Top 7 KPI Metrics for Food Production Businesses: Track What Matters!

Are you trying to find out how to measure the success of your food production business? Look no further! As a serial entrepreneur with years of experience, I know that tracking key performance indicators (KPIs) is crucial to generate profits and maintain growth. In this blog post, we will dive into the top seven KPI metrics that every food production business should be tracking.

• Monthly revenue: Your revenue is the lifeblood of your business. Tracking this metric will help you understand how much money your business generates every month and allow you to make informed decisions to increase profits.
• Percentage of local ingredients sourced: With the rise in demand for locally sourced food, tracking the percentage of this type of ingredients used in your products can help your business cater to this trend and appeal to more customers.
• Customer satisfaction rating: A happy customer is a returning customer. Tracking your satisfaction rating will help you understand how well your business meets customer expectations and how to improve.

These are just a few examples of the KPIs we will cover in this post. Each metric plays a significant role in the success of your food production business. Keep reading to find out more about how to track and calculate these core KPIs.

Monthly Revenue

As a serial entrepreneur who has built and scaled multiple businesses, tracking monthly revenue has always been a crucial metric for me. In the food production industry, it's important to keep a close eye on revenue to ensure that the business is profitable, sustainable, and meeting its financial goals. Let's take a closer look at this KPI and how to track and calculate it.

Definition

Monthly revenue is the total amount of money earned by a food production business from sales or services within a given calendar month.

Use Case

Monthly revenue is an essential KPI for any food production business. It helps you understand your business's financial health and how sales are trending over time. Tracking monthly revenue can help you identify patterns in customer behavior, such as seasonal fluctuations, and enable you to make informed, data-driven decisions to improve your business's bottom line.

How To Calculate KPI

The formula for calculating monthly revenue is straightforward:

Calculation Example

Let's say you run a food production business and your total sales for the month of May were $50,000. Your monthly revenue for May would be:

So your monthly revenue for May is $50,000.

KPI Advantages

• Helps you measure business performance
• Enables you to make data-driven decisions
• Identifies trends in customer behavior
• Allows you to set and achieve business goals
• Tracks progress towards financial targets

KPI Disadvantages

• May not be representative of profitability
• Does not take into account the cost of goods sold or other expenses
• Not useful for businesses with irregular revenue patterns

KPI Industry Benchmarks

Monthly revenue benchmarks can vary widely depending on the size and type of food production business. According to a recent study by the National Restaurant Association, the average monthly revenue for full-service restaurants in the US was $115,000, while fast-food restaurants had an average monthly revenue of $62,000.

Percentage of Local Ingredients Sourced

In the world of food production, one KPI metric that cannot be ignored is the percentage of local ingredients sourced. Many consumers are becoming more aware of the environmental and social impact of their food choices and are looking for locally sourced ingredients. Therefore, tracking this metric can help businesses meet this growing demand while also supporting the local economy.

Definition

Percentage of local ingredients sourced is a KPI metric that measures the proportion of ingredients in a product that come from the local area. A 'local area' can be defined in different ways, but typically refers to a geographic area within a certain radius of the production facility.

Use Case

This KPI is particularly relevant for food producers who want to appeal to the growing number of consumers who prioritize locally sourced, sustainable ingredients. It can also help businesses reduce transportation and logistical costs by sourcing ingredients from nearby suppliers instead of distant locations.

How To Calculate KPI

Calculation Example

Suppose a chocolate maker sources cocoa beans from two suppliers. One is local and supplies 400 kilograms of beans, while the other is located in another state and provides 600 kilograms. The chocolate maker uses a total of 800 kilograms of beans. To calculate the percentage of local ingredients sourced, we can use the formula:

KPI Advantages

• Helps businesses meet the demand for locally sourced, sustainable ingredients
• Can reduce transportation and logistical costs
• Fosters relationships with local suppliers and supports the local economy

KPI Disadvantages

• May limit access to certain ingredients that are not available locally
• Requires accurate and up-to-date tracking of ingredient sources
• May not be as relevant for businesses that focus on global sourcing and exotic ingredients

KPI Industry Benchmarks

There are no standard industry benchmarks for percentage of local ingredients sourced, as it can vary widely depending on the type of product, location, and target market. However, some regional or local industry associations may provide data or guidance on this metric.

