In this three part series we ask you to consider, What are the top key performance indicators (KPI’s) for your industry? Are you using KPI’s to manage your business successfully? Do you track, report, and utilize this data regularly to improve your manufacturing or distribution business? In this segment, we’ll look at KPI’s and considerations for manufacturing and distribution organizations.
There’s a good chance you’re experiencing the same current reality as a lot of manufacturing and distribution organizations in 2020. You’ve been impacted by a global pandemic; you could be slowing down, frequently starting and stopping, performing lay-offs, and shifting the How and What that have long been a focus. You might find yourself in a position to redefine or even re-invent some or many aspects of your business. McKinsey and Co. recently shared that redeploying talent, improving productivity, and shifting operations are three of five recommendations for reinventing your organization, post-Covid. We agree, and have taken on some of these ourselves here at ZBrains.
Using KPI’s to Manage Your Business
If you’re reading, and you’ve already identified – and are successfully using – data to capture KPI data for business insight, we’d like to present you with a stretch goal as you read through the article. Consider the competitive advantage of your business, the thing that sets you apart from your competitors.
- What differentiates you?
- And are you able to measure it today?
- How would your business change if you could measure and act on your differentiator?
Perhaps the content in this article can help trigger some ideas for you.
If your KPI’s are unknown or underutilized, you might be losing out on opportunities to set you up for a better trajectory in an unstable environment. We recommend this article for examples of some Key Performance Indicators for your industry. While there are many, many more than listed, the KPI’s we share are more or less universal for each industry where they’re listed. We hope it gives you ideas about the other data you want to capture. (You may even want to bookmark this article for reference again later.)
Keep reading for KPI’s by industry for manufacturing and distribution, and some thoughts about how you can put them into action with Zoho.
Manufacturing Industry KPI’s
The metrics required to successfully operate your manufacturing business are many and varied depending greatly on how and what your business is doing. However, speed and accuracy are paramount to doing it successfully with a gainful ROI. Here are three metrics for manufacturing that we think are fundamental KPI’s.
Overall Operating Efficiency
This high-level metric is the ratio between output and input in your business. Are you getting out what you’re putting in? This metric can also apply to employees in terms of “are they maximizing their ‘on’ time and creating value for the business.”
Profit Per Employee
As a lag measure, Profit per Employee can show you which lead measurements are progressing perfectly, or which areas need attention. This measure can help you bring to light the areas where profitability could be improved.
This KPI gives insight to one of the most important pieces of information for manufacturing businesses: Is your production being fully utilized? There are associated costs to equipment, people, and space. You can ensure that each is being maximized as needed using this data. Additionally, capacity utilization can give visibility to work balancing as certain production centers are selling more or less at different times.
What additional KPI’s are essential to your manufacturing operations?
Distribution Industry KPI’s
Total sales, cash flow, and margin are essential metrics for distribution, but they’re arguably necessary for most types of businesses. Whether your business is ecommerce, industrial equipment, consumer goods, or something different, you still need to know much of the same standard information. With that in mind, three important metrics to track in your distribution center, specifically relevant to distribution KPIs, are:
Inventory Turnover Ratio
This metric will give you purchasing trend insight. As a result it can show you which items may not be advantageous to keep, or which items require higher inventory levels.
Profitability by Item
You can inform larger strategies by knowing which areas (products, customers, and markets) are most profitable for you. Your Distribution and Sales Teams will thank you for making this data available!
On Time Shipping Ratio
Compare items or distribution centers, and find trends in shipping for performance improvement opportunities. This data can inform things like warehouse product organization, capacity utilization, and more whether it be an overall systemic issue or an item specific one.
Does your company have any data that’s been difficult to lock in? ZBrains consultants specialize in helping you identify, organize, and utilize this information for better business results. We help you bring all the pieces together from quoting to inventory and finance.
Why should you care about using KPI’s to manage your business?
We’ll end here with a quick summary of points to consider when you are researching KPI’s to use in your business. Think about which are most important to you, and can you get your hands on the data for them? Here six key reasons we think you should consider using KPI’s to manage your manufacturing or distribution business:
- KPI’s can offer early identification of issues (lead measures)
- You get visibility to overall company health without a great outlay of executive time
- Reference KPI’s and use them as guidance for decision making and strategy
- High level metrics make it easy to communicate business goals with your environment
- They will help you become familiar with patterns in your organization
- Finally, they can key you in on significance in areas needing performance improvements
Why is Zoho a great solution for helping you capture and report the data you need for your business?
This all boils down to financials and time tracking each of the seemingly small areas of your business. They can add up to big results. Currently, you might be paying for a lot of systems, and a change to one can affect the others and require development expenses. Maybe you have to manage multiple vendors, or your teams are working from siloed data. You can run reports and gain visibility to your organization using Zoho’s end-to-end solution.
Quit struggling to track your KPI’s, and avoid the disparate systems of data that make global reporting cost-prohibitive and time consuming.
If you’re taking the next steps to learn more about achieving more by using KPI’s to manage your manufacturing or distribution business, contact us any time.