Using key performance indicators (KPIs) to monitor and enhance business operations is not an option in the fast-paced and cutthroat fast-moving consumer goods (FMCG) sector. The success of FMCG firm depends on the ability to monitor and act upon five critical metrics, whether you are a senior executive, a member of the C-Suite, or a leadership position. Although the “periodic review” is a favored practice, continuous reviews and exception reporting are much more timely and effective in managing inventories.
IQR is an inventory management system that helps prevent the formation of excess and obsolete inventory. That means less money in inventory, lower carrying costs, and increased capital to operate your business. IQR provides unique analytical tools to effectively reduce your inventory levels and improve the quality of that inventory. Said another way, IQR is an inventory management system that includes a metric, a method and a tool that helps you reduce inventory and keep it down.
Reasons For Quality Inventory Management Systems
Earning money from home is actually very easy and doesn’t require any startup fees in most cases. This is a very powerful an effective tool for inventory valuation, reduction and review. Inventory managers find it very difficult to distinguish the good from the bad inventory in their facilities.
Mat Huffman, digital warehouse lead at MB Klein, told us about his experience using a SkuVault and BigCommerce integration to manage the company’s online store and brick-and-mortar store. Six Sigma is a brand of teaching that gives companies tools to improve the performance of their business and decrease the growth of excess inventory. Perpetual inventory management is simply counting inventory as soon as it arrives. It’s the most basic inventory management technique and can be recorded manually on pen and paper or a spreadsheet. Inventory control and monitoring systems are accounting approaches to track the number of goods on hand. Big companies often monitor inventory across stores, warehouses and even websites.
- Inventory control and monitoring systems are accounting approaches to track the number of goods on hand.
- It includes the cost of capital, storage space, handling, insurance, taxes, depreciation, and obsolescence.
- It’s difficult for inventory managers to tell the difference between good and terrible inventory in their convenience stores.
Until recently the limiting factor has been the time required to monitor and evaluate inventory performance. An effective inventory system helps lower inventory holding costs and provides easy access to standardized inventory locations. Both Facebook and Alphabet depend on advertising sales, so the steep decline in advertising from hard-hit industries such as travel early in the pandemic hurt both of those companies. They’re both doing just fine now — Facebook reported 56% revenue growth for the second quarter, and Alphabet saw sales jump 62%.
Transformation of Demand Planning, Procurement & Supply Chain with Data Analytics
Taking advantage of that ability in a way that does not cost too much is the future of this industry. Inventory control practices and policies should apply to more than just finished and raw goods. The following graphic shows all the things a business might manage using these practices. Initial freight charges, along with storage, security and maintenance of excess inventory, cost money and increase operating expenses for a business. Your customer also sees this number when viewing your website, and will be prevented from ordering an out-of-stock item. Having a modern IMS will mean less hassle for your customers, which likely will lead to repeat orders.
IBF On Demand Podcast
Just in case refers to an inventory strategy where companies keep large inventories on hand in case of a large and sudden increase in demand. For JIT manufacturing to succeed, companies must have steady production, high-quality workmanship, glitch-free plant machinery, and reliable suppliers. The sustainable growth rate is the maximum rate of growth that a company can sustain without raising additional equity or taking on new debt.
KPIs for FMCG Success
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Inventory shrinkage is the loss of inventory due to theft, damage, spoilage, misplacement, or error. It reduces your inventory value and profitability, and can indicate poor inventory security and quality control. To monitor your inventory shrinkage, you need to identify the sources and causes of your inventory loss, and quantify it as a percentage of your total inventory or sales. Many of the best practices noted earlier involve ad hoc analyses of the various order parameters coded in our MRP systems.
- The type of stock you have can also determine how much you should keep on hand.
- The IQR methodology as an inventory performance measurement approach “obsoletes” inventory turnover which lumps “good” and “bad” inventories all together.
- From geopolitical changes to supply chain disruptions, we help you stay a step ahead, ensuring continuity and stability.
- These include safety stock, lead time, order quantity, lot sizes, past usage and replenishment cycles.
- Whether your concern is thieves and shoplifters or your employees, stock security affects the bottom line.
For mature tech companies that produce profits, the price-to-earnings ratio is a useful metric. Divide stock price by per-share earnings and you get a multiple that tells you how highly the market values the company’s current earnings. The higher the multiple, the more value the market inventory quality ratio is placing on future earnings growth.
Stockout Rate
When I was consulting, it was not uncommon to see clients with low-quality inventory in the range of 25% to 50%. Periodic reviews and measurement of inventory quality, followed by purging the warehouses and plants of useless products, is among the simplest ways to reduce inventory. Certainly, finished goods inventories should be examined, but the real opportunity is usually with the raw, pack, and component inventory left unused for 12 months or with excess coverage. There are many reasons why this excess inventory exists, including discontinuations, poor EOQs, packaging changes, and formula changes.
Ensuring your stock is secure should also be top of mind when thinking about inventory control. Whether your concern is thieves and shoplifters or your employees, stock security affects the bottom line. Our savings compliance tracking closely monitors and validates realized savings against projections, ensuring transparency, accountability, and confidence in your procurement strategies.
McKinsey & Company reports that companies with high sales growth are 2.3 times more likely to have a data-driven strategy. The POR key performance indicator measures how well-rounded and precise orders are. It includes delivering on schedule, the right amount of stuff, and flawless paperwork. Fast-moving consumer goods refer to an enormous class of goods bought and sold frequently and at low prices. Items like cosmetics, packaged foods and drinks, beverages, cleaning supplies, and more fall under this category. Fast inventory turnover, widespread distribution, and massive FMCG manufacturing runs are the pillars on which the FMCG sector is built.