Manufacturing leaders need to provide and deliver effective procedures and improvement programs that will allow workers to meet the demands of a global environment.

Becky Partida, APQC

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Widespread outsourcing of production activities has put tremendous pressure on manufacturing managers to produce quality products that are delivered on time, at a competitive price and with excellent customer service. To accomplish this, manufacturing leaders must establish production schedules, optimum workflows, effective maintenance procedures and continuous improvement programs that will keep the organization moving forward.

To determine which manufacturing areas need improvement, organizations can benchmark their performance against that of other organizations. APQC has used data from its Open Standards Benchmarking in Manufacturing to create APQC’s Manufacturing Tune-Up Diagnostic, a collection of key performance indicators for manufacturing. Table 1 presents the indicators and how the participating organizations perform on these measures. In Table 1, top performer is the performance level below which 75 percent of responses fall, median is the value above and below which an equal number of responses fall, and bottom performer is the level below which 25 percent of responses fall.

APQC also has identified practices that can improve manufacturing performance for each of the key measures. 

Total Cost to Manufacture

The amount spent by organizations to manufacture products varies widely. The $430 difference between top and bottom performers in manufacturing cost per $1,000 revenue represents a potential cost savings of $2.15 billion for an organization with $5 billion in annual revenue. A lower manufacturing cost is desirable for obvious reasons. However, using cost alone as the basis for decision-making can have unintended consequences on quality, cycle time and other strategic concerns. When evaluating lower‐cost options — including outsourcing — consider their effect on customer satisfaction and other key metrics. 

Value of Plant Shipments

To understand the efficiency of manufacturing processes, a helpful measure is the value of plant shipments per employee. Top performers ship more than $300,000 more product per employee than bottom performers do.

Manufacturing managers should look for new approaches to motivate employees and inspire them to contribute ideas and energy to make the factory more productive. Communicating customer expectations and market challenges to all employees prepares them for optimal performance. Simpler, more transparent systems that automatically collect and transmit transaction data can speed up the flow of information to internal and external stakeholders, enabling faster implementation of performance improvement techniques. 

Unplanned Machine Downtime

The gap between top and bottom performers for unplanned downtime is 4 percent of scheduled run time. That unexpected downtime can wreak serious havoc on an organization’s production schedule and, ultimately, its bottom line.

If an organization determines the frequency of downtime, it can begin tracing and addressing the source of the interruptions. Preventative maintenance programs protect investments in equipment, thereby reducing the cost of delays resulting from unscheduled downtime. 

Manufacturing Cycle Time

Manufacturing cycle times can vary dramatically. Among the participating organizations, bottom performers take 88 more hours to produce products than top performers take — a difference of 11 working days.

Thanks to lean manufacturing and other process improvement initiatives, many factories have undergone radical transformations that have reduced manufacturing cycle times. Long production lines and stacks of work‐in‐process inventory have been replaced by flexible work cells that pull materials from suppliers and customize products based on individual orders. Customizable processes can reduce customer order lead times and yield better returns on invested capital. 

Conclusion

Benchmarking is an important first step in evaluating your organization’s manufacturing performance. By looking at how other organizations perform on key manufacturing measures, your organization can focus improvement efforts where they are needed most. 

APQC is an afililliate partner with AME, a Plant Engineering Content Partner. To learn more about APQC’s Manufacturing Tune-Up Diagnostic and access an interactive version that quickly identifies areas for improvement, visit www.apqc.org/manufacturing-tune-up.