Quality control in manufacturing means your customers get what they’ve paid for. A happy customer leads to brand loyalty which creates long-term profits for your company. Let’s learn what quality control is, some of the methods to employ it and the roles of your team to ensure quality control in manufacturing is delivered.

What Is Quality Control (QC)?

Quality control isn’t limited to manufacturing, of course. Quality control is a process that helps deliver products as planned or helps ensure project deliverables meet stakeholder requirements. It requires that the company support an environment where everyone, from management to employees, is executing their jobs as perfectly as possible.

The first thing that must be established is a benchmark or baseline from which to measure the product to make sure that it’s delivered to the project’s quality expectations. Products must also be tested throughout the production process to make sure the production line is operating normally, identify causes of defective products and solve any issues.

Another measure to prevent error is having a system to monitor your production process in real time. ProjectManager is online project management software that delivers real-time data to help you catch problems quickly and resolve them. Use our live kanban board to get a high-level view of your product. Use it to centralize processes, tag team members and ensure quality at every phase. Get started with ProjectManager today for free.

To make sure that products are manufactured to the quality standards set by an organization, a quality control management process must be established.

What Is Quality Control Management?

Quality control management refers to the process of establishing the framework that allows an organization to set quality standards, track the performance of their production floor and inspect the quality of their products.

This is done to standardize the manufacturing process and better ensure that each product from the assembly line is consistent and correctly made. Further, specifying which production activities are completed by which employee and capital assets such as equipment or machinery limits errors and helps organizations better understand the causes of manufacturing quality issues.

Quality Control Process

Each organization can establish its quality control process, which means there’s no standard approach. However, here are some basic steps that can help you build your own quality control management process.

• Define quality control standards and manufacturing key performance indicators (KPIs)
• Determine what quality control tools will be used to measure your quality control KPIs
• Define the steps of your quality control inspection process
• Identify who will be responsible for checking the quality of your processes and deliverables
• Make a quality control checklist to standardize the inspection process
• Write a quality control plan that covers the most important aspects of your quality control management guidelines

We’ll learn more about each of the elements of quality control mentioned in these steps in the sections below.

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Quality Control Template

Use this free Quality Control Template for Excel to manage your projects better.

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Quality Control Plan

A quality control plan is a document that describes the procedures, tools, documentation and metrics that will be used to implement the quality control process of an organization. Quality control plans are used in manufacturing, construction project management, software development and many other industries.

Quality Control Tools Examples

Many tools can be used to help you manage the quality of your products. Here are three examples of the most common quality control tools.

Quality Control Chart

A quality control chart is a graph that helps manufacturers gauge how consistent their production quality is by representing the number of defective products over time to identify patterns that can indicate whether the quantity of defects is constant, or if they fluctuate significantly, which can reveal issues in the production line. This allows organizations to fix those quality issues, be more productive and reduce their cost of quality.

Pareto Chart

A Pareto chart is a bar graph used to represent various causes of production quality issues, in which bar sizes show the total number of defective products and are arranged from longest to shortest from left to right. This helps manufacturers determine the major causes of quality control issues and resolve them.

Check Sheet

In manufacturing quality control, a check sheet is a table that allows you to track problems such as defective products and their causes over time. For example, you can create a check sheet to track how many defective products are manufactured daily, weekly, monthly or even quarterly.

Quality Control Template

This quality control template allows you to log any quality issues found as you test the quality of your products, which makes it an ideal tool for manufacturers. Track important details such as who will be responsible for fixing the product quality issue, the date when it was found, its status and the expected date when it will be resolved.

Quality Control vs. Quality Assurance

You’ll hear quality control and quality assurance interchanged, but these are two different things. Quality control is part of the larger quality management process, which focuses on meeting quality requirements.

Quality assurance is also part of the quality management plan and revolves around the activities within that plan that ensure that your product goes through production. It means that you’ve verified that the quality requirements that have been planned will be fulfilled in production.

Quality control takes place during the inspection. As noted, it’s a series of test procedures that make sure the product is safe and effective. Therefore, quality control and quality assurance are different in working together to ensure the quality of the product you’re manufacturing.

There are differences between the two. One, quality assurance is proactive, while quality control is reactive. That’s due to the nature of what they do and when they do it. Quality assurance is process-oriented and preventative while quality control focuses on the product itself and looks for any issues with its quality that will impact the customer.

Types of Quality Control Methods

There are methods of quality control that employ strategic procedures to ensure that the proper maintenance and quality testing in production is taking place. There are several types that we’ll discuss, but all involve training employees, creating standards for the output quality that can be measured to ensure they’re working and periodically testing these quality control methods to make sure there aren’t any inconsistencies.

100% Inspection Method

As the name implies, this method is a thorough assessment of all project items. By quality controlling every aspect of the production, you’re more likely to have better accuracy and remove most imperfections that might mistakenly be passed on to the customer. This method is best suited for those projects where even a slight flaw in the product can cause a recall, such as when processing meat. It is, as expected, a costly measure that doesn’t apply to every product.

Related: 14 Free Manufacturing Templates for Excel

Six Sigma

This quality control method works at improving current processes, products or services by discovering and eliminating defects in order to streamline manufacturing. The aim is that the manufacturing process will have little to no variance. Six Sigma works by defining the problem, measuring the current process and analyzing the root cause of variations and defects to identify the issues. It improves processes by eliminating the root cause of these defects and controlling the process to stay on track.

X-Bar Chart

An X-bar chart is used in quality control to monitor the mean of successive samples of a constant size. The Y-axis tracks the degree to which the deviation of the tested attribute is acceptable. This control chart is used for characteristics that can be measured on a continuous scale. That includes such things as weight, temperature, thickness and so forth. It is, however, rarely used alone and is often coupled with an R-chart, which is used to determine the stability and predictability of a process.

Total Quality Management (TQM)

Total quality management is an approach to quality control that aims for long-term success by providing customers with satisfaction. The customer comes first and employees must own quality control for their part in the production. This is fostered through the creation and implementation of processes that find successful products and then repeat them. It also looks at system integration to streamline processes. It’s data-driven and is constantly seeking ways to improve.

Statistical Quality Control (SQC)

This method uses statistical data, such as sampling and probability, for quality control. First, a unit of the final product is sampled and tested to determine if the standards for quality have been met. The sample size can be increased to represent more products. Process sampling is also employed with a control chart to map the changes in manufacturing. This identifies tolerable limits in product variations and leads to discovering problems that will be addressed through corrective measures.

Taguchi Method

This quality control method is based on research and development, product designs and reducing defects and failures in the manufacturing process. Developed by the Japanese engineer and statistician Genichi Taguchi, this method focuses more on design than the manufacturing process when dealing with quality control. It aims to remove variances in production before they happen.

Quality Control Roles

While everyone is often employed to maintain the quality of their piece of the larger manufacturing production, specific roles are dedicated to quality control. Let’s look at three of the pivotal roles of quality control.

Quality Manager

This is a supervisory role, one that oversees the product development processes to make sure they’re meeting the quality and efficiency standards that have been set by the company and any regulatory groups. The quality manager works with clients to ensure the final product meets their needs and requirements.

Quality Inspector

Under the quality manager will be a quality inspector who is responsible for making sure the manufactured products meet requirements from the company, regulators, customers, etc. They do this by testing products with tools and making sure the final product follows the guidelines that were developed by the company to ensure the product is safe and meets the needs of the customer without flaws.

Quality Engineer

Sometimes referred to as a QA engineer, QC engineer or senior quality specialist, a quality engineer works to ensure the overall quality of the manufactured product. They’ll test processes, monitor quality standards, create documentation, devise quality tests and define criteria that those tests should meet. They’re also responsible for fixing any problems they might find. They work with design teams, suppliers, manufacturing teams and customers to make sure the products produced are safe, reliable and meet customer expectations.

ProjectManager Helps With Quality Management

All of these quality control roles closely monitor the production processes and work to streamline them for greater efficiency while meeting quality standards. ProjectManager is online project management software that can do this in real time so you can respond to defects faster and resolve them quickly.

Automate Workflow to Streamline Production

Keeping teams focused on the important work ensures greater quality. Our workflow automation allows you to make a trigger that sets an action such as changing the tag, assignee and more instantly. To ensure that quality moves forward in the production line, set task approvals. Now before a status changes, the work is sent to a person with authority to approve it, ensuring quality control.

Manage Risk and Track Issues

Knowing what might go wrong and having a plan to identify and resolve those issues is the basis of risk management. Our risk management feature allows you to track all risks in one place, assess their impact and likelihood, assign an owner and much more. This allows you to manage risks to your production and avoid unexpected impacts on your scope, cost and delivery. Display risk cards showing priority, assignee, and response and add attachments and comments in real time.

Quality control managers can access customizable reports to get details on production and share updates with stakeholders. Our collaborative platform connects everyone across departments to foster better communication, which helps identify and resolve quality issues better. Our tool helps you plan your manufacturing, manage your resources and maintain the quality your customers want.

Related Content

• Project Quality Management: A Quick Guide
• What Is Quality Planning & Why Is It Important?
• How to Handle Time, Cost & Quality in Project Management
• Meeting Quality Targets on Projects
• Production Planning in Manufacturing: Best Practices for Production Plans

ProjectManager is award-winning software that helps you plan, manage and track quality control. Use multiple project views to allow everyone to work on the tools they want while sharing real-time data for better collaboration and decision-making. Get started with ProjectManager today for free.

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We’ll define project variance below as well as what a budget variance analysis is. There’s a section explaining the importance of tracking budget variance in project management and different project aspects to consider when tracking budget variance.

What Is Budget Variance?

Before defining budget variance, let’s look at the meaning of variance. Variance is a measure of how data points differ from the mean. The definition comes from probability theory and statistics. In project management, budget variance quantifies the difference between the budget and the actual cost of executing the project.

Budget variance is one of the tracking tools project managers use to ensure that the project isn’t costing too much. Projects that go over budget have to request further funding, which isn’t always available, or, in the case of a construction project, when costs outrun the budget, it eats into the general contractor’s profit margin. Neither is preferable to keeping to or staying under the project budget.

There are two ways to express budget variance:

• Positive Budget Variance: When the actual cost of the project is lower than the budgeted amount, which is a positive sign of financial performance.
• Negative Budget Variance: When the actual costs are higher than the budgeted amount, which means the project finances are underperforming and require further investigation to learn why.

Using project management software can track budget variance. ProjectManager is award-winning project and portfolio management software with robust Gantt charts that can set a baseline to track budget variance in real time. Once a budget has been set for the project and human and nonhuman resource costs are defined for the tasks, just set a baseline to capture that budget and track planned costs against actual costs in real time. Get started with ProjectManager today for free.

What Is Budget Variance Analysis?

Project managers use budget variance analysis when managing projects. It’s a key technique that helps monitor and control project costs.

Budget variance analysis simply compares the actual costs of a project against what the project has been budgeted for. Using a budget variance analysis can help determine if the project is meeting its budget goals.

This helps make more informed decisions about further costs in the project. It also helps identify when the project costs are going over budget, which allows project managers to respond quickly by reallocating resources to get back on track.

Why Is It Important to Track Budget Variance in Project Management?

