About Manufacturing KPIs, You Should Be Excited About Inbound Marketing
Manufacturing organizations succeed or fail based on their ability to measure KPIs and take the actions that improve them. Compared to some other industries, they have tremendous advantages for pursuing continuous improvement. After all: What you can’t measure, you can’t manage.
This makes manufacturers ideal candidates for the inbound marketing mindset.
While many people think of marketing as “more art than science,” inbound takes the opposite approach. It’s crucial to not only increase the range and frequency of marketing activities, but to identify the ones that are driving true ROI for your business.
Using website analytics and an open partnership with the sales team, it becomes possible to bring the continuous improvement ethos of manufacturing to your marketing: Delivering more compelling and effective marketing campaigns based on real-time insights about your customers.
These data-driven campaigns, in turn, power your business growth and raise sentiment about your brand.
That’s how modern marketing plugs in today’s most effective manufacturing enterprises.