Efficiency, quality, and customer service are three of the most important things to food business managers, whether they are in finance, operations, or on the executive team. You have set ambitious goals for your organisation, but with so many contributing or impacting factors towards that success, how do you tell if you are on track to reach those goals? The answer lies in being able to quickly analyse your operational performance data to provide the Key Performance Indicator (KPI) insights you need. If you are a smart forward-thinking organisation that has invested in food business management software and technology, this data will be readily at your fingertips at the click of a button. If not, manually analysing reams of paper logs and printed reports to get your answers is not ideal, and the answers you find will be out of date by the time you reach your conclusion.
Today’s food business management software solutions or Enterprise Resource Planning (ERP) systems constantly collect data electronically and in real-time at every stage of your operations; from cost of production and sale to quality control and inventory levels, or even production/packing line performance and on time delivery success.
But which insights should you be tracking? You should choose carefully and limit your dashboards to only show you the answers which indicate progress towards your organization’s strategic goals. Over-analysing your data and tracking too many KPI’s can lead to analysis-paralysis which is almost as damaging as being completely in the dark about your performance.
Most food business management software solutions will have out of the box KPI dashboards which can be configured by job role or user to show role-specific information in a user friendly visual or graphical format. These dashboards can be shared or published throughout the business to ensure efficient cross-department collaboration and inform smart business decision making. In addition, some chose to display a dashboard for all to see as an incentive or morale bosting visual indicator of performance. For example, displaying multiple packing line performance or job list data with Red/Amber/Green (RAG) status via a large screen on the production floor.
12 key KPI’s your food business management software should be tracking:
Operating Margin is a cornerstone KPI; your operating margin is a measure of how much profit you have left over after variable operating costs (such as wages, materials, operations, administrative costs, etc.) and before paying taxes or interest. This metric can illustrate if your profitability is improving—or even remaining stable—over time, and it gives some context for the other metrics you will be measuring. Operating margin is useful when benchmarking your business with your peers and competitors.
Margin per unit tracks the net earnings per unit, after deducting variable and fixed expenditures. Total Margin shows aggregated earnings per total quantity sold, after deducting variable and fixed expenditures. Margin Ratio per Unit illustrates the level of earnings compared to the expenditures.
Throughput is a measurement of how much product your manufacturing processes can put out over a set period. A dip in throughput could indicate issues or breakdowns somewhere in your production lines pointing to a need for process reviews or training or an increase in preventative maintenance.
While throughput measures the volume of food and beverage products your facilities produce, yield gets a little more specific by indicating how much of it is produced correctly. A consistent throughput but with lower overall yield could mean that one of your machines or processes is not operating correctly. Monitoring the yield of your facility can highlight potential issues before they develop into complete breakdowns or inflate your operating costs due to waste.
One of the numerous expenses food and beverage manufacturers need to manage is that of keeping maintenance and operational costs down. This is key to improving profitability. Recurring unplanned downtime is a major contributor to increased cost of production and diminished productivity. Too much downtime likely indicates a need for action; either to improve processes and training or upgrade equipment.
This is a measurement of how many times you cycle through your current inventory over a set time. It illustrates how often everything in your inventory is sold and replaced. Due to the perishable nature of food & beverage items, it is critical that your inventory turns over long before it spoils on the shelves and becomes waste.
Another important correlation to consider when defining inventory turnover goals is the gross margin on the sale of your products. Lower margins require higher stock turnover to meet revenue targets. Typically, in the food and beverage supply chain, buying less product more frequently allows for better inventory turnover metrics and less waste.
Total Inventory Quantity by Product
Shows how many units of each product are in inventory available to be sold at the beginning and the end of a specified period.
Total Inventory Value by Product
Shows the value of goods by each product line in inventory at the end of reporting period.
Total Quantity sold by Product
Shows how many units of each product was sold over a specified period.
Note: The Product category can have different metric units – weight units (kg), volume units(l), or packs units, bottles, etc.
Product Recall by Unit illustrates the quantity of product requested to return to the manufacturer. Product Recall by Value tracks the value of a certain product requested to return to the manufacturer. Whilst the Product Recall Ratio metric shows the quantity of a certain product requested to return compared to its production quantity.
This metric is essential to providing an exceptional service and customer satisfaction. Completing all orders on time, is as important as good inventory turnover. Your fill rate is the percentage of all orders that you ship on time and in full. In an ideal world this would be at 100% but, when balanced with the correct turnover of your inventory, can be difficult to maintain.
Distribution Cost as a Percentage of Revenue
One of the biggest costs for food and beverage manufacturers face is that of distributing product. A key aspect of maintaining efficiency is keeping those costs down. Tracking distribution costs as a percentage of your total revenue, will show you a picture of how efficient your distribution efforts are and prompt you to take steps whenever they trend upwards. Adjustments can be made to intercept any upward turn by consolidating multiple shipments, implementing route optimisation, or using “just-in-time” shipping processes.
Number of Non-Compliance Events
This measures the number of times your plant or facility operated beyond the regulatory compliance guidelines. It is among the most essential indicators used to analyse, and ultimately improve, compliance efforts for regulatory requirements like FSMA.
These are a selection of the many key KPIs that can be measured through analytics. With industry specific food business management software you can track the performance of a broad range of data points to ensure the productivity, profitability, food safety, service and quality requirements of you food operations are being met, and ultimately improved.