Project budgets aren’t arbitrary. They are what has been agreed upon as funding to deliver the product or service. First, the budget should have been accurately forecasted, which can be done with historical data, seeking experienced advice and more. Once that budget is finalized, the project costs must be monitored as it moves into the execution phase to ensure the project doesn’t go over budget.

Tracking budget variance not only helps project managers by letting them know if the project costs align with its budget but also allows them to see if there are any deviations. But by catching these areas of the project where actual costs are exceeding the budget, project managers can focus on them, uncover why costs are spiking and, when they do, work towards getting the project back on track.

There are other reasons for tracking budget variance; budget forecasts can change. Tracking budget variance can help identify those changes, whether they’re team-based assumptions on things that weren’t true, their estimates were poor, more work was added to or removed from the project, resources changed, etc.

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What Should Be Considered When Measuring Budget Variance?

There are many things to consider when measuring budget variance in a project. Anything that will cost the project or influence those costs will be under the purview of measuring project variance. Here are a few of those variables.

• Project Tasks: Activities that make up the project and produce the final deliverable, used when determining budget variance
• Resources: People, raw materials, equipment, etc., needed to execute project tasks
• Budgeted Costs: The estimated cost for delivering the project
• Actual Costs: The amount of money paid to deliver the project
• Cost Variance: The difference between expected and actual cost for the project
• Project Timeline and Task Due Dates: The schedule for the project is plotted on a timeline with deadlines for each task, which is used in calculating the budget variance

Budget Variance Formula

Now that we understand the various things to consider when measuring budget variance, let’s look at how budget variance is calculated. Simply take the project cost, or its budget, and subtract from it the actual cost of executing the project. The answer to that equation is the budget variance. Therefore, the budget variance formula is:

Project cost – actual cost = budget variance

Project Budget Variance Example

We’ve explored budget variance in the abstract. It’s time to look at the concept as it plays out in a project by illustrating tracking budget variance with an example. Let’s say Acme Construction has won a bid to build a garage with a budget of $250,000. Halfway through the project, they noticed by tracking the planned budget against the actual costs at that point that they have spent $150,000.

The general contractor sees that at that rate the project will go over budget, which means that the contractor will lose the profit margin or have to solicit more funds from the property owner. To remedy this situation, the contractor reallocates resources to have his crew and the subcontractors working on the job do their tasks more efficiently.

Tracking project budget variance again, the costs are now more aligned with the budget. By continuing to track the budget variance, the general contractor can keep the project on budget and, in so doing, maintain the profit that is built into that budget.

Project Budget Template

To see what that project budget variance example looks like on a real budget, download this free project budget template for Excel. It can be used to accurately estimate the project budget or play around with it and see how to track budget variance.

The free project budget template lists tasks and their associated labor, materials and miscellaneous costs. But there’s also a way to track project variance with a column for the budgeted, actual and balance, which shows if the project is in the red or not.

Common Causes of Budget Variance

There are generally four things to look out for when managing a project and trying to avoid the actual cost of executing it be more than the budgeted cost. Let’s look at some of the issues that project managers need to keep an eye out for.

Inaccurate Cost Estimation

Budgets are estimates. It forecasts the cost of the project as accurately as possible using a variety of techniques and the experience of those involved. However, it’s not an exact science. If the estimate wasn’t thorough enough or the calculation was poorly done, then the result is an imbalance in budget variance.

Changing Supply Prices

While project managers want to tie down suppliers and vendors with contracts that lock in the price they pay, there are often market powers beyond control that will impact these costs. If a certain raw material is contracted for, but there’s a supply chain shortage with no adequate substitute, then prices will change and impact the budget variance.

Low Performing Teams

Of course, budget forecasts could be spot on and supply chain issues nonexistent and still the actual cost of the project dwarfs the budget. That could be low-performing teams. If the wrong team is in place or even if the right one has been assembled, but they’re poorly managed or have low morale, it will negatively impact the project plan and its budget.

Scope Creep

Scope creep is when the project’s scope expands beyond what was originally planned without there being appropriate adjustments to the budget, schedule or resources. This will likely create delays, cost overruns and other issues that result in actual costs going over what had been budgeted for the project.

How ProjectManager Helps Track Project Variance

Use the project budget template to see how tracking budget variance works. However, templates are not great for managing budgets. They’re static documents that require someone to input data, which is labor-intensive and prone to human error. Project management software is a better tool. ProjectManager is award-winning project and portfolio management software that has robust Gantt charts that capture human and nonhuman resource costs, can set a baseline and track planned against actual costs in real time.

Track Costs at the Task Level With Multiple Project Views

The Gantt chart is a great planning and scheduling tool, but it’s only one of multiple project views available to manage projects. There are kanban boards that visualize workflow, task lists to focus on work and the sheet view, which is a spreadsheet. All of those views allow users to track budget variance at the task level. Hourly costs can be tracked on tasks. By cost tracking data, such as labor, materials, etc., helps to keep projects from going over budget.

Monitor Project Budgets With Real-Time Dashboards

Once a baseline has been set on the Gantt chart, budget variance can be tracked throughout the software. The real-time dashboards or portfolio dashboard that can track budget variance in projects and portfolios. Get a high-level view of key performance indicators (KPIs), including actual, planned and budgeted costs in an easy-to-read, colorful bar chart. Unlike lightweight alternative tools, there’s no time-consuming and complicated setup required. Jut toggle over to the dashboard whenever you need to check on costs.

For a more detailed look at progress and performance, use the customizable reporting tools. Reports on variance, among others, can be generated with a keystroke. There are also status, portfolio, timesheet (to track labor costs), workload and more reports. All can be filtered to show only the data you want to see and then shared across several formats with stakeholders to keep them informed.

ProjectManager is online project and portfolio management software that connects teams whether they’re in the office or out in the field. They can share files, comment at the task level, track budget variance and more on any device, including the mobile app. Plus, email and in-app notifications keeps everyone up to date. Join teams at Avis, Nestle and Siemens who use our software to deliver success. Get started with ProjectManager today for free.

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Download this free critical path template for Excel to calculate the critical path of any project. Better yet, open the critical path template in ProjectManager and schedule the project on powerful Gantt charts that filter for the critical path. When you open the template, simply click the filter icon and select, “critical path tasks.” Besides a robust Gantt chart, there are multiple project views, including the sheet, kanban, task and calendar views, which all update simultaneously in real time.

Using the critical path template in ProjectManager also connects the project plan to essential project management features, such as live dashboards, resource management tools, customizable reports and more. All this on a collaborative platform with unlimited file storage, secure timesheets and all the tools project managers and their teams need to deliver successful projects. Get started with ProjectManager today for free.

What Is a Critical Path Template?

A critical path template is an Excel document that has a network diagram, which shows the tasks as nodes or boxes. They’re connected by arrows that represent the dependencies between tasks. The arrows show the proper sequence of tasks and each task is assigned a duration.

Why Use a Critical Path Template?

A critical path template offers a more efficient way of calculating the critical path of a project. Critical path analysis involves many calculations, which are embedded as formulas in this critical path template for Excel. That saves time and reduces the effort, though it still pales compared to project management software.

A critical path method template is ideal for complicated project timelines because it allows project managers to visualize the longest, most important chain of tasks that must be completed to deliver the project successfully. This provides the project manager with insight into which tasks to prioritize and how much time will be needed to complete them.

Using the free project management critical path template helps to improve accuracy and flexibility when scheduling projects. It also provides clear communication between the project manager and stakeholders, which is why it’s a staple of project planning and scheduling.

When to Use This Critical Path Method Template

Use the critical path method template at the beginning of the planning stage of any project. When coming up with a project schedule, the project management critical path template will inform the creation of the schedule. In fact, a critical path analysis template is so important to project planning that it’s often employed during the project proposal stage before the project has been approved.

That’s because understanding the critical path is key to creating a realistic schedule and delivering the project on time and within budget. It’s never too early to have a clear picture of what must be done, the resources needed to do it and the costs that are associated with the execution of the project tasks. Having this knowledge even before the project is approved helps determine whether the project is viable.

Not all projects are the same and not all projects get the same benefits from the critical path template. Therefore, the project management critical path template is ideal for more complicated projects such as those with large number of tasks, many of which are interdependent.

Who Should Use This Critical Path Analysis Template?

The critical path template is useful for many industries. There are those who use a project management critical path template in enterprises that have complex projects. Therefore, professionals in product development, defense contractors, general contractors in construction and those in the aerospace sector will all use a critical path analysis template.

The project professionals who will find the critical path template most useful are in charge of the project. These tend to be project managers, who are responsible for the planning, execution and control of projects to ensure that they’re not overspending or facing delays that can interfere with meeting deadlines.

For example, Apple uses the critical path method to deliver its new products to market on time. They map the steps that need to be completed and track the progress to ensure they’re staying on schedule.

What Does This Critical Path Template for Excel Include?

This critical path method template helps estimate the task duration to make an accurate project schedule and identify its critical path. But before getting into that, let’s start with some important definitions to be familiar with.

• Earliest Start (ES): It’s the soonest a task can start. There are two ways to determine the ES of a task. One, if a task has no predecessors, like tasks A and B in this sample CPM diagram, then their ES will be 0 as they don’t need to wait for another task to be completed for them to start, and two, if a task has any preceding tasks, then its ES will be the earliest finish EF of the preceding task.
• Earliest Finish (EF): The earliest a task can be completed based on its earliest start value and its duration. For example, task A ES is 0 and it’s estimated to take 12 weeks, so its EF is 12.
• Latest Start (LS): This is the last minute you can start a task before it threatens to delay your project timeline. It’s calculated during the backward pass process in the CPM scheduling process.
• Latest Finish (LF): The latest activity can be completed which can be calculated by adding its duration and ES values.
• Slack: This describes how long you can delay a task before it impacts its task sequence and the project schedule. The tasks on the critical path have zero slack because they can’t be delayed.

How to Use ProjectManager’s Critical Path Template for Excel

ProjectManager can instantly filter a project schedule on the Gantt chart to show the project’s critical path. There’s no need to go through complex calculations or use a critical path template. But for those who want to use the project management critical path template in Excel, follow these steps.

1. Forward Pass in CPM

Use the CPM diagram and the estimated duration of each activity to determine their earliest start (ES) and earliest finish (EF). The ES of an activity is equal to the EF of its predecessor, and its EF is determined by the CPM formula EF = ES + t (t is the activity duration). The EF of the last activity identifies the expected time required to complete the entire project.

2. Backward Pass in CPM

Begins by assigning the last activity’s earliest finish as its latest finish. Then the CPM formula to find the LS is LS = LF – t (t is the activity duration). For the previous activities, the LF is the smallest of the start times for the activity that immediately follows.

ProjectManager Helps Manage Project Schedules

The free critical path method template for Excel is a helpful tool but has limitations. For one, it’s isolated from the actual project schedule. Therefore, all that work has to be transferred to a project plan. The critical path template also has no link to all the other project management tools needed to deliver that project. ProjectManager is award-winning project and portfolio management software that can filter for the critical path and has a full suite of features to help with scheduling, resources and tracking costs.

