Robotics and Computer Integrated Manufacturing 18 (2002) 171176

Establishing and improving manufacturing performance measures

M. Munir Ahmada,*, Nasreddin Dhafrb
a
Process Manufacturing and Design, School of Science and Technology, University of Teesside, Middlesbrough TS1 3BA, UK
b
Operation and Production, Jowfe Oil Technology, Libya

Abstract

This paper sets out the basis to establish key performance indicators (KPIs) in manufacturing companies. Their signicance and
how they can be used to make improvements. KPIs has been chosen in order to deal with the possibility of improving the utilization
of a process manufacturing plant. The objective is to present a new methodology for KPIs. Also methodologies on manufacturing
performance measures taken from the literature are used for the solution of improving the utilization. They are discussed on the
basis of a manufacturing experience. In this paper, a presentation of these methodologies, a critical evaluation and short examples of
applying them are included. The main conclusion of this paper is that the KPIs can be used quantitatively in assessing the
manufacturing performance of a company. r 2002 Published by Elsevier Science Ltd.

Keywords: Performance measurement; Manufacturing improvement; Key performance indicators

1. Introduction detriment of others. The mix chosen will in almost every

Key performance indicator (KPI), is a number or
value which can be compared against an internal target,
or an external target benchmarking to give an
indication of performance. That value can relate to
data collected or calculated from any process or activity.
The selection of a range of performance measures
which are appropriate to a particular company ought to
be made in the light of the companys strategic
intentions which will have been formed to suit the
competitive environment in which it operates and the
nature of business. For example, if technical leadership
and product innovation are to be the key source of a
manufacturing companys competitive advantage, then
it should be measuring its performance in this area
relative to its competitors. But if a service company
decides to differentiate itself in the marketplace on the
basis of quality of service, then, amongst other things, it
should be monitoring and controlling the desired level of
quality.
Whether the company is in the manufacturing or the
service sector, in choosing an appropriate range of
performance measures it will be necessary however to
balance them, to make sure that one dimension or set
of dimensions of performance is not stressed to the
*Corresponding author. Tel.: +44-1642-218-121; fax: +44-1642-
342-067.
instance be different. While most companies will tend to
organise their accounting systems using common
accounting principles, they will differ widely in the
choice, or potential choice, of performance indicators.
There are short-term measures which have to be
continually calculated and reviewed. These measures
can represent [1]
* a nancial performance indicator (business perfor-
mance);
* a technical performance indicator (productivity
measurement);
* an efciency indicator (human contribution measure-
ment).
It is very clear that by focusing only on results,
more harm than good can be achieved. Metrics
are absolutes and do not explain why things are so
good or bad and the decisions made based on
absolute numbers/ratios/percentages, could be very
detrimental to the businesses concerned in the long
term [1].
Also when taking the manufacturing productivity as
an example of an internal KPI that measures the
operational efciency of a manufacturing organization.
Many organizations use efciency metrics that only
measure a portion of the true productivity. Incomplete
metrics may lead to inappropriate action.

0736-5845/02/$ - see front matter r 2002 Published by Elsevier Science Ltd.

PII: S 0 7 3 6 - 5 8 4 5 ( 0 2 ) 0 0 0 0 7 - 8
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Performance areas must be operationalised, that is, 3. Measurement methodology

made measurable, in the form of performance indicators
in order for the company to be able to monitor
performance and goal realisation. The rst international
manufacturing strategy survey (IMSS), carried out in 20
countries around the globe, found that companies use a
variety of indicators to measure their company and
market performance [2].
2. KPIs for manufacturing performance
It was considered that the KPIs within the manufac-
turing strategy are cost, quality, exibility and delivery,
as well as inventory [3]. A part of a project survey was
carried out to identify which performance indicators
companies use and which ones they characterise as
important. The top ve were: protability, conformance
to specications, customer satisfaction, return on
investment and materials/overhead cost. When looking
at the performance areas to which the specic indicators
are related and considering their relative importance it
was also possible to rank the importance of performance
areas (from top to bottom): efciency, quality, compe-
tence (technical), exibility, innovativeness, speed and
capacity [2].
An improved methodology should be used to measure
all aspects of manufacturing productivity. This enables
the organisation to view productivity from the stand-
point of the entire system. A suitable measurement
methodology enables senior management to focus scarce
resources on elements that have the greatest impact on
productivity. Companies, who have this, have been able
to achieve additional production capacity, often without
large capital expenditures for additional machinery or
new technology.
Some manufacturing assessment methodologies were
available to us and were compared; a methodology was
introduced in [4], an example of this methodology is
shown in Fig. 1. In this methodology, we are unable to
draw a quantitative performance measure, as the
majority of the assessing elements on it are qualitative.
The methodology introduced in [5], which is shown in
Fig. 2 has been adopted from EFQM, which is also
based on qualitative assessment. Another methodology
was introduced in [6], an example of it is shown in
Fig. 3. In this methodology, we can assess the perfor-
mance in a quantitative way, and there are a supporting
formulas which can help when generating data from the
practice and assessing an accurate performance.

