Ongoing monitoring of KPIs against targets helps companies analyze performance and provides a measurable path to successful execution of your recovery strategy. This article offers manufacturers KPI considerations for several key factors that will help spur driver-based discussions within your organization.
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■ A more granular view of days on-hand can help
reduce the inefficiency of tying up cash in slow-
moving or excess inventory.
Decision-making support
■ People – operations and sales coordination
■ Process – sales and operations; operations KPI
flash reporting
■ Technology – ERP and MRP systems; business
intelligence solutions
Notable KPIs
■ Production and shipping volumes
■ Manufacturing capacity utilization
■ Downtime instances
■ Over-time %
■ Days inventory outstanding (DIO)
■ Order fulfillment lead time
■ On time in full delivery (OTIF)
Tracking Safety Wellness of Employees
Businesses need to prioritize the health and safety of
their employees in this business landscape. In addition
to production-related incidents, other employee-related
KPIs are critical to maintaining the organization’s overall
wellness and engagement. As such, organizations should
consider tracking employee departures and turnover
by functional areas to help identify if any additional
resources need to be deployed to maintain talent within
the company.
Planning areas of focus
■ Pinpointing areas to improve safety – tracking
incidents, such as injuries or OSHA violations, can
help illuminate broader trends and areas that may
need additional attention as operations continue to
flex (up or down) to meet demand requirements.
■ Employee engagement and turnover – in a
landscape where employees may need more
creative working accommodations, organizations
should consider taking a more purposeful
approach to analyzing employee departures and
turnover trends
Decision-making Support
■ People – executive management support
■ Process – executive flash reporting
■ Technology – payroll and incident tracking systems;
business intelligence solutions
Notable KPIs
■ Net headcount change
■ Employee turnover
■ Net revenue/employee
■ Safety incident rate
Final Thoughts
Ongoing monitoring of KPIs against targets helps
companies analyze performance and provides a
measurable path to successful execution of your recovery
strategy. In general, it is a best practice to align ongoing
performance management with the annual budget through
ongoing comparisons against both financial and KPI
targets. While you will want to select a group of measures
most appropriate for your goals and operations, these three
measures will likely be important for most manufacturers:
■ Days Inventory Outstanding: (Avg. Total Cost of
Inventory / Annual Cost of Goods Sold) x 365
■ On Time In Full Delivery: Orders that are On Time
AND In Full / Total number of cases
■ Cash to Cash Cycle Time: Days Inventory
Outstanding + Days Sales Outstanding – Days
Payables Outstanding
As manufacturing companies exit the depressed market
conditions related to COVID-19, demand and production
need to flex to meet market opportunities. To compensate
for the many unknowns of the recovery, 2021 financial
plans will benefit from utilizing KPIs to isolate the impact
of volume from other driving factors.
A shifting economic environment demands more visibility
and attention from business leaders. Management
teams need to be offensive by simplifying objectives and
empowering business leaders through KPIs.
Additional Resources
■ CBIZ’s Resource Centers: COVID-19 resource
center, Manufacturing Distribution Sectors
COVID-19 Resources, Accelerated Recovery
Resource Center
■ Article: 4 Ways the Manufacturing Distribution
Sector Can Prepare for the Post-COVID-19
Environment
■ eBook: A Roadmap to Transformative Growth
Your Team
We are here to help you identify key areas
that will affect performance in the years to
come as well as other issues that will arise
as recovery efforts are employed to combat
the effects of the COVID-19 pandemic.
Don’t hesitate to contact Luke Espich
(260.609.2317) or your CBIZ advisor for information
about the strategic financial planning and analysis
functions in the current environment.
OCTOBER 2020