14 Quality Metrics and KPIs Every Exec Should Monitor & How to Calculate Them

As the saying goes, what gets measured gets managed. Though sometimes it’s hard to know which metrics are the most important when focused on quality.

This post gives a high-level overview of 14 quality metrics examples every top executive should consider monitoring, depending on your specific goals and improvement needs.

Read the latest quality trends in manufacturing.

1. Cost of Quality

The Cost of Quality stands out as a crucial metric that warrants close monitoring, despite frequently being neglected. It encompasses both the expenses incurred due to poor quality and the investments made to ensure high quality.

The following formula for Cost of Quality was developed by ASQ, also known as the American Society of Quality:

COPQ includes internal and external failures, such as:

• Internal COPQ such as scrap, rework and re-inspection
• External COPQ when defects reach the customer, including adverse event reporting, warranty, corrections and removals, product liability and loss of brand reputation

COGQ is comprised of what you spend to create conforming products, including:

• Appraisal costs such as inspection and testing, quality audits and calibration
• Prevention costs such as statistical process control (SPC), quality planning and training

Read how to reduce manufacturing costs.

2. Defects

Calculating defect rate

There are a couple of ways to look at defects that tend to confuse people:

• Defective parts per million (DPPM): Interchangeably called parts per million (PPM) or defects per million (DPM), you can calculate DPPM with the following formula:

• Defects per million opportunities (DPMO): This metric proves particularly valuable in examining defects within subassemblies, where there could be numerous chances for failure. Calculate DPMO with the following formula:

3. Customer Complaints and Returns

Ensuring customer satisfaction

Closely monitoring customer issues is the only way to systematically prevent them. Figures to help you track customer-related issues include:

• Complaints, rejects or returns over a specific period
• Number resolved during a specific period
• Average taken to resolve customer complaints
• Warranty costs

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4. Scrap

Scrap rate is the percentage of materials sent to production that never become part of finished products. In addition, you’ll want to keep a close eye on total scrap costs.

Scrap to include in your calculations would be: vendor scrap, internal scrap, and internal setup scrap. Manufacturers usually have their own internal ways of calculating scrap, for example, some companies would not include setup scrap, so it’s important to check with your company on what to include.

An easy way to calculate scrap is:

5. Yield

Yield is a classic measure of process or plant effectiveness. Beyond total yield, consider monitoring first-pass yield (FPY), the percentage of products manufactured correctly the first time through without rework.

For example:

• 200 units enter A and 150 leave. The FPY for process A is 150/200 = .75
• 150 units go into B and 145 units leave. The FPY for process B is 145/150 = .97
• 145 units go into C and 130 leave. The FPY for C is 130/145 = .89
• 130 units got into D and 129 leave. The FPY for D is 129/130 = .99

6. Overall Equipment Effectiveness (OEE)

Overall Equipment Effectiveness (OEE) is an important measure of productivity and efficiency, calculated in simple terms as availability multiplied by performance and quality. Here’s a more detailed look at each of those component metrics:

Read how to streamline manufacturing processes.

7. Throughput

Throughput is the quantity of goods produced over a given period. You can measure throughput:

• Per machine
• Per product line
• For the entire plant

8. Supplier Quality Metrics

Suppliers have a huge impact on quality costs. Metrics to track here include:

• Supplier defect rate: Percentage of materials from suppliers not meeting quality specifications
• Supplier chargebacks: Total charged to suppliers for cost of non-conforming materials (possibly including late delivery and payroll costs)
• Incoming supplier quality: Percentage of materials received meeting quality requirements

Learn More About The Cost of Quality

9. Delivery Metrics

There are two crucial metrics you should be measuring with regards to delivery from a customer satisfaction and efficiency perspective:

• On-time delivery (OTD) is calculated as the percentage of units delivered within the OTD window.
• Perfect order metric (POM) or fill rate is the percentage of orders that arrive complete, on time, damage-free and with a correct invoice.

It’s harder to achieve a good POM considering that each component of this metric gets multiplied together:

10. Internal Timing Efficiency Metrics

A number of metrics provide insight into how efficiently your facility runs in terms of timing. A few basics include:

• Manufacturing Cycle Time: How much time it takes from order to production to finished goods
  Throughput time = Process time + Inspection time + move time + Queue time
• Changeover Time: How much time it takes to switch a line to another product, which can last anywhere from a few minutes to several weeks
• Change order cycle time: Average time to execute change orders from documentation through production
• New product introduction (NPI) rate: Average time to introduce a new product to market

11. Capacity Utilization Rate

Capacity utilization is the percentage of total output capacity used at any given point. This KPI can help with strategic planning and is also an indicator of market demand.

12. Schedule Realization

This metric tells you how often your plant reaches production targets over a given period of time. A simple calculation is orders completed by the scheduled date divided by a total number of orders.

13. Audit Metrics

Audit metrics are another leading indicator to monitor, especially if you’re using high-frequency layered process audits to reduce defects.

 

Which audit metrics should executives track? On a high level, you’ll want to look at:

• On-time audit completion rate
• Number of non-compliances per area
• Percentage of non-compliances receiving follow-up via mitigation or corrective action

14. Maintenance Metrics

Maintenance metrics serve as vital leading indicators for quality, offering an early alert system for potential quality concerns. Key leading metrics to track in this regard include:

• On-time completion of scheduled maintenance
• Ratio of planned maintenance activities completed to unplanned emergency maintenance
• Downtime as a percentage of total operating time

It’s essential to monitor a mix of leading and lagging indicators. While lagging indicators tell you the results you’re achieving, leading indicators let you step in early to make adjustments before things go off the rails.

And really, that’s what monitoring KPIs is all about—and what your customers expect to see you doing. Learn more about key manufacturing quality metrics.