Customer Satisfaction Rating

Definition

Customer satisfaction rating is a KPI metric used to measure how satisfied customers are with a product or service offered by a company. It reflects the quality of service delivery and the level of customer experience, which directly impacts business growth.

Use Case

Customer satisfaction rating is crucial in the food production industry as it determines customer loyalty, repeat business, and word-of-mouth promotions. It helps companies identify areas for improvement and adjust their offerings to meet customer needs and expectations.

How To Calculate KPI

To calculate customer satisfaction rating (CSR) KPI, use the following formula:

The survey questions should be designed to measure customer satisfaction on a scale of 1-10, with 1 being the lowest score and 10 being the highest.

Calculation Example

If a food production company surveys 500 customers and 450 report high satisfaction scores, the CSR KPI would be:

KPI Advantages

• Helps to improve customer loyalty and maintain a competitive edge
• Provides data to adjust offerings to meet customer needs and preferences
• Encourages employee engagement and job satisfaction by demonstrating the impact of their work on customers

KPI Disadvantages

• Results may be skewed if the survey sample is not representative of the entire customer base
• Questions may need to be modified frequently to reflect changing customer expectations
• Not all customers may participate in the survey, leading to incomplete data

KPI Industry Benchmarks

Industry benchmarks for CSR KPI vary depending on the type of food production company and target market. However, most companies aim for a CSR of 80% or higher.

Customer Satisfaction Rating

Definition

Customer satisfaction rating is a KPI metric used to measure how satisfied customers are with a product or service offered by a company. It reflects the quality of service delivery and the level of customer experience, which directly impacts business growth.

Use Case

Customer satisfaction rating is crucial in the food production industry as it determines customer loyalty, repeat business, and word-of-mouth promotions. It helps companies identify areas for improvement and adjust their offerings to meet customer needs and expectations.

How To Calculate KPI

To calculate customer satisfaction rating (CSR) KPI, use the following formula:

The survey questions should be designed to measure customer satisfaction on a scale of 1-10, with 1 being the lowest score and 10 being the highest.

Calculation Example

If a food production company surveys 500 customers and 450 report high satisfaction scores, the CSR KPI would be:

KPI Advantages

• Helps to improve customer loyalty and maintain a competitive edge
• Provides data to adjust offerings to meet customer needs and preferences
• Encourages employee engagement and job satisfaction by demonstrating the impact of their work on customers

KPI Disadvantages

• Results may be skewed if the survey sample is not representative of the entire customer base
• Questions may need to be modified frequently to reflect changing customer expectations
• Not all customers may participate in the survey, leading to incomplete data

KPI Industry Benchmarks

Industry benchmarks for CSR KPI vary depending on the type of food production company and target market. However, most companies aim for a CSR of 80% or higher.

Number of new customer referrals

Definition

The number of new customer referrals KPI is a metric that measures the effectiveness of your referral program in generating new business. This KPI tracks the volume of referrals that convert into new customers over a specific period.

Use Case

A referral program can be an excellent way to acquire new customers. Happy customers are more likely to refer their friends and family to your business. By tracking the number of new referrals, you can assess the impact of your program and identify areas for improvement.

How To Calculate KPI

To calculate the number of new customer referrals KPI, you need to divide the number of new customers acquired through referrals by the total number of customers acquired over the same period. Multiply the result by 100 to express the KPI as a percentage. The formula is:

Calculation Example

Suppose you acquired 100 new customers over three months, and 25 of them were acquired through referrals. The calculation would be:

In this example, 25% of new customers came through referrals.

KPI Advantages

• Measures the effectiveness of referral programs
• Identifies areas for improving referral program
• Low-cost way to acquire new customers

KPI Disadvantages

• May not capture all referrals
• Doesn't measure the quality of referred customers

KPI Industry Benchmarks

The industry benchmark for the number of new customer referrals KPI varies by industry. For example, in the telecommunications industry, a 5% to 10% referral rate is considered good. In the software industry, a 5% to 20% referral rate is standard.

