The Essential Guide to Manufacturing KPIs: Unlocking Operational Success

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During a recent Elevated Signals webinar, Michael Lattimer, an experienced manufacturing consultant with a background at Pure Sunfarms, AB InBev, and Labatt Breweries—joined Hardeep Shoker, COO and co-founder of Elevated Signals, to explore the power of Key Performance Indicators (KPIs) in transforming manufacturing operations. They shared actionable strategies to help Directors of Operations and Operations Managers optimize workflows, boost efficiency, and foster team alignment around shared objectives.

This blog captures the key insights and practical tips from their conversation, serving as your guide to leveraging KPIs to unlock growth in your manufacturing business.

Watch the Webinar

For more in-depth insights from Michael Lattimer and Hardeep Shoker, watch the full webinar here. 👇

What Are KPIs, and Why Do They Matter?

KPIs are measurable values that reflect your organization’s performance against critical objectives. In manufacturing, they answer the question: Are we winning?

From tracking production efficiency to ensuring on-time delivery, KPIs turn abstract goals into concrete targets. More importantly, they provide a common language across departments, aligning everyone around shared priorities.

Building the Right KPIs for Manufacturing Success

Selecting KPIs isn’t about choosing the most popular metrics; it’s about identifying what drives your unique strategy. Here’s how:

1. Start with Your Strategy

Michael highlighted the importance of starting with your company’s roadmap. Whether your goal is reducing costs or improving delivery times, every KPI should be tied to a strategic objective.

2. Focus on Simplicity

“Don’t overwhelm your team with data,” Michael advised. Start with 3-5 core KPIs that directly reflect your priorities. In a fast-paced manufacturing environment, focusing on a handful of metrics ensures clarity and action.

3. Make Metrics Actionable

“KPIs should drive behaviour, not just measure it,” said Hardeep. For example, tracking production attainment (% of scheduled production completed) encourages adherence to schedules and better resource allocation.

Must-Have KPIs for Manufacturing

Here are five KPIs discussed during the webinar that every manufacturing leader should consider:

  1. Delivery in Full, On Time (DIFOT):
    Michael explained that DIFOT measures your ability to meet customer deadlines while fulfilling complete orders. This KPI is critical for customer satisfaction and trust.
    • Goal: 95%+
  1. Production Efficiency: Measures the ratio of actual output to standard output, ensuring optimal resource utilization.
    • Formula: (Actual Output / Standard Output) x 100
  1. First Pass Yield (FPY):
    Tracks the percentage of products made correctly the first time, minimizing rework and waste.
    • Formula: (Good Units Produced / Total Units Produced) x 100
    • Goal: >90%
  1. Days Inventory Outstanding (DIO): Hardeep stressed the importance of managing inventory levels to avoid tying up capital unnecessarily.
    • Goal: Keep DIO low without disrupting operations.
  1. Schedule Attainment: Michael cited this KPI as a simple but powerful measure of how well your team adheres to the production schedule.
    • Goal: 90%+

Embedding KPIs into Your Culture

As Michael and Hardeep both noted, KPIs are only as effective as the team using them. Embedding them into your organization’s culture is essential.

1. Communicate the Big Picture

Help your team understand how their KPIs ladder up to company goals. When employees see their contribution to the bigger picture, they’re more likely to engage.

2. Incentivize Success

Consider short-term rewards, such as gift cards or extra time off, for teams that consistently hit targets. Tie long-term incentives to KPIs that drive strategic outcomes.

3. Leverage Technology Thoughtfully

While discussing tools, Hardeep noted that many startups start with Excel or paper-based tracking before scaling up to systems like Manufacturing Execution Systems (MES). He stressed the importance of choosing tools that align with your stage of growth and objectives.

Real-World Example: A KPI Success Story

“I worked with a client who initially thought they were performing at 98% for on-time delivery,” Michael explained during the webinar. “But after aligning their KPIs with customer expectations, we discovered their actual performance was only 82%. By recalibrating their metrics and embedding them into daily operations, the company improved to 95% in just two months. This not only rebuilt customer trust but also significantly boosted their profitability.”

Common KPI Mistakes and How to Avoid Them

Even with the best intentions, KPI initiatives can falter. Watch out for these common mistakes:

  • Tracking Too Many Metrics: Overloading teams dilutes focus.
  • Disconnected KPIs: Metrics must align with both strategy and customer expectations.
  • Neglecting Culture: Without team buy-in, even the best KPIs fall flat.

Conclusion

This blog, inspired by the insightful webinar discussion, reinforces the power of KPIs to drive operational excellence. By choosing metrics aligned with strategy, simplifying your approach, and embedding KPIs into your culture, you can transform your manufacturing facility into a high-performing operation.