The document outlines the importance of driver-based KPI analysis for manufacturers as they prepare for 2021, emphasizing proactive decision-making in a changing business landscape. It details various planning focuses and decision-making supports across areas such as prospecting, supply chain management, and employee safety, along with notable KPIs to monitor. Continuous monitoring of KPIs aligned with budget goals is essential for companies to successfully navigate the recovery from COVID-19 impacts.

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© Copyright 2020. CBIZ, Inc. NYSE Listed: CBZ. All rights reserved.
CBIZ Manufacturing
& Distribution
OCTOBER 2020
By LUKE ESPICH, DIRECTOR, STRATEGIC FINANCIAL
PLANNING & ANALYSIS
A
s companies plan for 2021, driver-based analysis
will be vital for proactive decision-making and
managing a shifting business environment.
Manufacturers commonly monitor business activities
through key performance indicators (KPIs) that boil
down financial and production outputs into meaningful
operational insights. As you enter an accelerated recovery
mode, your management teams should take inventory of
your current processes to unlock data-driven decision-
making on a day-to-day basis across your business.
The following KPI considerations are a few of the key
factors that will help spur driver-based discussions within
your organization. For each area of focus we suggest the
people, processes and technology that typically inform
the decision-making process.
Prospecting & New Business
Your customers are operating in a new and changing
landscape just as you are. One of the key considerations
for companies in 2021 will be to gauge new opportunities
and changes in customer demand. If the company has
used digital tools to assist in prospecting new business
and maintaining customer relationships, such as a
customer relationship management system (CRM), it
is time to consider investing time and resources into
cultivating those relationships.
Planning areas of focus
■ Maximize opportunities to sell additional products
and services to your existing customer base.
■ Take a fresh look at significant customers to
anticipate risk in projections and take mitigating
action where possible.
Decision-making support
■ People – sales and customer relationship
engagement
■ Process – monthly sales forecasting
■ Technology – CRM system; business intelligence
solutions
Notable KPIs
■ Weighted pipeline value
■ Value of new opportunity generation
■ Value of closed opportunities
■ Trend of daily gross revenue
■ Net sales %
■ Backlog days
■ Value of customer attrition
Production, Warehousing Shipping Interplay
As supply chains recover from a fractured state, your
organization will have to implement the best strategy
in terms of supply chain and fulfillment optimization.
Tracking real-time core metrics across purchasing,
production and warehousing intertwined with targets
and relevant financial impacts can pinpoint areas of
opportunity in which supply chain leaders can proactively
optimize operations. From raw materials to finished
goods, a more granular view of inventory turns and days
on-hand can help reduce the inefficiency of tying up cash
in slow-moving or excess inventory on an ongoing basis.
Planning areas of focus
■ Proactive supply chain management – month-end
snapshots of operational performance may not
be timely enough to react to changing supply and
demand factors.
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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