manufacturing best practices

Manufacturing Best Practices

Are you following manufacturing best practices? Are you striving to stay competitive in your market? As a leader in the manufacturing industry, it’s important for you to constantly seek improvements if you want your business to thrive (or survive). Over the years, we’ve partnered with many manufacturers to improve business results. Through these relationships, we’ve found that manufacturing best practices have a direct correlation with how you manage quotations, production, and profits.

You Can’t Manage What You Don’t Measure

We believe manufacturing best practices are equal to an improved management in those categories. But you can’t manage what you don’t measure. So our first word of advice is to start measuring your quotations, production, and profits. In this article we will explain in detail the importance of measuring these categories and what it could look like for your manufacturing operations.

1. Measure Quotations

Manufacturers need to spend a significant amount of time quoting jobs. To follow manufacturing best practices, you need to make sure this time is used as effectively as possible. While you can’t convert every quotation into an order, there are some things you can do to increase your conversion rate. For example, you shouldn’t spend time to produce a quote for a “tire kicker” who is just shopping around. Instead, you can reserve that time to discuss blanket order cost benefits with returning customers. Again, don’t expect to convert every customer quote. If your quotation conversion rate is abnormally high, it might indicate that your customers are undesirable by everyone else, or that your prices are too low. A good quote-to-close ratio by which to measure your quoting results is 70%.

2. Measure Production

Measuring production plays a large role in manufacturing best practices. Production data (e.g., customer fill rate, on-time delivery, perfect order percentage) reveals the way you manage orders. Your productivity defines the wellness of your customer relationships. Calculating production information into a percentage allows you to see data on orders that are shipped in full and on time as compared to all your orders. The percentage indicates how effectively you’re servicing your customers. It also tells you how efficient your production line is at moving product out the door, and if you are successfully maintaining production schedules. When you achieve a high fill rate percentage, you gain more credibility and trust among customers. This trust is valuable to win your fair share of customers, who would otherwise buy from your competitors. Always aim for a fill rate of 100%.

3. Measure Profits

Another best practice is to measure your profits, or your “EBITDA.” This stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” The calculation of EBITDA refers to your earning BEFORE any interest payments, tax, depreciation, or amortization is taken away during the final accounting of expenses and income. It’s usually seen as the primary measurement of the current operational profitability of a company. Monitoring this can give you insight as to whether or not you need to adjust your business expenses or product pricing.

Ready to Follow Manufacturing Best Practices?

If you’re ready to start following manufacturing best practices, you need to improve the way you manage your quotations, production, and profits. As mentioned in this article, we’ve found the best way for manufacturers to manage them is to start with data. As a result, we’ve created a free download that details exactly what manufacturers like you are tracking to win their fair share of the market. Click here to discover the 9 manufacturing key performance indicators you should be tracking.

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