Multiple Project Scheduling Views

Scheduling on the Gantt chart allows project managers to organize tasks, resources and costs and filter for the critical path. They can then set a baseline to track the planned vs. actual effort of their team to make sure they’re staying on schedule. However, Gantt charts aren’t ideal for team members executing their tasks, which is why there are multiple project tools so everyone can work how they want. Kanban boards visualize, customize and even can automate workflow, track costs and can be used for resource scheduling. Task lists are more than to-do lists, while the sheet view is a Gantt without a timeline and the calendar provides a monthly overview for stakeholders.

Manage Resources and Track Project Costs

The critical path method helps to create the project schedule, but to stay on track project managers must control resources. Once the team is onboarded to the project, each team member’s availability can be set, including PTO, vacation and global holidays, which makes assigning easier. To ensure that no one is overallocated, which can lead to delays, use the color-coded workload chart or team page to get an overview of the team’s workload and balance it to keep everyone working at capacity. Secure timesheets can provide visibility into labor costs or get a high-level overview of costs, time and more with real-time dashboards or customizable reports.

More Free Project Scheduling Templates

Not ready to upgrade to project management software? There are over 100 project management templates for Excel and Word that are free to download. These templates cover many industries and all project phases. Below are some of the free templates available for project scheduling.

Gantt Chart Template 

While this free Gantt chart template doesn’t filter for the critical path, it can help project managers organize their tasks. On the left is a spreadsheet that captures all project tasks and their start and end dates. Once added, they automatically populate a project timeline to show the entire project from start to finish in one place.

Project Calendar Template

There are free templates for various scheduling views, such as the free project calendar template for Excel. The project calendar template is a planning tool that shows start and end dates for all project activities every month. The template has a year’s worth of pages to organize tasks and assignments.

Resource Plan Template

Keeping to a project schedule requires managing resources. Use this free resource plan template for Excel to identify, list and organize all the resources needed to execute and deliver a project. It also helps project managers determine how many resources they need to complete the project on time.

Related Critical Path Method Content

The critical path is too important a topic in project management to be fully covered in one place. For those interested in going further into the subject, our site is rich with resources. We publish blogs weekly, have tutorial videos and, of course, free templates. The following are some of the pieces that we’ve published on critical path.

• 12 Best Project Management Charts for Project Planning
• PERT and CPM: Their Differences and How to Use Them
• Displaying the Critical Path on a Gantt Chart
• How to make a CPM Schedule: CPM Scheduling Basics

ProjectManager is online project and portfolio management software that connects teams whether they’re in the office, out in the field or anywhere in between. They can share files, comment at the task level and stay updated with email and in-app notifications. Join teams at Avis, Nestle and Siemens who use our software to deliver successful projects. Get started with ProjectManager today for free. 

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Manufacturing KPIs are key performance indicators and we’ll go into greater detail about the definition and why manufacturing metrics are so important. Then we’ll list the 10 most important manufacturing KPIs and conclude with how project management software can help you track them.

What Are Manufacturing KPIs?

Manufacturing KPIs are like any KPI in that they’re a metric to quantifiably measure performance over time; in this case, the KPIs focus on manufacturing. In terms of manufacturers, these KPIs are used to monitor, analyze and optimize operations. Teams can use the data to compare to their previous output and see how they compare to their competitors while pinpointing inefficiencies.

This is useful information to improve production by capturing what’s working and where there’s room to improve. That can mean reducing waste or even automating processes to keep production teams focused on more important tasks while the smaller tasks are taken off their plate. KPIs provide insights into challenges and successes in manufacturing operations that can be resolved or exploited.

When defining metrics for KPIs, it’s best to follow the SMART method. This technique stands for specific, measurable, actionable, realistic and time-based. For example, you don’t want to set a goal that’s unrealistic and cannot be achieved regardless of how much hard work is put in. Also, whatever goals are decided upon, it helps to have actionable steps to get there.

Whatever manufacturing KPIs you choose, you need to see them in real time rather than seeing a record of what’s already occurred. If you’re looking at old data, then you’re not sure what’s happening on the production line and your response will lag compared to the actual progress and performance of your production team. That’s why collecting manufacturing metrics with project management software is recommended.

ProjectManager is online project management software that uses real-time data to show your manufacturing schedule as it evolves. You can get a high-level view of your production process with our kanban boards that visually represent how tasks move throughout processes. Use the kanban board to centralize production processes, build a plan and collaborate with your team.

Why Are Manufacturing KPIs Important?

Manufacturers who want to stay competitive and succeed in business will benefit by using manufacturing KPIs. Otherwise, you’re just going by your gut when it comes to managing your manufacturing operations. As good as your instincts might be, without quantifiable data to back them up, you’re only guessing and can’t motivate production teams, executives, investors and so forth.

Look for an industry leader in manufacturing and you’ll find a company that uses manufacturing KPIs to increase their speed to market without adding excess expenses to their process. The manufacturing metrics point the way forward, which could lead to automation, reducing waste or having only the inventory on hand that you need rather than wasting money on unnecessary warehouse space.

There are as many reasons why manufacturers should use KPIs as there are KPIs. For example, you can uncover opportunities in your manufacturing cycle that were previously unaware of. These opportunities can lead to greater customer satisfaction, which not only improves your competitiveness but strengthens brand loyalty. You might even find ways to reduce costs, which customers will also like. Manufacturing KPIs need to be reviewed regularly and adjusted to keep you on track.

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Production Schedule Template

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20 Manufacturing KPI Examples

By now, you should be sold on the effectiveness of manufacturing KPIs. But so far, we’ve only talked about the subject without getting into specifics. There are many different  KPIs and each company has to determine what’s right for them by seeing how they align with the company’s production management goals. As noted earlier, manufacturing metrics also must be specific and measurable and provide an achievable value.

Here are 20 of the most common production and manufacturing KPI examples.

1. Cost Per Unit (CPU)

The cost per unit is how much money you’re spending for each item produced. This is an extremely important manufacturing KPI for you to determine a profitable price point for your product.  Therefore, consider all associated costs, such as materials, overhead, depreciation, labor and so forth, and then divide that by the number of units manufactured.

While not specifically related to manufacturing or production, this is a valuable KPI in that getting product to customers when they expect it is a make-or-break for your company. To calculate this KPI, you need to multiply the units delivered on time by 100 and then divide that figure by the number of units you have delivered. This creates a percentage of products that you’ve delivered on time to your customers.

2. Production Volume

Production volume measures the output for a period. This production KPI allows manufacturers to benchmark their manufacturing efficiency and understand the total units that are manufactured by the factory and determine whether they’ll meet their production budget. It’s determined by the total number of products manufactured over a specific period.

3. Production Downtime

Production downtime is the amount of time a factory’s production lines aren’t operating. This covers both planned downtime and unplanned downtime. Naturally, the less downtime you have, the more productive your manufacturing. To figure out production downtime add all the downtime over a specific timeframe.

4. Overall Operations Effectiveness (OOE)

Overall operations effectiveness is performance (percentage of time your plant is working at full capacity) multiplied by quality (the quality units produced in terms of a percentage of all units started) by availability (actual production time as a percentage of scheduled time to operate). Machine maintenance isn’t included in availability.

5. Overall Equipment Effectiveness (OEE)

Overall equipment effectiveness measures how productive your manufacturing plant is with no downtime by percentage. It can be calculated by multiplying performance by quality by availability. This helps you know how long equipment on your production line can operate at its peak. In this calculation, you do include machine maintenance downtime.

6. Total Effective Equipment Performance (TEEP)

Total effective equipment performance measure utilization. It shows how your production is doing compared to if it was running all the time, all year, while always producing quality products. Again, this is determined by performance multiplied by quality by availability.

7. Capacity Utilization

Your production capacity refers to the total production volume that can be manufactured with your current resources such as materials, labor or capital assets. The capacity utilization metric helps you determine the rate to which you’re using your production capacity. Ideally, you should use as much of your resources as possible to generate the most revenue per employee and use capital assets profitably.

Capacity Utilization = (Production Capacity Used Over a Specific Period / Total Production Capacity) * 100

8. First Pass Yield (FPY)

A first-pass yield is the number of non-defective products that don’t require any reworking in your first run at the plant. It can help you find issues in your manufacturing process. To calculate this manufacturing KPI, divide the number of non-defective products by the total number of products manufactured.

9. First Time Right (FTR)

This is a production metric that’s used as part of the total quality management (TQM) approach. The first time right (FTR) measures the ratio between the total units produced and the defective units. By measuring this, manufacturers can pinpoint potential problems in the production line and take corrective actions.

First time right (FTR) = (Total production units without defects / total number of manufactured units) * 100

10. Work-In-Process

An important production KPI, the work-in-process also known as WIP, allows you to measure the quantity and cost of the materials, parts or components from your production inventory as they’re transformed into finished goods through each of the steps of your manufacturing process.

(Beginning WIP Inventory + Manufacturing Costs) – Cost of Goods Manufactured = Ending WIP Inventory

11. Return on Assets (ROA)

This manufacturing KPI helps you determine the income generated by the capital assets that are utilized to manufacture your products. It will help you determine whether purchasing a particular piece of equipment or machinery has been profitable for your organization or not.

Return on assets (ROA) = Net Income / Average Value of Assets

12. Lead Time (LT)

Similar to cycle time, lead time measures the time that passes from the moment a customer places an order to its delivery date. This is a manufacturing metric that goes beyond the production process and also involves the manufacturer’s ability to execute other activities to fulfill customer orders such as managing its warehouse, shipping and delivering products on time.

Lead Time = Date when customer order is received – Date when customer receives order

13. Cycle Time

Cycle time is used to measure the time it takes to process raw materials, parts and components into a product from start to finish. This manufacturing KPI is very important when gauging the success of production optimization strategies such as rethinking your production routing or the shop floor plan.
Cycle Time = Net Production Time / Number of Units Produced

14. Cost of Goods Manufactured (COGM)

The cost of goods sold or COGM measures the costs that are directly related to the production of goods such as direct materials and labor and manufacturing overhead. Besides helping gauge the profitability of a production process, this is a very important metric because manufacturers need to include this value as an expense in their income statements.

COGM = (Beginning WIP inventory + Total Manufacturing Costs) – Ending WIP Inventory

15. Cost of Goods Sold (COGS)

As its name suggests, COGS is a similar metric to COGM but the cost of goods sold measures other costs which are required to sell the product, such as sales, marketing and administrative costs.

16. Takt Time

This metric helps you plan your production schedule based on the customer demand for your product. The more customer demand there is for your product, the faster it needs to be produced. This metric also allows you to estimate the production volume that needs to be manufactured.

TAKT Time= Net Time Available for Production / Estimated Customer Demand

17. Scrap Rate

This manufacturing KPI measures the volume of the discarded production materials compared to the total volume of materials used. It’s important to monitor this metric so you can minimize waste and make your production process more efficient and profitable.

18. Mean Time Between Failure (MTBF)

Production machinery and equipment will fail at some point, which is normal even if you have a rigorous maintenance schedule. This manufacturing KPI helps you gauge the failure rate of each of your production equipment pieces so you can determine which are the most reliable and which require closer supervision.

19. Maintenance Unit Cost

This metric can help you gauge how the cost of your maintenance activities impacts the profitability of your products by looking at the cost of making each unit. You can do this by allocating the maintenance costs of a piece of equipment to the units that it has produced over time. For example, you can calculate this for a period of a month, a quarter or a year. This will help you make decisions such as investing in machinery or re-thinking your maintenance schedule.

