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Introduction
Managing a soft drink factory requires careful planning and a review of factory performance that meets predefined goals. Key Performance Indicators (KPIs) are the most reliable way to track plant performance. From cost of goods sold (COG) to customer retention rate, there are 7 key soft drink factory KPIs that should be tracked regularly to help managers oversee factory performance.
The top 7 soft drink factory KPIs include:
- Cost of goods sold (cogs)
- Production efficiency
- Customer retention rate
- Product quality ratio
- Sales/profit margins
- Stock rotation
- Average selling price per unit
Learning how to track and calculate each of these KPIs is essential to properly assess the success of your soft drink plant. In this blog post, we’ll look at each KPI in detail and discuss how best to track and calculate them.
Cost of goods sold (cogs)
Definition
Cost of goods sold (COGS) is the total cost of producing a soft drink, which includes the cost of materials, labor, and other expenses associated with producing the product. Tracking and calculating COGs is important for soft drink manufacturers to understand the profitability of their products and make informed pricing decisions.
Benefits of Tracking
Tracking COGs helps soft drink manufacturers make informed decisions about their products. It also allows manufacturers to identify potential opportunities for savings, such as reducing production costs or sourcing cheaper materials. Tracking COGs also allows manufacturers to better understand the profitability of their products and make pricing decisions accordingly.
Industry Benchmarks
Industry benchmarks for COGs vary depending on the type of soft drink produced. Generally, the cogs for a can of soda are around 15-20%, while the cogs for a bottle of water are around 10-15%.
How to calculate
COGs can be calculated by adding together the cost of materials, labor, and other expenses associated with producing a product. It is important to note that COGS does not include overhead costs such as marketing or administration expenses.
Calculation example
For example, if the material cost for a can of soda is .50, the labor cost is .30, and the other expenses are .20, then the cogs for the box of soda would be .00.
Tips and tricks
- Be sure to include all costs associated with producing the product when calculating COGs.
- Keep track of industry benchmarks to ensure your COGs are in line with the industry average.
- Investigate potential opportunities for cost savings, such as reducing production costs or sourcing cheaper materials.
Production efficiency
Definition
Production efficiency is a key performance indicator that measures the rate of successful production production over a given period. It is calculated by dividing the actual output quantity by the expected output quantity. The higher the production efficiency, the better the performance of the plant.
Benefits of Tracking
- Monitoring production efficiency provides insight into plant performance.
- It can help identify areas for improvement and set production goals.
- It can also help identify potential bottlenecks in the production process.
Industry Benchmarks
The average production efficiency of a soft drink factory is usually around 85%. However, this may vary depending on the type of product produced, the production process and other factors.
How to calculate
The formula for calculating production efficiency is:
Calculation example
For example, if a factory should produce 200 cans of soft drink per hour, but actually produces 250 cans, the production efficiency can be calculated as follows:
Tips and tricks
- Encourage employees to identify areas for improvement and work together to increase production efficiency.
- Regularly monitor production efficiency and adjust targets accordingly.
- Invest in technology and equipment to automate and streamline production processes.
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Customer retention rate
Definition
Customer retention rate is a KPI metric that measures the percentage of customers in a given period who continue to buy from the same company. This metric provides valuable insight into a company’s customer base, loyalty, and satisfaction.
Benefits of Tracking
Tracking customer retention rate helps businesses understand how well they are performing in terms of customer service, product quality, and marketing. Additionally, it provides insight into customer loyalty and satisfaction levels, as well as how a business retains customers over time.
Industry Benchmarks
The industry benchmark for customer retention rate varies by industry and the type of products or services offered. Generally, a customer retention rate of 70-80% is considered good. A customer retention rate of over 90% is considered excellent.
How to calculate
The formula for calculating customer retention rate is:
Calculation example
For example, if a company has 500 customers at the start of the period and adds 100 new customers during the period and ends the period with 600 customers, the customer retention rate is:
Tips and Tricks for KPIs
- Track customer retention rates by different customer segments, such as new customers and customers.
- Regularly review customer retention rates to identify changes in customer behavior.
- Analyze customer retention rates to identify areas for improvement, such as product quality or customer service.
- Develop strategies to increase customer retention, such as loyalty programs and incentives.
- Monitor customer feedback to identify potential issues that can affect customer retention rates.
Product quality ratio
Definition
Product Quality Ratio (PQR) is a metric used to measure the quality of a product relative to the quality of the same product over a defined period of time. It is calculated by dividing the current Product Quality Score by the average Product Quality Score over the same time period.
Benefits of Tracking
PQR tracking offers an accurate measurement of a product’s quality, allowing a company to easily identify areas where quality control needs improvement. Additionally, tracking PQR helps a business understand customer satisfaction and loyalty, as customers will be more likely to return to a business that consistently produces high-quality products.
Industry Benchmarks
Industry benchmarks vary, but generally a product quality ratio above 0.90 is considered excellent, while a ratio below 0.80 is considered poor.
How to calculate
The Product Quality Ratio is calculated by dividing the current Product Quality Score by the average Product Quality Score over the same time period.
