Operational KPIs focus on cycle time, productivity, efficiency, quality, capacity, and safety to provide measurable insights into various production processes. They enable businesses to identify areas for improvement and achieve operational excellence.
Primary Implication
The role of operations is to convert sales into gross profit. Any breakdown in your operating cycle time will hurt profits. Waste, inefficiency, and errors create immediate profit losses. You protect yourself from this by controlling your operating processes and procedures through daily and weekly KPIs.
Recognizing operating areas costing you money is made easier when you know how the core areas of your operation should be performing. Operating KPIs give you a line of sight to what is and what should be happening. When the gap is great between the two, it’s time for management to intervene to resolve the performance issue.
Overview
A common approach to establishing the Do Work leading metrics for operations is to identify what problem you are trying to solve. Your KPIs for Operations will be found in the critical process steps performed. Below are some examples of a “problem-based” approach to setting weekly KPIs for operations:
Cycle Time—the measure of lead times
- On-Time Delivery Percent
- Critical Path Measures
Productivity—measure of output vs time
- Billable Hours Percentage
- Labor Capacity Utilization Percent
- Units per Labor Hour
Efficiency—the measure of process throughput
- Yield
- Inventory Turns
Quality
- Scrap
- Rework
Capacity
- Open Order Log
- Number of Active Jobs
- Back Order Rate
Utilization Percent
- Equipment Up-Time, Down-Time
Safety—to focus on safe work behaviors
- Days without Incidents
- Days without Violations
- Training Hours Percent
Once you have identified your operational KPIs, your next step is establishing a baseline to measure current performance against historical. Do this to measure your progress and gauge whether you are doing better or worse than when you started measuring operating activities.
Next is setting activity goals to push your sales function to improve. The gap between your goal and baseline is what you will be working close to realize your profit plan gross profit goals.