A6. Please tick the statement which best describes your customers perception of your products:
Your customer expectations are exceeded
Your customers are very satisfied
Your customers are satisfied
Your customers are sometimes satisfied
Your customers are indifferent
Our customers are sometimes dissatisfied
Your customers are dissatisfied
Your customers are very dissatisfied
Your customers are extremely dissatisfied

Fig. 1. An example of a questionnaire used to assess manufacturing [4].

PROCESS RESULTS
Score 1 2 3 4 5 6 7 8 9 10

Few procedures exist Procedures have been Critical processes are Meeting customer The system ensures
apart from financial written and imposed. owned and there is needs is clearly seen that all stakeholder
controls. Everyone A bureaucratic system support to monitor and byall as the purpose of needs are met by
does their best and exists with little improve them. all activities. existing and new
firefighting is the chance for Ownership is assigned Procedures and services. Customers
norm. changes are improvement. to management who operating standards are find iteasy to do
made to fix problems Mistakes are seen as review corrective owned by the business with the
as and when bad but are rarely action etc. operators, managers organisation. Feedback
appropriate. used to make and suppliers. leads to improvement
improvements. and innovation.

Fig. 2. An example of self-assessment matrix [5].

 M.M. Ahmad, N. Dhafr / Robotics and Computer Integrated Manufacturing 18 (2002) 171176 173

1. Do you routinely measure the % of On-Time-In-Full delivery (OTIF) delivery performance?

Yes No This year measure ............ Previous year measure .........
2. Do you routinely measure the customer complaints - % of orders delivered?
Yes No This year measure ............ Previous year measure .........
3. Do you routinely measure the % Product Rate?
Yes No This year measure ............ Previous year measure .........
4. Do you routinely measure the Overall Equipment Effectiveness OEE?
Yes No This year measure ............ Previous year measure .........

Fig. 3. An example from the KPI assessment [6].

The assessment and analysis of manufacturing per-
formance introduced in [6], was covering the areas of
quality, delivery reliability, cost (price minus prot
margin) and delivery lead time. These performance
indicators were selected because they indicate important
aspects of manufacturing performance areas and
are usually fairly easy to measure or estimate. The
companys relative performance in each area for a plant
or specic product (line) can be assessed through
comparison of relevant performance indicators with
internal goals/standards, competitors and customer
demand as shown in Table 1. After comparisons are
made for all performance areas, an overview of
performance gaps can be made. Since the importance
of each gap depends on the organisations environment,
specic company policy and market situation, it requires
the company to set priorities.
The measured KPIs are normally split into 6 sections:
(1) Safety & Environment (2) Flexibility (3) Innova-
tion (4) Performance (5) Quality (6) Dependability.
Our focus in this paper will be on the KPI of the
dependability.
(2) on-time-in-full delivery to customers (OTIFc),
(3) on-time-in-full delivery from suppliers (OTIFs),
(4) overall equipment effectiveness (OEE).
4.1. Customer complaints
Measurement that identies operational problems
that might be avoided in future. It will be determined
by the number and nature of customers complaints in
order to identify operational improvement projects.
Written, verbal and anecdotal information will be
recorded. This data will be shared to avoid repeat
problems at other sites. The quality assurance depart-
ment will be responsible to provide the information
required on a normal basis.
The goal will be to achieve o1% complaints on
dispatches. KPIs measured are normally the number of
customer complaint received which are normally ex-
pressed as an absolute number or as a percentage of
dispatches made. These complaints are not only related
to dispatches but could arise from any business area.

