There is nothing like a good set of key performance indicators (KPIs) for any organization. If asked, virtually any C-Suite leader of a beverage industry enterprise all would proclaim the active use of KPIs.
The problem is that KPIs are just that — indicators of performance. The basic KPI is just the start of the race; the finish line is actionable business insight.
If a KPI signals good performance or an individual manager sees his own KPIs leading the internal team, then quick satisfaction seldom leads to any added inquiry.
Scorecards for most organizations are directional indicators and shine a light on potential areas of the business that need attention and possible change. But now I want to shine a light on a business performance measure that seldom gets any attention from senior management: time to action (TTA).
Exactly how long does it take to see a problem and know the root cause so an informed decision can be made and tracked?
If performance measures reflect a negative trend, too often managers are left to their best guess on the true cause of the problem.
For example, if your KPI for overall margin indicates that in the past week, overall gross margins have declined, have you ever considered or really tracked how long it takes for you, as the chief executive officer or middle manager, to find the root cause of that decline? Is it a half-day, a full day or a week?
Whatever the delay, the time lag is a true cost of doing business especially in the competitive environment that exists in the current market. Yet, it often is not seriously examined.
Consider the fact that in today’s operating environment, a major portion of total annual gross profits generated are impacted by overall cost to serve and trade spend budgets.
Yet, many suppliers, distributors and retailers can’t readily evaluate and confirm the positive or negative impacts of promotions and discounting strategies. If they can, it takes days to know with certainty. The result is bad promotions are blindly repeated and too often the few promotions and discounts that truly drive value to the enterprise are discontinued to try something new.
What are the causes of this time lag and cost to the business?
In many cases, in-field managers can’t access the information needed to find the root cause to daily business problems. Too often, managers must return to the office and use multiple technology applications to try and identify the problem before they can take some form of action.
In other cases, managers might ask the IT department for added reports to help identify the problem.
When different managers within the organization are using multiple applications and their own calculations to determine the action they intend to take, it impacts the overall performance of the enterprise. When an organization unintentionally creates multiple versions of the truth by the actions of each individual manager, errors occur and real accountability is lost.
How does this time lag problem get resolved and drive improved performance?
First, every level of management should be using a single application, with all data resources down to the transaction level. This single application ensures all the data and all the inherent calculations are the same for every manager.
Second, the precision management solution used must have the capacity to scale the enormous data sets that exist within all levels of the beverage industry supply chain. All too often, the complaint of virtually every manager is “We are sitting on overwhelming amounts of data, but we can’t get to the precise information needed to make an intelligent decision, take appropriate action and track the results.”
The ability to scale these vast data sets is critical, as is the capacity to integrate multiple sources of data. This could include POS data from key accounts, general ledger, weather, demographics and route accounting. With the right solution and the needed data, managers can see the market with real precision leading to improved decisions.
Third, the common application engaging management must operate with almost the speed of thought. What does this mean? The right precision management solution will enable any manager to freely interrogate the data and literally get to the true root cause of the sales or operational problem in seconds, not hours or days. Speed to answers is critical for adoption.
When management relies on a precision solution deployed to every manager, the company has the capacity to scale the enormous data sets needed for true market insight. If the solution can do it all in seconds, the culture of the enterprise begins to change.
The right training coupled with the right technical solution decreases the lag time and the correct answers — and solutions — are received. Therefore, the resolution translates into more consistent sales and profits for the enterprise.
Accessible knowledge, empowered managers who are prepared to make and be held accountable for decisions, and ultimately a compensation program that rewards those decisions, changes the beverage business game forever. BI