Maintenance Unit Cost = Total Maintenance Costs of a Piece of Equipment / Number of Products Produced

20. Changeover Time

Most manufacturers use the same machinery and equipment to make various products, but usually, some adjustments are needed before switching from one product to another. Changeover time is a production metric that measures the time it takes for the new production workers to prepare the production line for a new production run after a run for another product is complete.

Average Changeover Time = Changeover Time / Number of Changeovers

Production Schedule Template

Many KPIs are worth tracking in manufacturing projects, a lot of which tie into production. One way to streamline the production schedule is to use a template. Our free production schedule template for Excel helps you track total product quantity, inventory volumes and more.

ProjectManager Helps You Track Manufacturing & Production KPIs

ProjectManager is award-winning project management software that helps manufacturers monitor production KPIs in real time. Manufacturers can get a high-level view of production metrics whenever they want by toggling to the live dashboard. But they can also set up production schedules on Gantt charts, manage workflows on kanban boards and track milestones with calendars. All project views are updated together so you’re always working on the most current data no matter which tool you’re using.

Get More Details With Customizable Reports

When you schedule your production on our Gantt charts and set the baseline, you can then track the planned effort against the actual effort in real time. This is reflected not only in the real-time dashboard but also in reporting features. You can generate status reports and portfolio reports if you manage more than one production line and many other reports with a keystroke. All reports can be filtered to show only the data you want to see. They can also be easily shared in multiple formats to keep stakeholders updated.

Keep Track of Production Teams

Another manufacturing KPI that we didn’t mention is our roundup of human resources. Our resource management features help you track your production team’s workload. Knowing how many jobs each member of the production line is responsible for can help you ensure that each is working at capacity without being over-allocated. It’s easy to see how your resources are allocated by viewing our color-coded workload chart. Now you can see at a glance who has too much work and who has too little. Then, right from the workload chart, you can reallocate your resources and balance your production team’s workload to make them more productive.

Beyond measuring manufacturing KPIs, our software has automation with task approval to ensure that only quality moves through the production cycle. You can customize workflows to gain efficiency and do more with less labor. There are also risk management tools to track issues in your production line until they’re resolved.

Related Manufacturing Content

• What Is Lean Manufacturing?
• Just-In-Time Manufacturing & Production (JIT): A Quick Guide
• Manufacturing Overhead: Definition, Formula and Examples
• 10 Free Manufacturing Excel Templates

ProjectManager is award-winning software that tracks manufacturing KPIs in real time. Our multiple project views give you Gantt charts to plan your production, kanban boards to manage workflow and much more. Plus, our collaborative platform makes it easy to share files, comment and more. Get started with ProjectManager today for free.

The post 20 Production and Manufacturing KPIs & Metrics (With Examples) appeared first on ProjectManager.

To understand capacity management, we’ll first fully define the term, list the different types and explain why it’s so important in operations management. Then we’ll discuss some of the strategies involved in implementing capacity management and their benefits.

What Is Capacity Management?

Capacity management is the process of controlling a business’ available capacity to ensure that resources are being used as efficiently as possible. Businesses have a finite amount of resources and capacity management is working to get the most out of their workforce, production, etc. Business capacity measures how much a company can produce or sell over a given period.

Looking at the various resources available to a company and comparing them to the time each needs for a specific project is part of capacity management. Then capacity management analyzes the capacity to get an overview of the composition of the human resources available and whether they are a good fit for the actual needs of the business. This leads to the development of a capacity management plan that addresses the supply and demand of resources.

Capacity management seeks to answer the following questions: are there enough available resources to cover all products and are there enough projects to supply all available resources with enough workload? Some might confuse this for resource management, but there are differences. Capacity management is the first step in project planning. Only after this has been done will management focus on resources, such as assigning teams and allocating tasks.

Being able to monitor resource capacity during the execution of projects is essential to ensuring that a business is maximizing its output. Project management software is a helpful tool in this process. ProjectManager is award-winning project and portfolio management software with features that oversee resources in real time. The team page allows managers to view all the human resources across their projects. They can then see if anyone is over- or underallocated and balance the team’s workload to keep everyone working at capacity to be as productive as possible. Get started with ProjectManager today for free.

Types of Capacity Management

Different types of capacity management must be managed to get the most out of production. These are potential capacity, which looks at the long term, immediate capacity, which is what’s currently available, and effective capacity, which is the total available capacity that can be put to use. In terms of types of capacity, there are also three types: workforce, production and resources. Let’s review each.

• Workforce Capacity Management: Aligns a company’s human resources with its operational requirements to meet customer demands, achieve business objectives and maintain a competitive advantage. It does this by identifying discrepancies between staff skills and upcoming work needs and making smooth transitions that integrate business strategy with human resource capabilities.
• Production Capacity Management: Seeks to manufacture the greatest amount of output in a production facility. Production capacity is measured in finished products over a given period. This helps manufacturers accurately quote lead times, provide more informed scheduling processes and gauges the efficiency of manufacturing processes and overall performance.
• Resource Capacity Management: Defines the amount of work that can be done by resources at a company, determining tasks and projects that can be completed by those resources over a set period and matches that work with the available resources to meet current and future demand. To do so effectively requires predicting demand, identifying resource gaps and developing and implementing strategies.

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Capacity Planning Template

Use this free Capacity Planning Template for Excel to manage your projects better.

Download Excel File

Proactive vs. Reactive Capacity Management

Proactive capacity management is planning and managing capacity to get the best business outcomes. Reactive capacity management is when managers and their teams respond to emerging capacity issues and try to stop them from negatively impacting performance.

Reactive capacity management can be risky. Following this type of response to capacity issues can lead to not having the resource capacity needed to effectively run projects. It requires visibility into the project so you’re not caught by surprise and unable to fulfill the project’s needs.

Employing proactive capacity management is preferred as it’s a planned method that can meet the anticipated resource challenges. It involves resource forecasting and monitoring to make sure that there are enough resources available and used appropriately to meet current and future project requirements.

By using the long-term process of proactive capacity planning costs are saved, resource utilization is optimized and there is better service quality. This allows businesses to better align resources with their objectives.

Importance of Capacity Management in Operations Management

Capacity management is important in operations management because it helps businesses with their budgeting and scaling so they can identify optimal levels of operations.

In terms of budgeting, capacity management helps businesses determine how their services are offered and the appropriate time frames and staff required to meet current and future operational costs. This informs yearly budgets to better allocate money for expenses.

For scaling benefits, capacity management helps businesses understand if there’s a need to add more staff to help meet anticipated demand based on capacity plans. Not only adding staff but adding specific skills or investing in a larger facility or new equipment is clearer through the lens of capacity planning.

Capacity Planning Template

This free capacity planning template for Excel allows you to estimate the human resource capacity that’s needed to execute a project, process or workflow. It allows you to identify the total available hours for your employees, the total hours that they’re scheduled to work, calculate their utilization rate and estimate costs based on their hourly pay rate.

Capacity Management Strategies

Manufacturers who want to ensure that they’re producing as much as they can to meet demand need to engage in capacity management strategies. Several are commonly used: lag, lead, match and adjustment strategy. All are ways that managers use to grow the business production capacity.

Lag Strategy

In this strategy, managers wait until there’s a surge in demand to act by increasing production and meet the current market demand. This is reactive and puts the business at a disadvantage if demand spikes to unexpected levels, which will be hard to ramp up production to meet. This scenario could result in customer attrition which is why businesses functioning at full capacity use lag strategy.

Lead Strategy

With a lead strategy, a business will increase its production capacity before a surge in demand. Of course, this assumes there will be an increase in demand just around the corner and the additional output will cover that increased demand. This strategy is better suited for larger companies that can warehouse excess inventory and the costs associated with it or even sacrifice stock that doesn’t sell.

Match Strategy

Match mixes lag and lead strategies. Businesses increase capacity after analyzing current market demands. But these increases are small until it becomes clear that demand is going through the roof. Then the business increases production to meet that demand. Again, these increases are always small and incremental, which allows the business to work on expanding sales.

Adjustment Strategy

This is similar to the match strategy as it uses both lag and lead strategies, but the adjustment strategy is more data-based. It uses planning tools to analyze multiple variables, such as demand forecasts, real-time sales data and seasonal trends. Thereby, capacity is adjusted more accurately in advance of demand.

Benefits of Capacity Management

Capacity management helps businesses be as productive as possible and meet the fluctuating market demand. But that’s only the start when it comes to the benefits of capacity management. Here are some other reasons to employ this process when manufacturing products.

• Improves cost estimates, especially during growth or recessions, by identifying sudden shifts in prices
• Optimizes production efficiency by scheduling production cycles ahead of time
• Reduces the general cost of doing business
• Helps with inventory management and issues within the supply chain
• Allocates resources better
• Provides operational analysis when thinking of growing the business

How ProjectManager Helps Monitor Resource Capacity

Capacity management relies on the close monitoring of production. It’s only through tracking and analyzing data that significant improvements can be made to manufacturing processes that will lead to greater capacity utilization. Project management software can help to provide the key performance indicators (KPIs) that will direct how to work more efficiently. ProjectManager is award-winning project and portfolio management software that has multiple project views that are all capturing live data and updating together in real time.

Allocate and Schedule Resources with Multiple Views

When onboarding team members, managers can set their availability, including PTO, vacation and global holidays. That makes it easier to allocate resources. Those resources can be scheduled on robust Gantt charts that organize tasks on a timeline but can also link all four types of task dependencies to avoid costly delays. Once the schedule is made, set a baseline and the software automatically compares planned versus actual progress in real time to keep work on track.

Track Labor Costs with Timesheets

Progress is one area of improvement to add capacity to production, but it’s not the only one. Reducing costs should also be on the forefront of a manager’s mind. There are several ways to track costs. One is with secure timesheets that streamline payroll, but also provide visibility into how far each team member has gone to completing their tasks and the labor costs associated with that. For a high-level overview, toggle to the real-time dashboard, which tracks many KPIs, including costs, with easy-to-use graphs and charts.

For a more detailed look at metrics, and to keep stakeholders informed on capacity, use the customizable reporting features. Reports on status, portfolio, workload, timesheets, variance and more can be generated with a keystroke. They can be filtered to show only pertinent data and shared across multiple formats with stakeholders.

ProjectManager is online project and portfolio management software that connects teams whether they’re in the office or on the factory floor. They can share files, comment at the task level and stay updated with email and in-app notifications. Join teams at Avis, Nestle and Siemens who use our software to deliver success. Get started with ProjectManager today for free.

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What Is a PERT Chart?

A PERT chart is used in project management to schedule, organize and coordinate project tasks. Often referred to as a PERT diagram, the word PERT is an acronym for program evaluation review technique. Project managers use this tool to visually represent the project timeline.

The PERT chart template can be used to break down each task so the project manager can analyze them. It does this by using nodes, which are represented by rectangles or circles and the events and milestones that occur throughout the project. Vectors connect the nodes are, which are lines that stand for the various tasks that must be executed.

The U.S. Navy first developed this methodology for scheduling in the 1950s. It was used to manage the Polaris submarine missile program. Around the same time, a method similar to the PERT chart called the critical path method (CPM) was developed in the private sector. PERT charts are used for more flexible timelines that have more uncertainty, while CPM is used for projects with a fixed timeline.

