Productivity Measures for the Manufacturing Industry


Productivity in the manufacturing industry can be analyzed in different ways. Such measures tell a company how well it is performing internally as well as in relation to similar businesses in the industry. Here we look at three of the ways companies assess their performance nowadays.

The Gold Standard for Productivity in Manufacturing

Overall Equipment Effectiveness (OEE) is the number one method to determine how well your business is performing in terms of productivity. This metric has three components: quality, performance, and availability.

While a score of 100% on each of the three key measures may seem impossible to achieve, this assessment will tell you where to focus your improvement efforts. If your company has a score of 85%, this is seen as world-class. New manufacturing companies tend to hover around 40%, while a score of 60% still shows room for improvement.

A full score on quality implies that every product produced passes inspection. Performance relates to producing items as quickly as possible and accounts for Small Stops and Slow Cycles. Availability of 100% means no downtime during planned production time.

OEE Overall Equipment Effectiveness is regarded as the best tool for identifying and reducing waste, redundancy, and losses in the production cycle, leading to actions to address shortfalls. It is also a benchmark for companies within the manufacturing industry. OEE is important because an improvement of 1% in a process’s time can save a company thousands.

Key Performance Indicators (KPIs)

The need for efficiency in manufacturing speaks to the bottom line and, in companies that are not machine-intensive, this means measuring and driving metrics around labor and raw materials. When production managers have been given a few leading indicator KPIs, this tends to push output more than the use of results (or lagging) KPIs. An example of a leading indicator KPI is the percentage of the team available. This cannot be known beforehand and means that aspects such as staff morale and dealing with absenteeism are important. Result indicator KPIs sum up what happens at the end of the manufacturing process and are based on existing trends. An example is profitability. Here are some of the most critical manufacturing KPIs.

The Three M’s

The three M’s in manufacturing are machinery, manpower, and materials. Two of these equate to the labor and raw materials already mentioned. Individual Resource Productivity (IRP) determines the output of each resource. This is calculated for every machine, worker, and material used and takes the form of a ratio. These are the input factors that give rise to the subsequent output. One common way to measure the inputs of machinery and manpower is in hours. Materials, on the other hand, are noted by volume or weight.

An example using the three M’s method is that if a machine works for five hours and produces an output of 90,000 units, then the productivity of that machine is 18,000 units per hour. Likewise, if an employee works for seven hours and produces the same 90,000 units, then that person’s productivity is 12,857 units per hour. In this way, it is possible to set standards for what is expected from each input to the manufacturing process.

It then becomes possible to measure performance and reward employees who work productively and determine which employees are not working to the required standard. In the same way, if a machine was meeting norms but started to drop, it may indicate that it needs maintenance or replacement. The benefits of one type of machinery over another can also be compared. In the above example, we may question why a particular machine was not working for a full seven hours. 

Improvements in processes and outcomes start with where companies place their focus in terms of what they measure.