Manufacturing is a complex and dynamic process that involves many stakeholders, such as suppliers, manufacturers, customers, and regulators. To ensure the efficiency and quality of the production process, it is essential to monitor and measure the performance of each stakeholder using key performance indicators (KPIs).
KPIs are quantifiable metrics that reflect the goals and objectives of the organization. They help to track progress, identify problems, and improve decision-making. However, not all KPIs are created equal. Some KPIs are more relevant and valuable than others, depending on the context and purpose of the measurement.
In this blog post, we will discuss choosing the best manufacturing KPIs for supplier and manufacturer collaboration. We will also provide some examples of common and effective KPIs that can be used to evaluate and improve the relationship between suppliers and manufacturers.
Why are Manufacturing KPIs Important for Supplier and Manufacturer Collaboration?
Suppliers and manufacturers are interdependent partners in the manufacturing process. They need to work together to ensure the timely delivery of quality products that meet customer expectations and regulatory standards. However, there are many challenges and risks involved in this collaboration, such as:
– Supply chain disruptions due to external factors, such as natural disasters, pandemics, or geopolitical issues.
– Quality issues due to defective materials, faulty equipment, or human errors.
– Cost overruns due to inefficient processes, waste, or rework.
– Delivery delays due to poor planning, coordination, or communication.
Suppliers and manufacturers must establish clear and mutually agreed-upon expectations, goals, and standards to overcome these challenges and risks. They must also monitor and measure their performance against these criteria using manufacturing KPIs.
Manufacturing KPIs can help suppliers and manufacturers to:
– Align their objectives and strategies with the overall business goals.
– Communicate effectively and transparently about their expectations, requirements, and feedback.
– Identify and resolve issues quickly and proactively.
– Optimize their processes and resources to reduce costs and waste.
– Improve their quality and customer satisfaction levels.
– Strengthen their trust and loyalty.
How to Choose the Best Manufacturing KPIs for Supplier and Manufacturer Collaboration?
There is no one-size-fits-all approach to choosing the best manufacturing KPIs for supplier and manufacturer collaboration. Different organizations may have other priorities, preferences, and capabilities. However, some general guidelines can help to select the most relevant and valuable KPIs for this purpose:
– Align the KPIs with the strategic goals of the organization. The KPIs should reflect what matters most for the success of the business.
– Choose KPIs that are SMART: Specific, Measurable, Actionable, Realistic, and Time-bound. The KPIs should be clear, quantifiable, achievable, relevant, and timely.
– Choose KPIs that are balanced. The KPIs should cover different aspects of the collaboration, such as quality, cost, delivery, innovation, etc.
– Choose KPIs that are mutually beneficial. The KPIs should create value for both parties and foster a win-win relationship.
– Choose KPIs that are adaptable. The KPIs should be flexible enough to accommodate market conditions, customer demands, or technological advancements.
What are Some Examples of Manufacturing KPIs for Supplier and Manufacturer Collaboration?
There are many possible manufacturing KPIs that can be used to measure and improve the collaboration between suppliers and manufacturers. Here are some examples of common and effective KPIs that can be applied in different scenarios:
– Supplier On-Time-In-Full (OTIF): This KPI measures the percentage of orders the supplier delivers on time and in full¹. It indicates the reliability and responsiveness of the supplier.
– Supplier Quality Rating (SQR): This KPI measures the percentage of orders that meet or exceed the quality standards set by the manufacturer². It indicates the quality performance of the supplier.
– Supplier Cost Performance Index (CPI): This KPI measures how well the supplier manages its costs relative to its budget. It indicates the efficiency and profitability of the supplier.
– Manufacturer Schedule Attainment: This KPI measures how well the manufacturer meets its production schedule according to its plan⁴. It indicates the effectiveness and productivity of the manufacturer.
– Manufacturer Throughput: This KPI measures how much output the manufacturer produces per unit of time. It indicates the capacity utilization of the manufacturer.
– Manufacturer Rework: This KPI measures how much rework or correction is required due to quality issues. It indicates the waste reduction of the manufacturer.
Conclusion
Manufacturing KPIs are essential tools for supplier and manufacturer collaboration. They help monitor and measure each stakeholder’s performance, identify and resolve issues, and optimize production processes. However, choosing the best manufacturing KPIs for this purpose can be challenging. Therefore, it is essential to follow some guidelines and examples to select the most relevant and valuable KPIs for the specific context and goal of the collaboration.