Why Use a PERT Chart Template?

Project managers use a PERT chart to estimate the minimum time needed to complete a project. By analyzing the work breakdown, task connections and the risks associated with the project, they can organize even complex projects by visualizing the dependencies between each step.

Using a PERT chart template simplifies the process by having the diagram already made so that users can fill in the spaces and follow the simple instructions to create the PERT chart. This creates continuity as project managers use the PERT chart template during and after the project, archiving the documentation of completed projects for future reference.

Project managers also use a PERT chart template to illustrate dependent tasks, make a project timeline and calculate the critical path. They’re great for organizing and managing projects that are large or complex. A PERT chart template simplifies the project management process and increases efficiency.

While the PERT chart template is a great tool for planning a project schedule, it becomes far more powerful when used with project management software. ProjectManager is award-winning project and portfolio management software with robust Gantt charts that represent the project as a timeline and offers more than a PERT chart template can. For example, there’s no need for complicated CPM calculations on the Gantt chart. It filters the critical path instantly. Users can also link all four types of task dependencies and set a baseline to track planned vs. actual progress in real time. Get started with ProjectManager today for free.

When to Use This PERT Chart Template

As noted, the PERT chart template is an essential tool for the planning stage of a project. It helps determine a project’s critical path so that all deadlines are met. It also helps to identify interdependencies of tasks and the knowledge of this helps avoid costly delays.

In fact, the PERT chart template can be employed before project planning. It’s a useful tool when determining if a project is viable during the initiation phase. That’s because it helps estimate the time needed to complete the project, which is valuable information as to whether the project is worth pursuing.

The PERT chart template is also valuable when preparing for a more complex and larger project. It can organize all the tasks and make something that feels unmanageable into a controlled and successful project. They can also help to explore what-if scenarios so that the right workflows can be chosen. Finally, project managers can use a PERT chart template when they want to clearly communicate the strategic position of the project to the project team.

Who Should Use This PERT Chart Template?

It should be clear by now that a PERT chart template is a tool project managers use for scheduling purposes. However, anyone responsible for planning a project will find a PERT chart template a powerful tool and method they’ll want to employ.

What Does This PERT Chart Template for Excel Include?

This PERT chart template allows you to estimate the duration of tasks to make an accurate project schedule. But before you do so, here are some important definitions you should be familiar with before starting.

PERT Chart Formula

A traditional PERT chart relies on the weighted average of three numbers that are based on the most pessimistic (P), the most optimistic (O) and the most likey (M) estimates for the project’s length.

• Optimistic Time (O): The least amount of time to accomplish a task or activity
• Pessimistic Time (P): The maximum amount of time to complete a task or activity. This is the worst-case scenario, assuming that anything that can go wrong does
• Most Likely Time (M): The most realistic time estimate for the task or activity, assuming no issues occur
• Expected Time (E): The time you’ll obtain after using the PERT chart formula, which weighs the optimistic, pessimistic and most likely times to find the most accurate time estimate. Based on these values, the PERT chart formula is:

E=(O + (4*M) + P) / 6

PERT Chart Standard Deviation

Use the formula below to find the PERT chart standard deviation. The larger your results, the less confidence you have in your estimate, and vice versa.

(P-O) / 6

Now that you understand what these important PERT concepts mean, let’s look at the elements that make up the PERT chart.

• Nodes: These are the symbols used to visualize project milestones, which are the outcomes of each task
• Arrows: Visual representation of the sequence of a task, diverging arrows indicate tasks that can be completed simultaneously
• Predecessor: An activity that precedes another and must finish before its successor can start
• Lead Time: How much time you should complete a task or activity without impacting the following

How to Use ProjectManager’s PERT Chart Template for Excel

Now that the nomenclature for a PERT chart is clear, it’s time to learn how to use this free PERT chart template for Excel. The formulas are embedded. All one needs to do is add their project information and follow these three steps.

1. List Tasks and Their Time Estimates

List the project tasks using the PERT chart table at the left side and then make an optimistic, pessimistic and a most likely time estimate for their completion. Once these three estimates have been entered in their corresponding columns, this template will automatically apply the PERT chart formula and fill the “Expected Time” and “Variance” columns.

2. Use Arrows and Nodes to Map Tasks and Milestones

A PERT chart uses arrows to represent tasks and show dependencies among them. Edit the task names and their duration on the PERT chart to show the project tasks you listed in step one as shown by the sample data in this PERT chart template for Excel. Copy and paste the sample PERT chart nodes and arrows to create a diagram that reflects your project workflows.

Then edit the project milestone names using the PERT chart nodes as shown in the sample PERT chart.

3. Identify Preceding Tasks

Now that the project tasks have been mapped using the PERT chart. It’s easy to visualize them more clearly, which facilitates filling out the “Preceding Tasks” column.

ProjectManager Helps Manage Project Schedules

While a PERT chart template is a valuable tool for scheduling a project, it won’t help implement or control that schedule as it’s executed. Templates are static documents. While the PERT chart template can help schedule a project, project management software is designed to manage it. ProjectManager is award-winning project and portfolio management software that has the features project managers and their teams want to do their work more efficiently and effectively.

Use Multiple Project Scheduling Views

Gantt charts work with the PERT chart template to organize tasks, identify task dependencies and set baselines to track scheduling and budget variance in real time. Project managers use them to plan, manage and track projects, but teams don’t need all those bells and whistles when executing their tasks. That’s why multiple project views all update simultaneously to keep everyone working on the same pages. Teams can visualize workflow with kanban boards or manage tasks with the list view. There’s a sheet view, which is the Gantt without a timeline, and a monthly calendar overview that helps stakeholders stay updated.

Manage Resources and Track Costs

To stay on schedule requires monitoring and controlling the project as it’s being executed. Project managers can get a high-level view of time, cost and more with real-time project and portfolio dashboards or use customizable reports for a closer look at the data. Labor costs can be monitored with secure timesheets that do more than streamline payroll, they also provide visibility into how much time and money each team member spends on their tasks. The team page or color-coded workload chart allows project managers to see the whole team’s allocation and balance their workload to keep them working at capacity and productive.

More Free Project Scheduling Templates

For those who aren’t ready to upgrade and still want to schedule projects with templates, here are a few more free project management templates that can help deliver projects on time.

Gantt Chart Template 

While not as feature-rich as Gantt chart software, this free Gantt chart template for Excel can organize tasks, list their start and end dates and duration on the spreadsheet’s left side of the template. Then, the right side of the timeline automatically populates with a bar chart showing the whole project in one place.

Project Calendar Template

Another way to schedule tasks is using the familiar grid of a calendar, which shows the project over the course of a month’s time. This free project calendar template for Excel allows users to plot their tasks over days with colored bars to indicate which project phase it’s a part of.

Resource Plan Template

Use this free resource plan template to ensure that projects have the resources they need when they need them. Identify, list and organize resources and determine the quantity and costs required. Then schedule resources across a weekly calendar over a month or customize the template to add more time as needed.

Related PERT Chart Content

There’s more to PERT than a PERT chart template. For those interested in going deeper, the following links to some articles on planning software, an ultimate guide to PERT charts and comparing PERT charts to Gantt charts and network diagrams.

• 12 Best Project Management Charts for Project Planning
• PERT Chart: The Ultimate Guide (with Examples)
• PERT and CPM: Their Differences and How to Use Them
• Gantt Chart vs. PERT Chart vs. Network Diagram

ProjectManager is online project and portfolio management software that connects teams whether they’re in the office, out in the field or anywhere else. They can share files, comment at the task level and stay updated with email and in-app notifications. Join teams at Avis, Nestle and Siemens who use our software to deliver successful projects. Get started with ProjectManager today for free.

The post PERT Chart Template appeared first on ProjectManager.

This requires first an understanding of demand management and how it benefits business. Next, we’ll outline the demand management process to learn how to implement this planning methodology and how software can facilitate that process.

What Is Demand Management?

Demand management is the process of managing customer needs for a product that a company sells. It’s a planning methodology that tries to forecast what a customer will want, when they’ll want it and the logistics of getting that product to them. By planning, companies can identify and avoid potential problems, such as bottlenecks in production or the supply chain and market volatility.

In manufacturing, demand management comes after supply chain management, such as managing procurement and suppliers, but before portfolio management. Demand management is cross-functional as it crosses many disciplines, from consumer demand, supply teams and inventory to marketing and customer service.

One way to look at demand management is as a bridge between the marketplace and a company’s internal operations. That is, demand management works to create interactions between operations and marketing with the goal of being able to develop actions that align the fluctuations of the market with a company’s strategy, production capacity and customer needs.

Managing production is key to demand management and project management software is essential to that process. ProjectManager is award-winning project and portfolio management software with resource allocation features to keep teams working at capacity. Use the team page or the color-coded workload chart to monitor your team’s allocation. If some are over- or underallocated, the team’s workload can be balanced quickly to keep them as productive as needed to meet demand. Get started with ProjectManager today for free.

What Is the Importance of Demand Management for Businesses?

Understanding customer demand will benefit any business that manufactures or sells products. Demand management is a crucial part of any business strategy so they have stock on hand to meet customer needs. Here are some other reasons that illustrate the importance of demand management for businesses.

Helps Organizations Establish their Production Budget

Demand management allows companies to analyze and predict changes and trends in market demand. This leads to a reduction in costs due to overproduction or stockouts. It also informs the production budget to make sure that there are enough funds to meet demand but not add unnecessary costs through excess inventory, labor, etc.

Allows Businesses to Meet Customer Demand

Knowing what customers want allows for better planning of delivering it to them. If there’s a spike in customer demand or if customer demand is waning, production planning must follow suit or suffer a loss in business or the cost of carrying unwanted inventory. Demand management allows for a better gauge of customer demand.

Prevents Excess Inventory and Overproduction

As stated above, excess inventory is costly. All that product must be stored, which leads to money spent on items that aren’t being sold. Ideally, a company wants a warehouse full of inventory that will move due to a balance between what’s in stock and the customer demand. Demand management is a way to achieve that balance.

Helps With Supply Chain Planning

Supply chain planning is all about optimizing the manufacturing and delivery of goods. It starts with raw materials, moves to finished products and ends with customers. A clear picture of customer demand will inform these steps, from knowing how much raw material is needed to the quantity of items produced, etc. Demand management, then, is an integral part of this process and helps a business spend only what it needs.

Informs Workforce Planning

Demand management helps managers understand the current and future workforce requirements, which allows them to plan better. The managers better understand customer demand, which leads to knowing how to allocate resources to meet that demand by having the right people with the right skills.

Demand Management Process

Demand management helps businesses to oversee and manage customer demand. To do this, though, requires a process. The demand management process includes knowing what customers want and the steps necessary to fulfill those needs. To plan for current and future demand requires following these six steps in the demand management process.

Demand Forecasting

Demand forecasting is the process of predicting customer needs for a business’ products. That demand determines what adjustments need to be made or if new offerings should be added. Estimating what customers want and how much of each item they’ll want isn’t an exact science. To get an accurate estimate, businesses use many methods, some qualitative and other quantitative. Data, software and analytics are all used in this process, but predictions should always be hedged by noting their strengths and weaknesses.

