Timely Performance Measurement and Analytics in a Demand-Driven World

Collecting execution-based data about actual demand and supply activities in real time or near real time, at the necessary level of granularity, is critical to perfect order attainment, and should not be limited to just your own internal planning and manufacturing processes. For effective performance management, the food and beverage manufacturer needs to define and manage the business based on internal, customer and supplier target metrics, which might include specific products, quantities, timelines, levels of quality, windows of responsiveness to change and goals around rewards and penalties associated with hitting or missing targeted results during actual execution, all within their end-to-end demand driven supply chain.

Focus on the Right Performance Measures

Food and beverage manufacturers may be tempted to continue focusing on performance metrics originally developed when they operated on a ‘push product to inventory’ rather than a more competitive ‘customer pull’ based, demand driven business strategy. Such make to stock metrics have traditionally been related to either efficiency or cost factors.

Certainly accurate costing is still important, along with manufacturing efficiency, utilization rates, and return on capital. While all of these internal metrics remain important business standards, in a demand-driven supply chain, measuring service performance in your customers’ terms is even more critical.

Look at the whole supply chain. Analyze actual sales in detail. Measure forecast accuracy by product and customer, not just at the product line level, in order to understand perfect order performance and other supply chain metrics. Provide your sales team incentive, not on their forecast accuracy, but on their ability to continually improve forecast accuracy. Continuous improvement is a better goal than measuring absolute forecast accuracy, though setting a realistic minimum accuracy target is also important. Once you’ve set forecasting performance goals, follow up by measuring and rewarding sales and marketing appropriately against these goals.

It’s important to measure out-of-stock occurrences, not just at the distribution center, but as close to the point of use as possible. Focusing on these and similar external measures of service performance will help move your business towards being more demand driven.

Lot Tracking Visibility and Shelf Life

Both customer and government regulations dictate that food and beverage manufacturers provide track and trace audit control by individual inventory lot, following through the entire supply chain, from source to end consumers.

The ability to automate the collection of every material transaction (i.e. real time data collection) and to be able to perform timely customer spot audits that ultimately confirm the safe and secure handling of a product lot (i.e. execute against stringent performance metrics) – this, in itself, is a key metric of the manufacturer’s demand driven supply chain, a supply chain that focuses on further accelerating inventory turns and keeping material fresh and in constant motion.

The useful shelf life of inventory ingredients, intermediates and finished good lots, often with very low inventory stocking level policies, given demand fulfillment lead times, places extra emphasis on forecast accuracy and demand planning, in a demand-driven supply chain. This provides a clear example of the importance of real time information and visibility of material aging and shelf life by product lot and inventory location, in the plant and throughout the supply chain. Manufacturers can better manage their business based on the critical performance metric of both expiring and expired material as potential waste, as well as the impact on revenue due to lost opportunities as unmet sales demand, or as credited sales returns.

Leveraging Evolving Technologies

New technology advancements continue to provide food and beverage manufacturers improved opportunities for real time performance visibility and management, as well as offering data mining tools for improved historical trend analysis.