Your Guide to Software Selection

12 Manufacturing KPIs Your ERP Software Should Track

Process manufacturers use key performance indicators (KPIs) to measure and evaluate success according to critical business objectives. These are important to your operation. Equally important is making sound business decisions based upon relevant, real-time data.

The right Enterprise Resource Planning (ERP) software can help your company track its KPIs through sophisticated analysis and reporting functionalities that employ business intelligence (BI)––charts, dashboards, displays, graphs, and reports.

An ERP software system designed for process manufacturers will help address product quality issues––from recipe revision controls to traceability in case of a contamination/recall event to customer relationships––as well as inventory status, from the raw materials/ingredients on hand to finished pieces in production on the line, or stored in the warehouse, awaiting distribution.

Integration – Critical data is always ready for your query because it is constantly being gathered and stored within the central database of your ERP solution. There are no information silos to anticipate or work around. Plus, this up-to-the-minute information is consequently the most reliable.

Cycle time – You may want to monitor the cycle time of your production, from the beginning to end of product creation and from finished production to the actual shipment. The ERP can track this information for you, helping you find ways to improve timing, perhaps by moving raw ingredients more efficiently, replacing a vendor, or addressing setup times, for example.

Inventory turns – Would it be important for you to know how often your company completely sells and replaces its entire inventory over a certain amount of time? Definitely, since many companies often have a significant amount of money tied up in its inventory. Having slow-moving items in inventory uses up valuable space and makes the warehouse less efficient. Accountants and management can easily prepare these inventory performance ratios using their ERP data.

Inventory deviation – It may be beneficial for your company to track the actual number of pieces in inventory versus what you believe to be in inventory, based upon your manual processes. The use of ERP helps to lower this deviation rate since all inventory transactions are performed in the software in real-time, using a warehouse management system, thus increasing your bottom line.

Costs – What constitutes the true cost of a finished product? Your ERP solution can capture the cost of labor, equipment, raw materials/ingredients, handling, landed costs, distribution, etc. and factor them into a figure you may want to reduce or account for by raising the price of your item.

Downtime – If production is at a standstill, the cause needs to be known to be properly tracked. Reasons for downtime can be entered into the ERP software, tracked, and later evaluated as to equipment failure, operator error, batch contamination, etc.

Reject ratio – Reducing scrap left over from the production process helps your company meet its profitability goals. Is your scrap ratio within tolerable limits? Keep track of a product’s scrap factor and yield percentages in the bill of materials (BOM) and calculate the differences between projected scrap and realized scrap through your ERP system.

Financials – Reports for accounts payable and receivable, monthly-quarterly-year-end, cash flow, income statement, balance sheet, etc. can be generated from your ERP solution to give you a true picture of the company’s financial health.

Sales – Lead response time and the rate of contact and follow-up may be important to your sales team. A CRM with ERP integration can quickly analyze, manage, and synchronize sales and provide you the tools you need to see if you’re meeting the company’s sales initiatives.

Quality control (QC) and quality assurance (QA) – It is important for you to know the condition of the raw materials/ingredients provided by your vendor, and to be reassured that your products are safe and up to the expectations of your customers. ERP software can help you perform QC and QA testing, and issue reports to the FDA and other regulatory entities in minutes instead of hours.

Order Management – The number of sales order returns your company experiences due to improper shipments, mistakes, and defects can damage your brand reputation and lead to unhappy customers. With a powerful ERP solution in place, you’ll be able to provide more insight into what is causing these types of issues and rectify the situations.

Trends – Your ERP software can assist you with assessing consumer trends and predicting future behavior patterns. Or, it might be important to know how calendar dates, weather conditions, growth in e-commerce, or the price of oil may affect your operation. The information lies in your historical and real-time data, and even by interfacing with external data resources. With the power of a business intelligence suite within your ERP, you can easily manipulate dashboards and share critical trend data across your organization.

KPIs are important for assessing accountability and measuring the success of your process manufacturing operation. With the assistance of an ERP system, you can access real-time relevant data and functionalities that will allow you take the pulse of your company’s performance through your important KPIs––measuring, evaluating, comparing, and making critical decisions to affect the company’s efficiency, productivity, product quality, profitability, and future trajectory.

Kate M. Orbeck12 Manufacturing KPIs Your ERP Software Should Track

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