Manufacturers collect a large amount of information from suppliers, stores, merchandisers. But this data helps to evaluate the production (manufacturer) efficiency and benefit the business only when it is correctly analyzed by the company: the necessary metrics are monitored and there is an understanding of what the data shows, together with an answer to the question “why this happened”. This approach to FMCG analysis allows companies to keep track of causes and effects and make the right management decisions.
Today we’ll discuss metrics that help a company to understand its market standing, where it is successful, and where it is worth reviewing some processes.
Table of Сontents
Out of Stock Rate, On-Shelf Availability, Margin by Product Category and other FMCG metrics to monitor
While communicating with our customers, we have identified ten metrics that FMCG manufacturers and distributors are monitoring or strive to monitor on an ongoing basis to ensure increase in sales.
1. Market share is the percentage of total sales that a company or product holds. This metric allows assessing competitive performance, planning marketing strategies correctly, identifying growth drivers, etc.
The FMCG market is changing rapidly, so it is essential for companies to continuously monitor this indicator over time and make timely adjustments to their strategy.
2. Inventory Turnover Ratio (ITR) shows the efficiency of a company’s inventory management. According to Statista, the global average inventory loss rate in the FMCG industry was 2.85% in 2023. This means that companies failed to receive revenue from almost 3% of their inventories.
Therefore, companies need to understand how long it takes to sell the average stock of goods in the warehouse. For this they need to know their ITR. This can be done in two ways: calculate the ratio of the cost of goods sold to the average annual inventory balance or the ratio of revenue to the average annual inventory balance.
Knowing the inventory turnover ratio, the company can calculate the turnover ratio in days. Using this indicator, they can determine how many days the warehouse stocks will last for stable sales, or the materials at the enterprise will last for the production of the required quantity of goods.
6. Sold Products within Freshness Date measures the percentage of products sold within the freshness date of the total number of goods. Expired products are one of the sources of losses for an FMCG company, so it is important to keep track of the products sold within due date and try to increase it. To do this, companies run promotions and offer discounts for goods that may soon become “expired”.
But there is one problem: if a company wants 100% of its products to be sold and have no expired products, it must be prepared for an out-of-stock situation. In the real world, it is almost impossible to accurately calculate the volume of supplies and the time frame within which the products will be sold. Therefore, you have to face a trade-off between the availability of your products on the shelves and sales within their expiration date.
KPIs must be aligned with strategies
Keeping track of KPIs helps companies to ensure sales control, determine their strengths and weaknesses; understand whether the current strategy is well-performing and get answers to many questions.
Keep in mind that companies evaluate each process: logistics, marketing, sales, etc. In order not to be swamped with an immense amount of data, select key indicators that will demonstrate business performance and meet the company’s goals at the moment, for example, some indicators will be tracked to expand market representation, and others will be tracked to increase revenue from online channels.