Demand Planning

Once the forecast is clear, the planning begins. Demand planning is part of the demand management process that enables a business to plan to meet the demand forecast through the production of its products. This is also part of the larger supply chain process and requires an understanding of horizon (timeline for the demand plan), frequency (how often the plan is updated) and granularity (level of detail in the plan). This allows for the creation of a demand plan that meets customer needs.

Demand Modeling

One way to make a more accurate demand forecast and, therefore, have a better demand plan is through demand modeling. Demand modeling uses predictive analysis to understand customer behavior. It looks at things such as the propensity of a customer to purchase a product and how the propensity changes based on things like the price of that product. Historical data is also used to better understand the customers’ behavior.

Demand Capacity

Demand capacity is a ratio that compares the production that a company makes with the demand coming from its customers. When manufacturing, businesses measure demand capacity to make sure they have the production capacity levels that allow them to meet the demand for their products. Calculating this uses several sources, such as sales records, customer feedback, inventory levels, production reports or service logs.

Demand Sensing

Another way to predict customer demand is with demand sensing, which uses real-time data and analytics to understand and predict what a customer will want, when they’ll want it and how much they’ll want. This is done by reviewing sales history, inventory levels and customer behavior, point-of-sale systems, online sales platforms and customer surveys. While not perfect, demand sensing can reduce forecast error by up to 50 percent and increase accuracy by up to 20 percent.

Demand Shaping

Demand shaping is a supply chain strategy that uses tactics such as price and promotion incentives, product substitutions and cost modifications to lure customers to buy specific products. Through these means, a business can influence demand for a certain item to match its planned supply.

What Does a Demand Manager Do?

The person responsible for the demand management process is a demand manager or demand planning manager a professional tasked with overseeing the daily operations of the demand planning team, who analyzes customer and vendor demand to create and refine their forecasts.

Demand managers are responsible for reviewing purchase history, sales history and the marketing strategies businesses use to promote products and stimulate growth. They also evaluate their effectiveness and respond accordingly to improve.

To do this, the demand manager will come up with effective forecast models based on industry trends and demand patterns. They’ll implement solutions to improve the accuracy of demand forecasting, as well. They are highly analytical and have a deep knowledge of advanced mathematical and forecasting policies.

How to Manage Production With ProjectManager

Demand management has a great influence on production. It tells manufacturers how much of a product customers want so they can produce just the right amount or as close to that number as possible. This saves money on labor, storage and more. However, demand management can’t help create a more effective production plan, but project management software can. ProjectManager is award-winning project and portfolio management software with multiple project views to plan production activities, schedule resources and track labor costs to ensure that manufacturing goes according to budget.

Plan Production Activities

Managers can plan their production activities on robust Gantt charts that link all four types of task dependencies to avoid delays. Once the schedule is made, resources allocated and costs determined, set a baseline to capture that plan so it can be compared to actual progress and costs during production. Real-time dashboards capture key performance indicators (KPIs) on easy-to-use graphs and charts for a high-level overview of production. There are also customizable kanban boards with columns that reflect the production cycle and cards that track costs, progress and schedule resources. Use kanban to manage order fulfillment, too.

Track Labor Costs With Timesheets

Keeping a close eye on labor costs helps manage production costs. Employees can use timesheets that automatically add their hours and are securely sealed once sent to a manager to review and pass onto payroll. While this streamlines the payroll process, it’s only part of what timesheets can do. Timesheets capture labor costs and let managers see how far each team member is in terms of completing their assigned tasks. This allows managers to calculate whether the production is progressing as planned or if resources need to be allocated to get back on track.

Stakeholders can stay up to date with production by using one of the multiple project views to track progress, such as the calendar view, which is more a high-level overview of the production cycle. But there are also customizable reports on project status, portfolio, variance and much more. All can be filtered to show only the data stakeholders want to see and shared with them across formats.

ProjectManager is online project and portfolio management software that connects teams whether they’re in the office or on the factory floor. They can share files, comment at the task level and stay updated with email and in-app notifications. Join teams from companies, such as Avis, Nestle and Siemens who are using our software to deliver success. Get started with ProjectManager today for free.

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Let’s define manufacturing overhead, look at the manufacturing overhead formula and how to calculate manufacturing overhead.

What Is Manufacturing Overhead?

Manufacturing overhead is the sum of all the manufacturing costs except direct labor or direct materials costs. This is why manufacturing overhead is considered an indirect cost.

Manufacturing overhead costs include selling, general and administrative expenses, such as corporate salaries, audit and legal fees, are simply recorded as expenses and are added to the income statement for the accounting period in which they occur.

Manufacturing overhead is added to the units produced within a reporting period and is the sum of all indirect costs when creating a financial statement. It’s added to the cost of the final product, along with direct material and direct labor costs. According to generally accepted accounting principles (GAAP), the manufacturing overhead appears on the balance sheet as the cost of a finished goods and work-in-progress inventory as well as the cost of the goods income statement.

The ability to track those costs is important and project management software can help. ProjectManager is online work and project management software that delivers real-time data to monitor costs as they happen. While we have many project views, the kanban board contains key details on how much you’re spending on production. Use it to centralize manufacturing processes and collaborate with your team so you know how much you’re spending during production. Get started with ProjectManager for free today.

Examples of Manufacturing Overhead Costs

Some other examples can include the rent you pay on your factory building, supplies that are not directly associated with products and wages of people who work in the plant but are not directly creating products.

If you’d like to know the overhead cost per unit, divide the total manufacturing overhead cost by the number of units you manufacture. To know the exact number of units to manufacture for the next quarter, make a production budget.

How to Calculate Manufacturing Overhead

The first thing you have to do is identify the manufacturing overhead costs. These are the indirect costs that help run the manufacturing facility. All these indirect costs are added together. Now that you have an estimate for your manufacturing overhead costs, the next step is to determine the manufacturing overhead rate using the equation above.

When you do this calculation and find that the manufacturing overhead rate is low, that means you’re running your business efficiently. The higher the percentage, the more likely you’re dealing with a lagging production process.

This not only helps you run your business more effectively but is instrumental in making a budget. Knowing how much money you need to set aside for manufacturing overhead will help you create a more accurate budget.

Manufacturing Overhead Formula

First, identify the manufacturing expenses in your business for a given period. Once you do, add them to find your total manufacturing overhead cost.

There are various formulas you can use to calculate the manufacturing overhead costs of your business, but the most commonly used method is the total manufacturing overhead formula:

Total Manufacturing Overhead Cost = Indirect Labor + Indirect Materials + Any Other Fixed or Variable Manufacturing Overhead Costs

Manufacturing Overhead Per Unit Formula

If you’d like to know the overhead cost per unit, divide the total manufacturing overhead cost by the number of units you manufacture.

Manufacturing Overhead Per Unit = Total Manufacturing Overhead / Number of Units Produced

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What Is Included in Manufacturing Overhead?

Manufacturing overhead is referred to as indirect costs because it’s hard to trace them to the product. A final product’s cost is based on a pre-determined overhead absorption rate. That overhead absorption rate is the manufacturing overhead costs per unit, called the cost driver, which is labor costs, labor hours and machine hours.

Five basic types of costs are included in manufacturing overhead, which are as follows:

Indirect Labor

These are costs that the business takes on for employees not directly involved in the production of the product. This can include security guards, janitors, those who repair machinery, plant managers, supervisors and quality inspectors. All their salaries are considered indirect labor costs. Companies discover these indirect labor costs by identifying and assigning costs to overhead activities and assigning those costs to the product. That means tracking the time spent on those employees working, but not directly involved in manufacturing.

Indirect Materials

These are costs that are incurred for materials that are used in manufacturing but are not assigned to a specific product. Those costs are almost exclusively related to consumables, such as lubricants for machinery, light bulbs and other janitorial supplies. These costs are spread over the entire inventory since it is too difficult to track the use of these indirect materials.

Utilities

Costs associated with utilities can be hard to calculate as they fluctuate with the number of materials being produced. Therefore, natural gas, electricity and water are overhead costs, but they aren’t constant. You might need more or less, for example, depending on the demand for your product in the market. This makes them variable overhead costs. They are calculated for the whole facility and then allocated over the entire product inventory.

Related: 10 Free Manufacturing Excel Templates

Physical Costs

These physical costs are calculated either by the declining balance method or a straight-line method. The declining balance method involves using a constant rate of depreciation applied to the asset’s book value each year. The straight-line depreciation method distributes the carrying amount of a fixed asset evenly across its useful life. The latter is used when there is no pattern to the asset’s loss of value.

Financial Costs

As the name implies, these are financial overhead costs that are unavoidable or can be canceled. Among these costs, you’ll find things such as property taxes that the government might be charging on your manufacturing facility. But they can also include audit and legal fees as well as any insurance policies you have. These financial costs are mostly constant and don’t change so they’re allocated across the entire product inventory.

Free Production Schedule Template

Calculating manufacturing overhead is only one aspect of running an efficient and profitable project. You also need to closely monitor your production schedule so you can make adjustments as needed. Download our free production schedule template for Excel to monitor production dates, inventory and more.

Examples of Manufacturing Overhead Costs

Now that we’ve defined the main types of manufacturing overhead cost categories, let’s look at 10 examples of fixed and variable manufacturing overhead costs.

Fixed Manufacturing Costs Examples

• Real estate taxes
• Factory Insurance
• Depreciation of production facilities and capital assets
• Legal fees related to regulatory compliance
• Rent of production facilities

Variable Manufacturing Costs Examples

• Indirect materials
• Indirect labor
• Factory utilities
• Warehousing, transportation and other logistics management costs
• Machinery and equipment supplies and consumables

How to Calculate Manufacturing Overhead

The manufacturing overhead rate is the ratio between overhead costs and the value of goods sold, which allows manufacturers to gauge the impact that overhead costs have on the profitability of their manufacturing operations.

Manufacturing Overhead Rate Formula

You can find the overhead rate of your manufacturing operations using the following formula.

Manufacturing Overhead Rate = Fixed Overhead Costs + Sales * 100

Predetermined Manufacturing Overhead Rate Formula

You can also use the formula below to calculate a predetermined manufacturing overhead cost rate that will be allocated to all the units that are produced instead of allocating overhead costs to each of them.

This is done by production managers so they can easily calculate their cost of goods sold and cost of goods manufactured. A predetermined manufacturing overhead rate can also be helpful when making a manufacturing overhead budget.

Predetermined Manufacturing Overhead Rate = Budgeted Overhead / Budgeted Activity Level

Note: The activity level can be represented in terms of the machine hours or direct labor hours that will be utilized to manufacture products.

What Is a Manufacturing Overhead Budget?

A manufacturing overhead budget covers all fixed, variable and applied manufacturing overhead costs of an organization. These costs are then allocated to each unit that’s produced and documented as part of the cost of goods sold in a manufacturer’s master budget.

The costs from the overhead budget are also used for calculating the cost of finished goods inventory, which goes into the budgeted balance sheet. Additionally, this budget will allow you to calculate a predetermined manufacturing overhead rate, which you can then use to measure your production costs.