4.2. On-time-in-full delivery to customers (OTIFc)

4. Dependability
The purpose of this KPI is to measure the delivery
This KPI consist of:
of the product on time and in full with no defects in
(1) customer complaints, the product, packaging, transport arrangement or

Table 1
A selected results from year 2000 compared to the world-class performances and the process

No. Activity The manufacturing plant World class (benchmarking) Process

1 Output 4500 N/A 30,000

2 Uptime 200 days N/A 300
3 Product delivery performance (OTIF) 91% >99.9% 100
4 Adherence to production plan 80% >99% 100
5 Customer complaints 1% o0.01% 0
6 Product rate 49% >95% 100
7 Quality rate 94% >95% 100
8 Availability 83% >95% 100
9 OEE 38% >85% 100
10 Absenteeism 6% 1.8% 0
11 Average training days/employee 8 13 N/A
174 M.M. Ahmad, N. Dhafr / Robotics and Computer Integrated Manufacturing 18 (2002) 171176
supporting documentation. It will measure the ability
to adhere to the rst agreed demand date for each
order, and whether there were any problems with
the materials shipped. Supporting such a measure
needs a rigorous recording system either by the plant
itself, or by the distribution company if this aspect
is out-sourced [6]. The goal in this KPI will be to achieve
a value >99%.
4.3. On-time-in-full delivery from suppliers (OTIFs)
This KPI will measure the receipt of raw materials
and other supplies on time and in full with no defects in
the product, packaging, transport arrangement or
supporting documentation. Suppliers can dramatically
affect our dependability. It will measure the ability of
the suppliers to adhere to the rst agreed demand date
for each order, and whether there were any problems
with the materials received.
The goal in this KPI will be to achieve a value >99%.
4.4. Overall equipment effectiveness (OEE)
This measure is designed to determine just how
reliable our assets are and their capability to deliver
the outstanding performance expected from a world
class operation.
OEE Product rate  Quality rate  Availability:
OEE works on the principle that the best manufacturing
performance is when a site operates to full capacity
always produces perfect product and never breaks
down. capacity usage, quality performance and break-
down data will therefore be combined to determine the
OEE. The manufacturing manager at the site will be
responsible to provide the information required on a
timely basis.
It was suggested [6] that an overall equipment
effectiveness of 85% for a batch type plant and 95%
for a continuous plant. Since the benchmarking against
best practices and established KPI is the basics for
continuous improvement of an enterprise [7]. For batch
plant this can be achieved by
Quality RateX95%; Product RateX95%
AvailabilityX95%
and for continuous plant
Quality Rate > 99%; Product RateX95%
AvailabilityX99%:
Also it is not uncommon for an existing process plant to
be operating with an OEE of o50%. The question is
how much higher OEE could be achieved, how could the
process technology inuence that value and what will be
the long-term target?
It is suggested that an OEE of 99% on the critical
equipment will be the future target. This can be achieved
by
Quality Rate > 99:9%; Product Rate > 99:5%;
Reliability > 99:5%:
To achieve these the following practices should be
implemented.
Six sigma performances, fully automatic start-up,
shutdown and fail-safe, intelligent measurement, total
accurate dynamic models, multivariate statistical
process control, design for success not failure, and
predictive maintenance.
4.5. Quality rate
This is the amount of product that is right rst time
with out adjustment, recycles and so on. To achieve the
six-sigma performance described previously, it is neces-
sary to achieve a very high right-rst-time rate.
Good production
Quality rate :
Good production Failed QC
4.6. Product rate
The product rate is dened as the average rate that the
plant operates divided by the best that has ever been
achieved.
For losses measured in time
8760  time lost due to s=d  MPR  tonnage lost due to being below MPR
:
8760  time lost due to s=d  MPR
For losses measured in tonnes
8760  MPR  P lost due to s=d  P lost due to being below MPR
8760  MPR  P lost due to s=d
:
And in some cases, the actual losses due to being below
the MPR are not accurately recorded. In this case, the
calculation of product rate is
Good production potential make in periods of no demand QC
:
8760  MPR  P lost to s=d
4.7. Availability
The availability is dened as the number of hours the
plant operates divided by the number of hours in a year.
8760  number of hours of total shutdown
:
8760
5. Examining the methodology against a manufacturing
case
The chosen methodology was applied to a speciality
chemicals plant. Results were compared to the world
 M.M. Ahmad, N. Dhafr / Robotics and Computer Integrated Manufacturing 18 (2002) 171176 175

class performances and the designed process output as Table 3

shown in tables. Another results for year 2001 are shown
in Table 2. No. KPI Gaps

2000 2001
5.1. Data analysis
1 Product delivery performance 10% 50%
Adherence to production plan, 20% 14%
We can see from Table 1 that there are gaps between Customer complaints 5% 3%
the manufacturing plant measures and the world class Product rate 46% 40%
measures. These gaps have been identied as areas for Availability 19% 4%
Quality rate 1% 5%
improvement. Table 3 highlights these gaps.
OEE 46% 40%
The main factors which contribute to low manufac- Absenteeism 4.2% 3.2%
turing performance measures are shown in Figs. 4 and 5. Average training days 5 days 6 days
they show that only 60% of time was spent on actual
production, hence low OEE of 38% and 45%. The
future work will cover different production periods,
products and plants (Figs. 6 and 7).