Calculation example
For example, if a product had an average quality score of 8 in the last month and the current quality score is 10, the product’s quality-to-service ratio would be calculated as follows:
Tips and tricks the KPI
- Set a target product quality ratio you want to achieve and track your progress.
- Identify areas where quality control needs improvement and take steps to improve them.
- Track customer satisfaction metrics to ensure customers are satisfied with the quality of your products.
- Set up incentives for employees who consistently produce high-quality products.
Sales/profit margins
Definition
The sales/profit margins KPI measures the amount of revenue a soft drink factory generates from its sales minus the cost of goods. This metric is used to assess the financial performance of a factory, as it helps identify the amount of revenue earned per unit of sale.
Benefits of Tracking
- Sales/profit margins provide an indication of the overall financial health of the plant.
- It helps identify areas of cost savings and potential revenue gains.
- It can be used to compare the performance of different factories.
Industry Benchmarks
The average sales/profit margin for soft drink factories is around 10-20%. Some factories may have higher margins, while others may have lower margins. It is important for managers to understand the industry benchmarks for their plant and adjust their strategies accordingly.
How to calculate
The formula to calculate KPI sales/profit margin is:
Sales / Profit Margin = (Total Revenue – Cost of Goods) / Total Revenue
Calculation example
For example, if a soft drink factory has total revenue of 0,000 and cost of goods of 0,000, the sales/profit margin KPI would be calculated as follows:
Sales / profit margin = (0,000 – 0,000) / 0,000 = 0.5
Therefore, the sales/profit KPI for this plant is 50%.
KPI Tips and Tricks
- Managers should regularly monitor the sales/profits KPI to ensure that it is within expected levels.
- It is important to identify potential areas for cost savings and revenue gains to increase the sales/profit margin.
- It is also important to compare the performance of different factories to identify areas for improvement.
Stock rotation
Definition
Inventory turnover is a metric that measures the number of times a company’s inventory is sold or used during a given time period. It is an important metric for measuring the efficiency of a company’s operations and its ability to meet customer demand in a timely manner.
Benefits of Tracking
Tracking inventory turnover allows companies to identify areas for improvement in their operations. It can also help them better predict customer demand and understand when they need to invest in additional inventory. Additionally, tracking inventory turnover can help a business understand how their pricing and marketing strategies are going.
Industry Benchmarks
The industry benchmark for inventory turnover varies by business type and business size. Generally speaking, a higher turnover rate is considered better. A turnover rate of 4 or more is considered good, while a turnover rate of 6 or more is considered excellent.
How to calculate
Inventory turnover is calculated by dividing the cost of goods sold (COG) by the average inventory for the period. The formula for inventory turnover is:
Calculation example
For example, if a company had a total COG of 0,000 and an average inventory of 0,000, its inventory turnover would be 5. The formula for this calculation would be:
Tips and tricks
- Be sure to regularly track inventory turnover to better understand the performance of your operations.
- Look for ways to reduce inventory levels without impacting customer satisfaction.
- Compare your inventory turnover against industry benchmarks to make sure you are performing at an acceptable level.
- Consider investing in inventory management software to help automate and streamline the tracking process.
Average selling price per unit
Definition
Average selling price per unit (ASPPU) is a metric used to measure the average price of a single unit of product or service. This metric is important in understanding the profitability of a product or service because the higher the profit, the higher the profit.
Benefits of Tracking
Tracking the average selling price per unit is important for understanding the overall profitability of a product or service. It is also useful for understanding customer demand and how to adjust prices to maximize profits. Tracking this metric also allows a business to identify any potential pricing issues that could affect sales.
Industry Benchmarks
The average selling price per unit varies from industry to industry. Generally, a higher ASPPU indicates a more profitable product or service because it indicates that customers are willing to pay a higher price for it. However, it is important to consider the cost of production, as well as the demand for the product or service when calculating ASPPU.
How to calculate
The average selling price per unit is calculated by dividing the total sales revenue by the number of units sold. The formula is:
Calculation example
For example, if a soft drink factory sold 10,000 cans of soda for a total of ,000, the average selling price per unit would be .00.
Tips and Tricks for KPIs
- Monitor the average selling price per unit over time to identify any changes in price or customer demand.
- Adjust pricing strategies to maximize profits and ensure the average selling price per unit is as high as possible.
- Compare average selling price per unit to industry benchmarks to ensure competitiveness.
- Consider the cost of production when calculating the average selling price per unit.
Conclusion
Measuring the right KPIs is a key part of evaluating the performance of any soft drink factory. By understanding and closely monitoring the 7 KPIs discussed in this blog post, plant owners can better assess their management strategies and make necessary changes to improve the performance of their plants. Cost of goods sold, production efficiency, customer retention rate, product quality ratio, sales/profit margins, inventory turnover and average selling price are the key metrics that should be tracked in order to properly assess the performance of a soft drink factory.
- Home
- Cost of goods sold (cogs)
- Production efficiency
- Customer retention rate
- Product quality ratio
- Sales/profit margins
- Stock rotation
- Average selling price per unit