Manufacturing Overhead Budget Example

A manufacturing overhead budget should include the following elements:

• Budgeted direct labor hours
• Predetermined variable manufacturing overhead rate
• Total variable manufacturing overhead
• Total fixed manufacturing overhead
• Total manufacturing overhead
• Capital assets depreciation
• Cash disbursements for manufacturing overhead

Most manufacturing overhead budgets cover a year, but each of these values are calculated quarterly. Here’s what a sample manufacturing overhead budget looks like. To make this sample manufacturing overhead budget, we’ve included a predetermined variable manufacturing overhead rate which we multiplied by the total direct labor hours for a quarter to find the applied variable manufacturing overhead.

Then we added the fixed manufacturing overhead for each month to obtain the total manufacturing overhead values.  Finally, we deducted the monthly depreciation value from the capital assets and organizational resources to find the actual cash paid for manufacturing overhead.

Types of Manufacturing Overhead

The total manufacturing overhead of an organization can be divided into subcategories: fixed manufacturing overhead, variable manufacturing overhead and applied manufacturing overhead for more thorough cost tracking.

You may also track the manufacturing overhead rate of your production process to determine the degree to which overhead costs increase the cost of manufacturing your products.

Fixed Manufacturing Overhead (FMOH)

The term fixed manufacturing overhead refers to all factory overhead costs that do not depend on the production volume of a manufacturing business.

Some examples of fixed manufacturing costs include the rent of the production facility, salaries of members of the production department that aren’t directly involved in the manufacturing process or the depreciation of capital assets.

Variable Manufacturing Overhead (VMOH)

Variable manufacturing overhead is the sum of all the factory overhead costs that vary depending on the production volume of the organization but aren’t related to resources that are used directly for the production of goods.

Some examples of variable manufacturing overhead costs are the cost of utilities such as electricity, water or fuel to operate machinery and supplies such as protective equipment or sales commissions.

Applied Manufacturing Overhead

The term applied manufacturing overhead refers to a method of calculating factory overhead that’s unique to the cost-accounting method in which overhead costs are allocated to a specific production order, product or department within a company.

This method allows organizations to better allocate their overhead costs and determine which processes or products are most impacted by them.

Applied Manufacturing Overhead Formula

This is the formula to calculate applied manufacturing overhead in manufacturing.

Applied overhead = estimated amount of overhead costs / estimated activity of the base unit

Manufacturing Overhead Calculation Example

Let’s now look at an example of manufacturing overhead. Consider Tillery Manufacturing, a business that makes shoes. In a good month, Tillery produces 100 shoes with indirect costs for each shoe at $10 apiece. The manufacturing overhead cost would be 100 multiplied by 10, which equals 1,000 or $1,000.

Now, what is the percentage of that? First figure out your monthly sales. Let’s say you sell 50 shoes each month. Therefore, the percentage is 1,000 divided by your monthly sales of 50 multiplied by 100 equals 5000. That gives you a percentage of two percent, which is very good. Your fantasy manufacturing business is very efficient!

How ProjectManager Helps With Manufacturing Costs

ProjectManager is cloud-based software that keeps everyone connected in your business. Salespeople on the road are getting the same real-time data that managers and workers are the floors are using to run production. ProjectManager has the tools you need to keep monitor and control all your costs, including your manufacturing overhead.

Manage Planned and Actual Costs on Interactive Gantt Charts

Once you set a baseline to capture your schedule, planned costs and actual costs can be compared to ensure you’re keeping to your budget. You add the hourly rate of your work and then assign their hours, which will then populate the Gantt and the sheet view (like the Gantt but without a graphic timeline). You can also track non-human resources, such as equipment, suppliers and more.

Track Costs With One-Click Reports

As mentioned above, you can track costs on the real-time dashboard and real-time portfolio dashboard, but you can also pull cost and budget data in downloadable reports with a keystroke. Get reports on project or portfolio status, project plan, tasks, timesheets and more. All reports can be filtered to show only the cost data and then easily shared by PDF or printed out to update stakeholders.

Streamline Payroll With Secure Timesheets

Our timesheet feature is a secure way to track the cost and the time your team is putting into completing their tasks. Teams can log hours or managers can set their hours. Once the timesheet is submitted, it’s locked for security. You can even set reminders for timesheets to make sure that everything runs smoothly.

There are other notifications you can receive by email or in the tool to alert you about activity and task reminders. Our collaborative platform lets you share files and comments with everyone no matter where or when. There are also workflow automation and task authorization features to free up your workers to focus on what matters without jeopardizing quality. You get it all with ProjectManager.

ProjectManager is award-winning work and project management software that connects teams with collaboration tools and a single source of truth. With features for task and resource management, workload and timesheets, our flexible software can meet the needs of myriad industries. Join the teams at Seimens, Nestle and and NASA that have already succeeded with our tool. Get started with ProjectManager today for free.

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To do so, there are several warehouse optimization techniques that we’ll list and define below. We’ll also explain how warehouse optimization fits into warehouse management, why it’s important and the benefits of optimizing warehouse processes.

What Is Warehouse Optimization?

Warehouse optimization is the process of managing the day-to-day operations of a business’ inventory and storeroom to get the most out of its available space and resources. This is done through finding ways to make warehouse processes more efficient, including the warehouse operations process, which includes receiving, picking, packing, storage, shipping, etc.

To achieve the goals of warehouse optimization, businesses must know the space in which goods are stored and plan how to take full advantage of it. Inventory management is also part of this process, which includes tracking, transportation, packing and shipping. Whether there’s one warehouse or many, prioritizing tasks is essential if challenging. Warehouse automation can reduce manual and repetitive tasks to streamline the process.

While warehouse optimization includes the seamless integration of technologies such as robotics and Internet of Things (IoT) sensors, project management software can handle the various tasks and resource scheduling involved in running an efficient warehouse. ProjectManager is award-winning project and portfolio management software with customizable kanban that can streamline warehouse operations processes to gain greater efficiency. Kanban boards can mimic warehouse processes and cards can schedule resources, track costs and hold task details, such as description, priority and assignee. Get started with ProjectManager today for free.

Types of Warehouse Optimization Techniques

There are many ways to achieve the goals of warehouse optimization. All of them can be important, but four are essential and should be part of any warehouse optimization plan. They are as follows.

1. Warehouse Layout Optimization

The warehouse layout is key to optimizing the space to store more and pick faster. A warehouse manager will want to use every square inch of space to its fullest potential. There are many ways to do this via warehouse management, such as strategically selecting racking systems. Think about which is best for how business is being done, whether that’s pallet racking, cantilever or drive-in racking.

Horizontal space is only part of the equation. One must also seek to convert underused vertical dimensions. High-rise shelving and mezzanine levels can greatly expand the layout of the warehouse space and increase capacity. Flexible work areas can be modified according to requirements, such as during the seasonal rush. All of these measures provide tangible benefits, such as reducing rental costs, enhancing mobility and lowering energy costs.

2. Warehouse Storage Optimization

Different but related to warehouse layout optimization is warehouse storage optimization. When talking about storage, it’s more than space, but the strategic placement and rotation of stock. Various methods can be employed, such as directed or random putaway, combined with ABC analysis (prioritizing more important goods) and determining stock-keeping unit (SKU) prioritization.

For example, items with a high turnover rate should be easily accessible to reduce picking times and facilitate logistics management. Stock transfers can also refine the selection of optimal locations for each SKU. Climate control is key to keeping inventory and goods with precise storage specifications must be considered, such as temperature or humidity levels. That’s where first in, first out (FIFO) systems can help with efficient rack rotation, curtailing obsolescence and spoilage.

3. Warehouse Slotting Optimization

Slotting is the process of organizing a warehouse to maximize space and efficiency. This process is also used to improve inventory management and can reduce the overall cost of warehousing goods. This is often done by SKU number, product type or any other type of project characteristic.

Optimizing slotting is beneficial for many reasons. For one, it allows for faster picking with fewer errors as it avoids confusion for the picker. It also increases the storage capacity by identifying opportunities, which can help a business delay expanding or spending more on additional warehouse space. Finally, it leads to a reduction in carrying costs. By improving processes, carrying costs are minimized as businesses don’t have to hire more help or rent out additional warehouse space.

Warehouse Picking Optimization

This addresses labor by enhancing workforce productivity without sacrificing employee welfare. This starts by hiring well-qualified workers in the warehouse. That, of course, is easier said than done. One course of action is to have regular training programs to hone the skills of the workforce, but also reinforce safety protocols. This can help boost job satisfaction. Think about an ergonomic workspace design, which can reduce work-related stress and absenteeism.

Another thing to consider is effective shift scheduling to ensure that the warehouse operates at peak capacity and doesn’t squander resources over slow periods. Employees want employers to think of their happiness and expect a work-life balance, fair pay, benefits, scheduling flexibility and mental health care. Provide this and expect a more motivated workforce, diminished turnover rates and optimized operations with existing resources.

Warehouse Optimization vs. Warehouse Management

Warehouse optimization is part of the larger warehouse management. Warehouse management is made up of the principles and processes involved in running the day-to-day operations of a warehouse. Warehouse management seeks warehouse optimization in organizing warehouse space, scheduling labor, managing inventory and fulfilling orders.

Benefits of Warehouse Optimization

There are many reasons why optimizing a warehouse is good for business. Many of those have already been touched upon, but there’s much more to say about why warehouse optimization is important for business.

For one, it increases employee productivity by assessing current workflow, making changes and improving operations, which creates more warehouse space. This makes for a more comfortable working environment, which reflects positively on employee productivity.

Warehouse optimization also improves organization and flow by improving the layout to better pack, ship and store goods. Optimizing warehouse storage increases capacity and improves organization and, therefore, the flow of operations. It makes it easier for employees to do their jobs and reduces the time it takes to complete orders.

This also helps avoid missed sales opportunities. With the improvement of facility storage, the chances of missing out on sales are diminished because more storage means it’s possible to increase production if necessary. The more product stored leads to more products sold.

All this leads to money, time and resources saved, whether it’s ordering in bulk (suppliers often discount for bulk) or avoiding the need to rent or purchase new storage space. Increased space and improved workflow will also lead to a decrease in employee injuries.

Warehouse Optimization Tips

Now that it’s clear what warehouse optimization is and the various techniques that can be used to deliver efficiency to a business’ inventory management, it’s time to explore some ways to get the most out of optimizing a warehouse. We’ve outlined some tips for optimizing warehouse layout and organization, workflows and processes, tools and technology.

Design a floor plan that meets current needs, but also allows for growth. For example, you should set up quality control areas near the packaging area. Always use clear signage for efficient navigation and make aisles as wide as possible to increase storage capacity. Each zone should have hard boundaries to maximize space efficiency. If needed, you can reclaim floor space with the 5S method: sort, set in order, shine, standardize and systematize.

It’s important to know your staffing requirements and outsource work as needed to handle spikes in demand. The warehouse should operate at 85 percent occupancy to avoid congestion. Partner with shipping providers to provide shipping options for your customers and consider a multi-order picking process.

Finally, use project management tools. This is an easy way to monitor key performance indicators (KPIs) and eliminate information silos. Software is also helpful in identifying peaks in warehouse capacity and can help analyze supply chain performance and adapt to changing market conditions.

ProjectManager Helps Manage Warehouse Operations

That last tip of using software is especially important. While there are robotics and other tools designed to improve the logistics of warehouse operations, project management software provides efficiencies in how work is planned, executed and managed. ProjectManager is award-winning project and portfolio management software with features to optimize warehouse operations. We’ve already mentioned how kanban boards can streamline warehouse operations and manage order fulfillment, but that’s only the beginning of what they can do.

