Over the past several years, manufacturing and distribution (M&D) companies have experienced unparalleled changes and disruptions, challenging companies and leaders to rethink and pivot to stay ahead of the curve. The cost of containers and shipping remains higher than ever before, and labor markets are significantly tighter with salary increases due to intense competition. Companies must continue to evaluate their systems, streamline operations, and make thoughtful pivots to succeed. In the current marketplace, agility is the name of the game.
Citrin Cooperman’s 2023 M&D Pulse Survey identified several key performance indicators (KPIs) from over 200 top senior executives. The large majority of these leaders currently use financial dashboards to monitor their KPIs. Higher revenue companies are even more likely to use these, underscoring the importance of monitoring and tracking metrics for the success of a company.
Below are the top three KPIs that were identified in our survey.
1. Quality control performance
Quality control (QC) affects both material costing and order fulfillment and was noted as the top KPI by our survey respondents. Monitoring and continually improving QC measures can help your company detect and minimize unnecessary costs. In a competitive market saturated with copious options for consumers, a solid brand identity and consistent quality helps companies rise above the rest. Having real-time data on your materials, suppliers, machines, operators, and production times is incredibly important to the success of any company.
2. Material costing
Climbing interest rates, unending inflation, widespread labor shortages, geopolitical instability, and effects of climate change have all had impacts on the cost and souring of materials. Companies should routinely assess their suppliers, identify, and form relationships with backup suppliers. M&D companies can only pass a finite amount of increased costs, such as higher employee salaries, onto their customers to remain competitive. Transparency has become increasingly important to the modern consumer – communicating any changes in cost or supply will help to establish and maintain trust.
3. Order fulfillment
Consumer preferences and demands have shifted since the onset of the pandemic in 2019. Many customers now prefer the ease of making online purchases and expect reliable, fast shipping. Companies with slow or unreliable lead and delivery times will struggle to keep up with their quicker counterparts. Tracking lead and delivery times can help your company identify inconsistencies so that any issues can be improved promptly. You cannot create efficiencies by sacrificing on quality, so it’s important to evaluate both.
Many companies are also focused on monitoring inventory management, capacity utilization, throughput (how fast the machines are creating the product), machine utilization, and predictive maintenance of the machines. Along with those KPIs, it is also important to track customer satisfaction, measure returns, and identify products that are defective or inferior to ensure that all of these changes are not forcing an issue somewhere else.
The power of technology
To effectively measure these KPIs on a routine basis, leveraging technology is paramount. If your business has not made recent investments in upgrading technology, now may be an advantageous time to do so. The implementation of more sophisticated technology can help companies better forecast and budget, so all of the metrics have meaning and purpose.
Not only can technology help to track and evaluate KPIs, an enterprise resource planning (ERP) system can also help to address ongoing labor shortages by offering increased automation for rote tasks and significantly improving efficiencies. Ninety-six percent of the top senior executives polled in our 2023 Pulse Survey indicated that their company uses an ERP system, and ninety-four percent said that their system is integrated with their inventory sourcing partners.
Without careful planning and action to make necessary adjustments, these metrics are rendered ineffective. Continual evaluation and implementation of a plan of action is necessary for M&D companies to be at the top of their game. Review your indicators often, make a plan to implement necessary changes, remeasure, repeat. Citrin Cooperman’s Manufacturing and Distribution Practice can help you plan for the unexpected. Our team is well-equipped to help your business identify, implement, and improve effective monitoring systems. For more information, please contact Jennifer Hogencamp at firstname.lastname@example.org or Citrin Cooperman at email@example.com.
“Citrin Cooperman” is the brand under which Citrin Cooperman & Company, LLP, a licensed independent CPA firm, and Citrin Cooperman Advisors LLC serve clients’ business needs. The two firms operate as separate legal entities in an alternative practice structure. Citrin Cooperman is an independent member of Moore North America, which is itself a regional member of Moore Global Network Limited (MGNL).
Jennifer Hogencamp is a partner in Citrin Cooperman’s Providence office, with almost 20 years of public accounting experience. Jen provides audit services to a wide array of clients including those in the education, hospitality, technology, and manufacturing and distribution industries.
500 Exchange Street, Suite 9-100 | Providence, RI 02903 | 401-421-4800 | citrincooperman.com