Waste reduction percentage

Definition

Waste reduction percentage is a KPI that measures the amount of food waste that is reduced relative to the total amount of food produced.

Use Case

Waste reduction percentage is important for food production companies to track as it helps to minimize food waste and associated costs. It also helps to ensure that the company is operating sustainably and contributing to a healthy environment.

How To Calculate KPI

Waste reduction percentage can be calculated using the following formula:

Calculation Example

Suppose that a food production company produces 2000 kg of food in a month, but 200 kg of that food is wasted. The waste reduction percentage would be:

KPI Advantages

• Minimizes food waste and associated costs
• Ensures sustainable operation
• Contributes to a healthy environment

KPI Disadvantages

• Does not account for the quality of the food produced
• May not be applicable to all types of food production companies

KPI Industry Benchmarks

The industry benchmark for waste reduction percentage varies depending on the type of food production company, but a general benchmark is 70-90%.

Number of wholesale partnerships established

As a food production company, it is essential to establish wholesale partnerships with other businesses to expand your reach and increase sales. The number of these partnerships is a critical KPI metric that measures the success of your business. Let's dive into the details of this KPI.

Definition

The 'Number of wholesale partnerships established' KPI measures the number of wholesale partnerships established by a food production company during a specific period.

Use Case

This KPI is essential for businesses that rely on wholesale partnerships, for example, those that produce specialty food items, and need to partner with retailers to reach their target customers. It helps them track the number of partners established and identify areas where they need to expand their network.

How To Calculate KPI

To calculate the 'Number of wholesale partnerships established' KPI for your food production company, use the following formula:

The KPI measures the net change in the number of wholesale partnerships during a specific period.

Calculation Example

Suppose your food production company started the year with 20 wholesale partnerships, established six new partnerships, and ended the year with only 22 partnerships. You also had two partnerships terminated during the year. The calculation of the 'Number of wholesale partnerships established' KPI for the year is:

Since there was no net change in the number of partnerships, the KPI score is zero.

KPI Advantages

• Helps food production companies monitor the growth and decline of their wholesale partnerships.
• Allows companies to identify potential areas for expansion and partnership termination.
• Encourages companies to actively manage their wholesale partnerships and build long-term relationships with partners.

KPI Disadvantages

• The KPI does not consider the quality of the wholesale partnerships established.
• The KPI does not assess the profitability or impact of the partnerships.

KPI Industry Benchmarks

Currently, there are no available industry benchmarks for the 'Number of wholesale partnerships established' KPI. However, businesses should aim to establish long-term partnerships with retailers and distributors to foster growth and stability.

Inventory turnover rate

Definition

Inventory turnover rate measures how efficiently the inventory is being managed by an organization. It is a KPI that tells how many times a company's inventory is sold and replaced over a period of time.

Use Case

Inventory turnover rate is important for businesses as it helps them in determining the amount of inventory they require to maintain the sales growth. It also helps in avoiding stockouts and overstocking, which can lead to loss of sales and additional costs.

How To Calculate KPI

Inventory turnover rate can be calculated using the following formula:

Calculation Example

If a company has $1,000,000 in cost of goods sold and $200,000 in average inventory in a year. The inventory turnover rate will be:

KPI Advantages

• Helps companies with better cash flow management
• Helps in identifying underperforming products
• Helps in optimizing inventory levels for better cost management

KPI Disadvantages

• Inventory turnover rate can differ from industry to industry, so benchmarking can be difficult.
• It may not be suitable for businesses with seasonal sales or high-value inventory items.
• It assumes that all inventory is sold at the same profit margin, which may not be true for all businesses.

KPI Industry Benchmarks

The industry benchmark for inventory turnover rate can vary depending upon the business industry. However, in general, a higher inventory turnover rate indicates better inventory management. As per the industry standards, companies should aim to have an inventory turnover rate between 4 and 8 times per year.