Industry 4.0 • April 16, 2020

KPI Metrics Are Changing (Once Again) – Can Your Systems Keep Up?

iBase-t Experts

radical change

I just read about new research findings on how the KPI metrics used in the aerospace and defense (A&D) industry vary significantly in some respects with those tracked in all other industries. While traditional metrics such as net profit margin, workplace safety, and current capacity utilization are consistently seen as critical across all industrial markets, the A&D industry places much greater attention on manufacturing cycle time, on-time delivery, and the speed of new product introduction (NPI). 

This makes sense. In complex discrete manufacturing, a low volume production environment, the impact on cycle time and on-time delivery is acutely felt if targets are not met – especially when operating with a high backlog. These KPIs will have a big impact on NPI, so they should be managed with a similar focus. They are well aligned to make sure every product is always delivered with the right specifications, to each respective client, every time.

Then along came the coronavirus. I suspect production lines across the world are now focused on a different set of metrics, such as what percentage of my staff are healthy and able to show up for work today? More specifically, how is this pandemic impacting my suppliers, their staffing, and what parts or product components are now at risk? 

This scenario planning got me thinking. Those with a flexible approach to KPI tracking and the systems that can support an agile strategy will likely perform far better than the rest. With such a rapid change of operating environments, how well are your data gathering and metrics reporting capabilities keeping up?

The Dynamic Nature of What to Measure

As we try to make sense of the world we now live in, it has become painfully clear that a lot of things are changing quickly. Now is the time to adapt. Thoughts on optimizing a profit margin have shifted to how to keep businesses running and not run out of cash. 

It is in times of change where it can be helpful to take a step back and re-think how you define success. What is it that your company or business unit is trying to accomplish? How can this goal now be achieved, given the recent changes? What is your critical path to success, and what are the metrics you need to track to achieve that goal? 

These are great questions to ask now. I suspect they are being considered across the world. Those in the manufacturing industry must find a way to continue with production. How can you enforce the necessary safety and compliance standards while now working with fewer staff yet maintain the same level of product quality? What can be operated remotely? If customers can’t take delivery now, what sort of delays can be put in place to better align your cost of carry? What should be done today to best position for a ramp up when we are in a post-virus lockdown condition when production lines need to run at near capacity?  

The Emergence of New Metrics

Not only have our business conditions changed, but so too have expectations on what can be measured. This shift has been led by an explosion in the availability of highly granular data. 

We live in an “Industrial Internet of Things” world. Everything is now “smarter,” from the cars we drive to the systems we run to the factories we manage. Therefore, the choice and methodology of tracking KPIs must change also. This includes placing much greater of a focus on not only what has happened, but what will happen in the future based on data insights collected every day. 

The days of a decade passing between the conception of a new product and its delivery are long gone. So too have the days of setting up metrics at the start of running a business, and then assuming they don’t need to change. 

Innovation is being driven by advances in augmented reality, predictive analytics, and artificial intelligence, which has forever altered the mindset of A&D executives. Each of these new technologies unlocks new business opportunities – and new KPIs to be measured as part of achieving that vision.

KPI Systems Must Catch Up

As is the case during times of dynamic change – we know what we want, but sometimes the existing infrastructure can’t keep up with expectations. To an extent, this is happening with all the Industrial Transformation initiatives now in deployment. It is also the case with what KPIs are being measured and how that measurement is being achieved.

Read more about what is Industrial Transformation (IX)?

In order to move forward, manufacturers must consider that a whole new series of innovative KPIs are now needed to best manage our business. Only then can we achieve the full vision of smart manufacturing and Industry 4.0. 

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