Fast-moving consumer goods (FMCG) are always changing, so monitoring, analyzing, and enhancing performance is crucial. The company’s success in the FMCG business depends on whether you hold the title of senior executive, c-suite leader, or member of the corporate leadership team.
According to a study by McKinsey, companies that effectively use KPIs in decision-making are more likely to outperform their peers, achieving 126% higher profit margins. Here, we will explore the world of FMCG KPIs (key performance indicators) that can propel expansion, efficiency, and profit.
Successful FMCG KPIs to Track Progress
What are FMCG? 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.
After defining fast-moving consumer goods, we can dive into the key performance indicators (KPIs) that propel businesses in this sector.
1. Inventory Turnover Ratio (ITR)
The inventory turnover rate (ITR) is a standard KPI used to evaluate the effectiveness of a company’s stock management. The figure is determined by dividing the period’s COGS by the average inventory value. The FMCG sector relies heavily on effective stock management; hence, a high ITR is a positive indicator.
ITR = Cost of Goods Sold (COGS) / Average Inventory Value
According to Statista, the global retail inventory shrinkage rate was 2.85% in 2023, highlighting the importance of efficient inventory management.
2. On-Time Delivery (OTD)
In the fast moving consumer goods supply chain for products, on-time delivery is paramount. OTD tracks how many orders are delivered on time. Maintaining a high on-time delivery rate improves customer satisfaction and lessens the likelihood of stockouts and surpluses.
OTD = (Number of Orders Delivered on Time / Total Number of Orders) * 100
A study by Convey found that late deliveries can lead to a 20% drop in customer satisfaction.
3. Perfect Order Rate (POR)
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. A high POR is indicative of a well-oiled supply chain.
POR = (Number of Error-Free Orders / Total Number of Orders) * 100
A survey by GT Nexus revealed that a 1% improvement in POR can lead to a 1.8% increase in profit.
4. Sales Growth Rate
The success of product releases, advertising campaigns, and market expansion initiatives may all be gauged by keeping tabs on sales growth rate. Sales growth is measured as a percentage increase over a given time frame.
Sales Growth Rate = [(Current Sales – Previous Sales) / Previous Sales] * 100
McKinsey & Company reports that companies with high sales growth are 2.3 times more likely to have a data-driven strategy.
5. Gross Margin
A product’s or a category’s gross margin reveals its profitability. It’s determined by dividing total income by the sum remaining after deducting the cost of products sold. Keeping the gross margin where it should be is essential to continuing to turn a profit.
Gross Margin = [(Total Revenue – Cost of Goods Sold) / Total Revenue] * 100
According to Deloitte, companies with a higher gross margin tend to have greater resilience during economic downturns.
6. Return on Assets (ROA)
Return on assets (ROA) measures how effectively assets are used to generate income. To determine this ratio, divide net income by total assets. Improved resource management is reflected in a greater ROA.
ROA = Net Income / Total Assets
A study in the Harvard Business Review found that high-performing companies have an average ROA of 6.8%.
7. Market Share
Your company’s market share in the fast-moving consumer goods market is the percentage you control. Monitoring shifts in market share provides insight into your competitive standing and the market dynamics.
Market Share = (Company’s Sales / Total Market Sales) * 100
The Nielsen Company reported that companies with a larger market share are often more resilient in competitive markets.
8. Customer Satisfaction (CSAT)
Customers’ needs come first in the fast-moving consumer goods sector. As determined by polls and comments, customer satisfaction is CSAT’s primary metric. Customers who feel their needs have been met are likelier to become devoted patrons.
CSAT = (Number of Satisfied Customers / Total Number of Customers Surveyed) * 100
According to Zendesk, companies with a high CSAT score (90 or above) tend to have a 34% higher customer retention rate.
9. Forecast Accuracy
The accuracy of your sales estimates is measured by comparing them to actual sales. By minimizing the possibility of over- or under-stocking, inventory management is improved when prediction accuracy is increased.
Forecast Accuracy = |(Actual Sales – Forecasted Sales) / Actual Sales| * 100
A study by Capgemini found that companies with improved forecast accuracy can reduce excess inventory costs by up to 40%.
10. Sustainability Metrics
The fast-moving consumer goods sector is starting to pay more attention to environmental concerns. To achieve sustainability objectives and win over environmentally sensitive customers, paying attention to FMCG metrics like carbon footprint, waste, and responsible sourcing is crucial.
Some common sustainability measures include a decrease in carbon emissions (expressed as CO2 equivalents), a decrease in waste (expressed as pounds or kilograms), and a rise in responsible sourcing compliance (expressed as a share of total sourced materials).
Nielsen’s Global Corporate Sustainability Report revealed that 81% of global respondents strongly believe companies should help improve the environment.
KPIs for FMCG Success
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.
Adopting FMCG key performance indicators, including inventory turnover ratio, on-time delivery, and customer satisfaction, can help improve operational efficiency, increase customer loyalty, and ultimately boost a company’s bottom line.
Remember that each key performance indicator provides a different perspective to assess company’s success as you make way through the complex FMCG market. You can keep FMCG company at the forefront of its field by using these insights to guide data-driven decision-making and strengthen position as a market leader. Your company’s success in the fast-moving FMCG sector will depend on carefully monitoring key performance indicators.
How can Brickclay Help
Brickclay empowers senior executives, C-suite leaders, corporate leadership, and organizational decision-makers in the FMCG industry to excel in tracking and optimizing key performance indicators (KPIs). Our advanced data analytics, supply chain optimization, and predictive analytics solutions enable businesses to enhance inventory turnover, ensure on-time deliveries, improve perfect order rates, predict sales growth, optimize gross margins, and achieve higher returns on assets. We support your journey towards market leadership, customer satisfaction, sustainability goals, and improved forecast accuracy. Discover how Brickclay can elevate FMCG performance. Contact us today for tailored solutions.