Set Workflow Automation and Recurring Tasks

Warehouse optimization is fostered by many things, utmost among them automation. The more work that can be taken out of the hands of employees gives them the freedom to devote that time to more important tasks. Workflow automation streamlines manual and repetitive tasks. Use it with custom workflows to automate actions when defined triggers occur on the task level. For example, when the status of a task changes from picked to pack the task can be assigned to another employee. There are also task approval settings for quality control. Use recurring tasks to stay reminded or repeat work.

Manage Resources and Monitor the Costs of Warehouse Operations

Keeping employees working at capacity leads to greater productivity. Use the team page or the color-coded workload chart to view all employees’ tasks. See instantly who is over- or underallocated. Then, balance their workload to keep everyone working and happy. Use the real-time dashboard to get a high-level workload overview and much more. The dashboard constantly updates with live data, such as cost and time, which are then displayed on easy-to-read graphs and charts.

The kanban is only one of the multiple project views available. Users can choose between Gantt charts to plan, schedule and track warehouse operations activities. Link task dependencies to avoid delays and set a baseline to track the planned effort against the actual effort in real time. Employees can use task lists to stay on top of their work, while stakeholders can use the sheet or calendar view to stay updated. All project views update simultaneously so everyone is always working on the same page.

ProjectManager is online project and portfolio management software that connects everyone whether they’re working in the office or on the warehouse floor. They can share files, comment at the task level and stay updated with email and in-app notifications. Join teams at Avis, Nestle and Siemens who use our software to deliver success. Get started with ProjectManager today for free.

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To understand effective warehouse operations, you must first be clear on the warehouse operations process and how it plays into the larger warehouse operations management. Read about that and how to improve the efficiency of warehouse operations.

What Are Warehouse Operations?

Warehouse operations consist of the processes used when managing the activities associated with receiving, storing, packing and distributing goods in a company’s stockroom. This includes warehouse management systems (WMS), workflow processes, human and nonhuman resource management and more.

Warehouse operations aim to satisfy customer needs and requirements while optimizing space, equipment and labor as effectively as possible. That means that stored goods must be accessible and protected from damage. Achieving these goals requires ongoing planning and being able to quickly adapt to change.

Project management software can help manage the warehouse operations process to reach its objectives. ProjectManager is award-winning project and portfolio management software with powerful kanban boards that help control the inventory life cycle. Kanban boards can be set up to reflect the warehouse operations process, while kanban cards can capture data from individual orders. Each card can track planned versus actual progress, schedule resources and more to keep warehouse operations running smoothly. Get started with ProjectManager today for free.

The Warehouse Operations Process

Project management software will help control the warehouse operations process. However, this requires an intimate understanding of the warehouse operations process. There are six fundamental processes to warehouse operations: receiving, storing, picking, packing, shipping and returning. Being able to optimize these seven processes streamlines warehouse operations and reduces costs and errors, which leads to a higher perfect order rate.

Receiving

This is the first warehouse operations process, also one of the most important to perform properly. It starts by verifying that the right product in the right quantity and without damage was delivered. The responsibility of the goods is then transferred to the responsibility of the warehouse, which is now tasked with maintaining the condition of the goods as received until shipped. Doing this allows warehouses to filter out damaged goods and avoid liability.

Put-Away

Once received, the goods must be taken from the receiving dock to their warehouse storage location. Not putting goods in their proper place interferes with warehouse operations and reduces productivity. Putting away goods also allows them to be stored more efficiently, reduces travel time, ensures safety for goods and employees, utilizes space better and makes it easier to find, track and retrieve when needed.

Storing

This leads to the next warehouse operations process, storing the goods. Put-away moves the goods from where they’re received to the warehouse. Storing is finding the opportune site to store each of the goods that are received. As noted, this helps optimize space and increase labor efficiency.

Picking

When a customer order comes in, goods must be retrieved, which is the picking process in warehouse operations. This is the most expensive process in warehouse operations and can be over half of the total operating expense for the warehouse. Therefore, being as efficient as possible with the picking process can save money and increase warehouse efficiency. Another advantage of streamlining the picking process is it increases accuracy as errors negatively impact customer satisfaction.

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Packing

Once picked, the goods must be packaged. Packing is the consolidation of picked goods from the customer’s sales order that’s then prepared for shipment, such as putting them in boxes and adding address labels. It’s important to avoid damages during this process and when packing use lightweight materials that protect the goods but don’t add undue costs to shipping.

Shipping

The final step in the warehouse operations process is shipping (unless goods are returned, but we’ll get to that in a moment). If all the other processes have been done correctly, all that’s needed is to ensure that the package is delivered to the right address and customer when it’s expected and without damage. Also, shipping should be as economical as possible for the shipper without impacting the delivery for the customer.

Returning

Occasionally, goods will be returned due to damage or an error. This process begins with the prior process. When shipping, a return label should be included in the packaging. Once the return is delivered to the warehouse, staff should inspect it for damage, review the reasons for its return and scan it back into the tracking system. If the item isn’t damaged or expired, it can be returned to its place in the warehouse, otherwise, it should be discarded or salvaged. Detailed records of this process should be kept.

What Is Warehouse Operations Management?

Warehouse operations management is simply the principles and processes involved in running the day-to-day operations of a warehouse. This includes all processes defined above, but also the scheduling of labor and the management of inventory and order fulfillment. Warehouse operations management seeks to have all these aspects of running a warehouse’s operations work together as efficiently as possible to increase productivity and reduce costs.

How to Improve the Efficiency of Warehouse Operations

It’s clear that improving the efficiency of warehouse operations is key to running a successful business, but what are some practical things that can be done to increase efficiency? Below are some of the things that warehouse operations will benefit from employing.

Use a Warehouse Management System

A warehouse management system is made to increase efficiency and accuracy in the warehouse operations processes. The software can be found in businesses working in retail space, distribution and manufacturing. That’s because the WMS improves the flow of goods through automation, which eliminates human error, reduces labor costs and can track orders.

Automate or Outsource Warehouse Operations

Automated workflows will help streamline warehouse operations processes, but businesses can also remove the entire process by partnering with a third-party vendor. This provides companies with a more experienced and likely better service at a lower risk to them. It can also reduce costs, help with compliance with current guidelines and keep organizations focused on their core strengths.

Use Kanban Pull System for Inventory Management

Kanban pull system is ideally suited for warehouse operations because of its lean approach similar to just-in-time stock control. It means that work starts only when the customer submits a purchase order. This is a visual workflow tool designed to reduce waste, minimize inventory levels to just what’s needed at the moment and improve inventory control. This leads to cost savings and greater efficiency and the dividends are more customer satisfaction.

Optimize the Warehouse Layout

The better a warehouse is laid out, the more streamlined its processes. The benefits include less time wasted having to retrieve or pick goods, quicker turnaround times and it gives a warehouse capacity to handle a larger volume of orders. All this leads to greater customer satisfaction as well as loyalty, as they appreciate getting orders on time and in good condition.

Implement Lean Manufacturing Principles and Techniques

Lean manufacturing is all about reducing waste and increasing productivity and customer satisfaction. Running a lead warehouse does all that by taking advantage of opportunities for improvement and focusing on value creation for customers. It streamlines warehouse operations processes. It’s based on the lean manufacturing principles of eliminating waste, reducing inventory levels and improving operational efficiency.

Warehouse Operations Roles and Responsibilities

Many warehouse professionals manage and run the warehouse operations processes. Each has a distinct role and responsibility, which together keeps the warehouse operating efficiently. The following are the three basic categories of people who ensure the warehouse is working as it should.

• Warehouse Operations Manager: Oversees all daily activities of the warehouse. As part of the supply chain, they must be adaptable, open-minded, have strong communication skills and build and manage a self-sufficient team.
• Warehouse Supervisor: Also oversees the general operations of the warehouse and its staff, including recording and maintaining inventory, advising receiving and shipping as well providing training. They work under the warehouse operations manager.
• Warehouse Workers: The team responsible for managing customer orders, overseeing and processing incoming stock, picking, packing and shipping orders as well as dealing with returns.

Why Are Warehouse Operations Important for Businesses?

As stated at the start, a company involved in selling goods lives and dies by the success or failure of its warehouse operations. It’s that important for business. It satisfies customer demand and builds customer loyalty. Effective warehouse operations will increase productivity and much more. Here’s a short list.

Order Fulfillment Process

The order fulfillment process starts with receiving a customer’s order and ends with delivering the goods to that customer. Along the way, goods are stored and managed to avoid overstocking and shortages. Warehouse operations play a critical role in this process, ensuring that orders are accurately picked, packed and prepared for shipping.

Supply Chain and Logistics Management

The warehouse is a bridge between production and distribution in the supply chain. Warehouses store goods after they’re produced or procured until they’re shipped to the customer. That shipping is where logistics management comes into play. It ensures that goods are delivered to the right place, on time and in proper condition, while keeping costs low and maximizing efficiency.

Inventory Management

A warehouse serves to store inventory, which is why inventory management is forever tied to warehouse operations. That’s because inventory management controls the warehouse operations process from order to storing and selling of goods. It manages supplies and the floor of raw materials from procurement to finished products in production.

Operational and Production Costs

Without managing warehouse operations, costs are likely to get out of control. Operation costs include the cost of the goods being made and stored, but also all operating expenses, called selling, general and administrative (SG&A) expenses. Production costs are direct and indirect costs from manufacturing a product, such as labor, raw materials, etc.

How ProjectManager Helps With Warehouse Operations Management

Considering the importance of warehouse operations, businesses seek the best software to help them manage the warehouse operations process. ProjectManager is award-winning project and portfolio management software with the features to plan, schedule and track warehouse operations activities in real time. Resource management tools and cost-tracking features ensure that warehouse operations stay within budget and customers receive their orders on time.

Plan, Schedule and Track Warehouse Operations Activities

Warehouse operations include activities such as receiving, storing, packing and shipping, to name only a few. Planning out those activities on a robust Gantt chart makes sure that all those tasks are organized and assigned. Managers can see the whole plan in one place but also link all four types of task dependencies to avoid delays. When the schedule is complete, set a baseline to capture it and associated costs. This allows managers to track the planned effort against the actual effort in real time to stay on schedule.

Manage Resources and Monitor the Costs of Warehouse Operations

To keep to that schedule requires constant monitoring. Human resources are responsible for the day-to-day warehouse operations and their tasks can be viewed in one place on the team page or color-coded workload chart. If someone is over- or underallocated, balance their workload to keep everyone working at capacity. For a high-level overview, toggle to the real-time dashboard, with easy-to-read graphs and charts showing time, costs, workload and more.

When more detail is called for, use the customizable reporting features. Reports on timesheets, project or portfolio status, variance, workload and more can be generated with a keystroke. All reports can be filtered to show only what’s important and then shared in a variety of formats with stakeholders to keep them updated.

ProjectManager is online project and portfolio management software that connects teams whether they’re in the office, in the factory or warehouse floor. They can share files, comment at the task level and stay up to date with email and in-app notifications. Join teams at Avis, Nestle and Siemens who use our software to deliver success. Get started with ProjectManager today for free.

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