The Top Success Metrics and KPIs Manufacturers Need to Know

Manufacturing has always been data-driven, even before the advent of computers. Production managers constantly monitored output, productivity, and other KPIs (key performance indicators) — but the digital transformation has taken metrics tracking to new heights.

Any automated and digitalized process generates an incredible volume of data, with the potential to reveal everything from granular inefficiencies to game-changing opportunities. With the latest generation of cloud-based software, like CPQ (configure, price, quote), performance data goes beyond production metrics to measure the performance of sales processes. But which KPIs are the most important to track, and what do they mean?

The Most Important Metrics of Success

Specialty manufacturers that offer customizable or configurable products have different measurement standards than operations that profit from sheer output and efficiency. Here are the six metrics you need to know:
The ACV is a sales metric that provides insight into the overall effectiveness of your sales strategy. Calculate it by adding the value of all active quotes over a given time frame and dividing that sum by the number of total quotes in that same period. ACV shows the impact of your sales funnel, outreach strategy, deals, and incentive programs on the value of each lead. Use this to refine your sales strategy by testing new incentives and touchpoint methodologies over a certain time period, and see how it impacts your ACV.
How effective is your sales team at retaining customers or renewing contracts? The customer churn rate holds the answer. This metric is for any manufacturer that relies on ongoing renewals, and tracks the number of customers who don’t renew or re-up contracts. You can calculate churn by identifying how many customers were lost in a given timeframe and dividing that number by the total number of customers who were active during that same period.
In the configure, price, quote process, error rate measures the number of mistakes in delivering a particular quote. Mistakes can happen at any stage of the process, such as configuring an non-viable product, or incorrectly pricing a custom order. The higher an error rate, the more problems you have in your sales process, putting your company at risk of losing revenue and reputation. An advanced CPQ solution can reduce error rate to zero.
This old-school KPI measures the time it takes from an order approval to completion of actual production. In the digital era, CPQ software and workflow automation can indirectly speed up production time with faster communication. Once a customer approves a quote and makes payment, the software can automatically add the order to the production team’s queue so there’s no time lost in relaying information.
Another metric that hails from the early days of manufacturing, the ROR measures the net gain or loss from an investment over a period of time. Digital manufacturing tools like CPQ deliver a significant ROR over time, due to their low up-front costs. What’s more, CPQ enables massive efficiency gains throughout the entire sales process. CPQ solutions are a bedrock for productive sales teams because they enable them to close more deals in less time.
As sales processes become more automated and customers expect fast responses, time to quote is becoming a more important metric. It measures how long it takes between initial configuration to delivering the final quote to the customer for consideration. The longer this takes, the greater chance there is to lose business to a competitor. You can also look at changes in this metric to see the impact of your efforts when refining your sales processes.

Anything That Can Be Measured Can Be Improved

Technology has transformed manufacturing operations, and performance metrics have only become more important as a result. Now we can quantify the efficiency of every single process, including those involved in configuring, pricing, and quoting products.
Revalize CPQ a leading cloud-based sales solutions for specialty manufacturers that enables complete visibility into your sales process. By leveraging the platform, you can improve every KPI in this article. Learn more about Revalize in our free ebook, The Ultimate Guide to CPQ. Or schedule a demo to see the platform for yourself.