Leverage Your Data to Manufacture Profitable Growth
May 18, 2016
Make better use of the data you already have to make better decisions by implementing these three easy enhancements.
It’s rapidly becoming the most popular four-letter word in corporate America.
Here’s some data on data: more has been created in the past two years than in the entire previous history of the human race. And, perhaps more incredibly, only half of one percent of all data will ever by analyzed and used.
But what about YOUR data? Are you leveraging it to “manufacture” profitable growth (pun intended)?
And by “data,” I don’t necessarily mean “big data” – a term that’s all the rage in recent years. Big data refers to the use of predictive analytics and other sophisticated methods to extract value from large, very complex data. It can be useful, especially for large global companies.
But most of you don’t need more data. You already have plenty. You’ve been collecting data and reviewing reports and spreadsheets forever.
What you need is to make better use of the data you already have – the data that can help you make better decisions.
It’s a fairly common need among manufacturers, and it spurred the launch of our Knowledge Services group at HA&W. We’re now providing clients with workshops, process improvements and managed services – all designed to help them turn data into fact-based decisions.
But there are three easy enhancements you can implement right now to put to your company’s data to work for you.
#1: USE DATA TO CREATE “THE REPORT.”
Not a report. The Report — a one-page document that measures and tracks the right things, primarily those key metrics that determine whether or not you reach your business goals.
It doesn’t replace your other, more detailed reports. But it does provide topline information that gets right to the heart of your business, thus helping you anticipate – and prevent – the surprises that derail so many businesses.
Importantly, The Report is simple, concise and designed to be understood by all employees. From senior managers to line workers, The Report can get everyone on the same page in knowing your most important goals – and all that is necessary to achieve them.
#2: GENERATE TRAILING 12-MONTH CHARTS OF SALES, COSTS, PROFIT AND OTHER BASIC METRICS
It’s the moving average of the most important business measures, and thus tells you where you are, where you’ve been and where you’re headed. Up is good. Flat is bad. Down is very bad.
Trailing 12-Month Charts are perfect for managers who hate working with numbers, and they can give you the necessary nudge to take action when the train may be heading for derailment.
To get you started on creating and using these charts, we’ve provided online a template for Trailing 12-Month Charts. Just visit www.CEOTools.com/GMAW to download and give it a try.
#3: CHART THE KEY PERFORMANCE INDICATORS (KPIS) OF YOUR BUSINESS
Unlike the first two, the KPI report takes you a bit farther under the hood by using data to precisely track cause and effect – that is, how a change in one metric can impact another.
As an example, let’s look at a KPI comparing sales volume to call volume. Do more calls mean more sales? If not, take a closer look at the calls you are making. Some other good KPIs are revenue per employee, profit per sales person, and profit per customer.
DATA IN ACTION
This approach really worked for one of our clients, a Georgia-based manufacturer of commercial products.
Revenue was growing but gross margin was not. They weren’t getting the benefit of getting bigger. Our initial analysis of their existing KPIs revealed some errors and inconsistencies in reporting that had led to some wrong decisions about product mix and pricing.
Once management got a clearer look at the big picture, they determined that they could both raise prices and reduce inventory on certain SKUs – with no negative impact on customers. With those changes, they expect to garner an additional $300K annually in gross margin.
Results like those are why data analysis is all the rage – in every industry. By better understanding and using your data, you can bolster revenues, cut costs or prompt decisions that can make you a more profitable manufacturer.
For more information, contact Adam Beckerman, partner-in-charge of Manufacturing & Distribution, at [email protected] or 404-898-7542.
Adam Beckerman leads the Manufacturing & Distribution Group at HA&W, a nationally-recognized tax, audit and business advisory firm headquartered in Georgia and a longtime supporter of Georgia manufacturers.
About the Author
Adam Beckerman is Aprio’s Manufacturing and Distribution Leader and Assurance Partner. Adam's team of 30 professionals focus on the manufacturing industry with 20+ years of experience enabling the success of manufacturing start-ups, growth companies and businesses preparing for equity events.