6. An improved measurement methodology

The assessment and analysis of manufacturing per-

formance introduced in this paper is covering the areas
of quality, delivery reliability, cost (price minus prot
margin) and delivery lead time. These performance
indicators were selected because they indicate important
aspects of manufacturing performance areas and are Fig. 4. Production period from 1/1/200031/12/2000.
usually fairly easy to measure or estimate. In our case
(the selected plant), measuring the performance of the
whole plant as one production line will not provide a
real results, that is because of production aspect found
in this kind of plants, that is the company pursues the
strategy of make-to-order and the plant contains ve
separate production vessels, normally these vessels not
on operation all of them at the same time because of the
market demand, in sometimes only one or two or three
vessels are in operation while the others staying idle
waiting for a production program. When there is a
production, the only part of the plant runs all the time is
the utility which is shared between the production Fig. 5. Production period from 1/1/200131/12/2001. ( ) Actual
vessels. As a result, applying the selected measurement production; ( ) High stock; ( ) Maintenance; ( ) Other reasons.

Table 2
A selected results from year 2001 compared to the world-class performances and the process

No. Activity The manufacturing plant World class (benchmarking) Process

1 Output 6947 N/A 30,000

2 Uptime 224 days N/A 300
3 Product delivery performance (OTIF) 69% >999% 100
4 Adherence to production plan 85% >99% 100
5 Customer complaints 3% o0.01% 0
6 Product rate 55% >95% 100
7 Quality rate 90% >95% 100
8 Availability 91% >95% 100
9 OEE 45% >85% 100
10 Absenteeism 4% 1.8% 0
11 Average training days/employee 7 13 N/A
176 M.M. Ahmad, N. Dhafr / Robotics and Computer Integrated Manufacturing 18 (2002) 171176

Table 4
Comparison of the results of ve production vessels

Annual output, tonnes (plant capacity) (drums) 30,000

Vessel V1 V2 V3 V4 V5

Planned throughput (forecast) 931 940 1304 1951 1747

Actual throughput 933 944 1326 1986 1758
Sales value 138,206 #### 299,192 478,124 361,931
Number of deliveries 17 14 18 12 12
Number of OTIF deliveries 12 11 14 7 7
% OTIF 70 78.57 77 58.33 58.33
% Customer complaints 1.9 5.26 2.2 3.85 3.41
Availability 0.95 0.9 0.93 0.9 0.89
Product rate 0.77 0.6 0.63 0.55 0.52
Quality rate 0.88 0.92 0.92 0.91 0.86
OEE 0.64 0.49 0.53 0.45 0.39

1 After comparisons are made for all performance

0.9
areas, an overview of performance gaps can be made.
0.8
Since the importance of each gap depends on the
Availability organisations environment, specic company policy
0.7 Product rate
Quality rate
and market situation, it requires the company to set
0.6
priorities.
0.5 An example of the suggested measurement procedure
0.4 is shown in Table 4.
V1 V2 V3 V4 V5

Fig. 6. The three components of OEE for the ve production vessels.

7. Conclusions
OEE
0.7
There are many ways to raise the OEE. Some of the
0.6
actions could be the training of operators, reviewing the
0.5
bottleneck machines involving technical improvements,
0.4
OEE ne tuning of production schedules, redesigning of
0.3
products and improving the operating instructions.
0.2
Some of these improvements may require substantial
0.1
investments. With good OEE measurement it is possible
0
V1 V2 V3 V4 V5
to pick up the project with quickest returns. Accurate
OEE measurement makes it possible to follow up the
Fig. 7. The overall equipment effectiveness for the ve production outcomes of the development and investments.
vessels.

methodology to measure the performance of this plant

will not give right results about the real situation in the
plant, since the results will be based on the running
vessels as this methodology will take into account that
the plant is running regardless of the idle vessels, high
results on some performance indicators may be scored
with the fact that more than half of the plant is idle, or
low results may score because of the low output of the
plant. As a result of this aspect, it was decided to
measure the performance for each vessel individually,
and this gave to us many advantages since it is easiest to
nd the places need improvements, as it gave us the
ability to monitor the strengths and the weaknesses of
the production of each individual vessel and the related
performance.
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