There are thousands of financial, sales, manufacturing, and operational metrics that manufacturers develop and monitor to drive improvements throughout every aspect of their business.
But what are the most critical metrics that transcend industry segments which everyone should consider?
Below are recommendations for key performance indicators that successful manufacturers use to grow strategically.
Revenue: Total sales of products and services generate revenue, a lagging indicator measured against sales targets and adjusted for seasonality or market fluctuations. Monitor new revenue separate from recurring revenue, which is easier to predict.
Expense: Expenses should be categorised and monitored separately. Overhead costs are indirect fixed costs independent of sales or production volume.
Cash Flow: Cash flow is vital for manufacturers who often purchase materials months before actual customer demand. Operating Cash Flow metrics are dependent on accurate net income calculations, non-cash expenses, and working capital analysis.
Estimates/Quotes: Your sales pipeline is a leading indicator of future revenue and manufacturing demand. Monitor estimate and quote levels and conversions for better revenue forecasts.
Marketing Leads: Manufacturing sales can be a lengthy process. It's vital to maintain and grow a pipeline of leads through various marketing activities. Measurement of lead volume, marketing activities, and conversion rates are leading indicators of future sales. Customer Metrics: Manufacturers should monitor several metrics related to customers.
These include total customer lifetime value, customer retention (or churn), customer acquisition costs, and customer growth in customer revenue and a number of accounts.
Staffing: Staff availability and efficiency are crucial for managing daily operations. Monitor attendance, performance, and employee utilisation.
Operating Margin: Also called Return on Sales (ROS), operating margins measure profits after paying variable costs before interest or tax. They are a vital metric to measure topline operational performance.
Quote-to-Cash Cycle: Quote-to-cash is the time from customer quote to cash receipt. This top-line metric reflects efficient order cycles, fulfilment, and accounts receivable collection business processes.
Throughput: Throughput is a critical metric for manufacturing businesses. Measure throughput using production volume by units produced or as a percentage of total production capacity.
Schedule Attainment: Analyse actual production completion dates compared to required dates to understand how manufacturing performs against customer requests and requirements.
Utilisation and Efficiency: Monitor labour and machine utilisation and efficiency to spot issues and identify ways to reduce costs and improve profitability.
Metrics are meaningless without action. Therefore, every company must develop plans to continuously monitor and improve metrics with documented procedures to act on insights gained through key performance indicators.
Measures should include training and corrective actions with project management to coordinate activities.
MYOB Acumatica Manufacturing Visual Workflow Engine enables power users to see and modify states, actions, transitions, and valid values, and enabled fields to control workflow without coding.
Leverage ERP workflows to manage corrective actions and trigger business events to create and assign tasks for users in the system.
Employee training is crucial to ensure that existing and new employees understand the importance of metrics and their role in data collection, assessment, and corrective actions.
Leverage embedded wikis as training aids for employees, create training videos on wiki pages and generate recurring training tasks with CRM to ensure that employees review metric policies and procedures frequently.
Metrics provide manufacturing leaders with real-time business insights to remain agile and drive innovation throughout their organisations. However, manufacturers with disconnected systems and legacy ERP applications struggle to connect data across disparate platforms with few tools to streamline metric management.
Modern cloud applications like MYOB Acumatica Manufacturing empower manufacturers with real-time insights through role-based dashboards, live reports, and inquiries with drill-downs to source transactions. In addition, dimensional business intelligence and automated business events and workflows empower leaders with tools to manage their business objectives efficiently.
Built on a future-proof cloud platform with native artificial intelligence and machine learning, MYOB Acumatica Manufacturing provides unparalleled manufacturing depth with robust financials, native customer relationship management, and powerful business intelligence applications.
Selecting the right ERP system for your business is difficult. There are 100s of choices out there and it can all get a bit confusing. Do you need industry-specific requirements?
Boost sales, maximise resources, and improve profits with best-in-class applications for production, estimating, engineering, material planning, scheduling, product configuration, and manufacturing data collection.
MYOB Acumatica Manufacturing is designed for Australian discrete manufacturers to support their ongoing growth and success.