Insufficient quality control can create huge losses for manufacturers. The cost of poor quality is estimated to range between 5%-30% of gross sales for most facilities. Depending on the scale of your operations, this may amount to thousands or even millions of dollars in lost profits.
The good news is it is relatively easy to recover this money on future production rounds. The key to this lies in tracking the right information to achieve measurable improvements.
There are many different key performance metrics (KPIs) that a manufacturer can track to better understand where their operation stands in terms of quality.
With Matics Real-time Operational Intelligence (RtOI), manufacturers can take control of how they track, analyze, and use KPIs. Here are some of the most important KPIs that manufacturers should monitor to ensure that their quality stays on track.
5 Key Metrics That Drive Higher Manufacturing Quality
Yield is manufacturing’s most basic quality performance metric. It reveals how many quality products have been produced at a factory within a given time period.
To calculate the first-pass yield, divide the number of quality units produced without any re-running by the total number of units produced. Overall yield is calculated the same way but includes products that may have been re-run to correct quality issues found on the first pass.
Your overall yield should be higher than your first-pass yield, but ideally, the difference should be minimal. If there is a too-wide gap between these figures, it’s time to invest in better initial quality control procedures. Producing as many quality units as possible on the first try reduces the overall cost per unit at your facility and may increase your profit margin as a result.
2. Scrap Rate
The scrap rate refers to the percentage of materials that are allocated to production but are not used as part of any final products. This could be because the materials themselves are of poor quality, because the manufacturing processes used did not result in a quality product, or because there is waste occurring during the production process.
This is one manufacturing quality measurement no facility can afford to overlook. While it is unrealistic to expect to achieve a scrap rate of zero, your plant should have processes in place to ensure every product coming off the lines falls within acceptable quality standards and produces as little waste as possible. If the issue lies in poor-quality materials, it may be helpful to determine which supplier they are coming from using customer complaints and/or supplier chargebacks.
3. Customer Complaints
Consider tracking the number of customer complaints you’ve received over the course of the year, the number of complaints you resolved within that same timeframe and the amount of time it took to resolve each complaint. Your facility should be addressing each grievance in a timely fashion to promote a cycle of perpetual product refinement.
You may also benefit from tracking other customer satisfaction metrics, including your churn rate and the cost of customer acquisition. These measurements indirectly reflect product quality and play a significant part in inflating expenses within a manufacturing plant.
4. Supplier Defect Rate
Making quality products is impossible without quality materials to work with. This metric measures the percentage of materials received from suppliers that conform to established quality standards. Materials that don’t meet this benchmark cannot be used and represent wasted resources for manufacturers.
Since switching suppliers is a fundamental requirement of manufacturing planning for quality, it is helpful to reduce this metric into percentages for each supplier. When you identify which suppliers are performing poorly, you can either discuss this problem with them or replace them outright, generating significant savings. This is particularly important for manufacturers operating in multi-stage production industries such as electronics and aerospace. So many pre-manufactured parts are used that you may need to investigate further down the supply line to find the real problem.
5. Supplier Chargebacks
Chargebacks are a common way of dealing with poor quality shipments from suppliers. In some cases, a chargeback for defective materials will only include the cost of the materials themselves. In others, additional costs such as delivery surcharges and labor expenses may be included as well.
Tracking the amount of money that you recover this way can provide you with additional information regarding the cost of poor quality in your facility. This metric is distinct from the supplier defect rate; it provides a better estimate of the cost of poor quality inside your facility. The business implications of a defective fifty-cent standard-issue part are very different from a defective $100 custom part and should be recognized as such.
Taking a New Approach to KPI Management
Conventional manufacturing operations have long relied on KPIs as an important analytical tool. However, that tool has been used to review production across individual runs, shifts, days, or other periods of time. With modern solutions such as Matics RtOI, manufacturers can transition from reactive to proactive KPI management.
RtOI aggregates and analyzes production data in real time, making it possible to see the progression of KPIs as production is happening instead of after the fact. When quality issues start to develop, production teams can identify them right away and take action to correct the issue now instead of playing catch-up the next shift.
With RtOI, quality KPI thresholds and other trigger events can do more than just inform production teams. With integrated work management tools, manufacturers can establish automated workflows in response to triggers, rapidly putting steps to correct the issue into action. This leads to a faster resolution and, in turn, higher yields, less scrap, and reduced rework.
Manufacturers aren’t limited to conventional KPIs and metrics to monitor and analyze their operations. Matics RtOI allows for the creation of custom KPIs to gain the most valuable insight into your unique processes. With Matics RtOI, you can take an entirely new approach to KPI management.
Enjoy Total Visibility Using Quality Metrics in Manufacturing
The more you know about your facility’s quality control processes, the more you can work toward improving them. Matics delivers unparalleled insight into manufacturing production metrics, including key quality metrics in manufacturing.
Contact us today to learn more about our software solution, the information it provides, and how you can use it to further your plant’s production and revenue goals.