Identifying the most critical KPIs to measure performance in your industry – and then leveraging the best tools to monitor, understand and act on those KPIs – isn’t cut and dry. The answers to these questions can vary greatly from business to business, even within industries.
First, you must determine which KPIs are most informative and useful in terms of your business goals and industry expectations. Then, determine if you’d benefit from industry-specific tools versus using out-of-the-box Business Financial software and a general business intelligence (BI) tool.
Many wineries still do a great deal of manual management, tracking and reporting outside of their systems. The general software they use doesn’t simplify and automate processes, offers useful inventory level information or allow them to track varietals. As a result, everything is much more difficult than it needs to be. Wine is an industry with such a high level of variety and complexity that it warrants industry-specific treatment.
The good news is that industry-specific offerings are now more accessible and affordable to small- and mid-sized wineries than ever before thanks to Cloud-based subscription models. Plus, today’s tools offer greater functionality and more capabilities that resonate with the industry they are built for.
To position yourself for success, you need to be aware of several critical metrics to track in the wine industry, the benefits of tracking them, and how VinPoint amplifies the impact of your efforts.
What Metrics are Important to Wineries?
Some metrics are important to all businesses, such as gross profit margin, revenue trends and operating expenses. Others are either unique to or of greater importance in the wine industry.
To add to the complexity, there are hundreds of potential metrics to track and not all of them provide value in terms of strategic planning, optimization and growth. If you can only choose a handful to keep a finger on and pull into your daily or weekly view, which should they be?
1. Production KPIs
KPIs related to production processes are top of the list for the beverage industry. Critical production KPIs include:
Throughput: The amount of product coming off your line or lines.
Yield: The percentage of grapes that can be used to produce quality wine and doesn’t require rework.
Reject Ratio: The amount of product made incorrectly that becomes waste versus the throughput.
Understanding how much you produce, what percentage is useable and what percentage is a loss will help you maintain control of an efficient process, improve an inefficient one, catch costly productivity interruptions and strategize to increase production overall.
2. Average Order Value
Average order value (AOV) is just what it sounds like: the amount of money, on average, that customers spend on a single order of wine. For example, according to Finmodelslab, the AOV across the wine industry in the U.S. is around $50. This considers everything from quick liquor store purchases of cheap wine for a casual party to more serious purchases at upscale wineries.
Understanding how much the average customer is willing to spend at your winery will help you determine pricing adjustments and identify opportunities to improve your offerings to bring that figure up.
To calculate this metric, follow the calculation:
Average Order Value = Total Revenue/Number of Orders
For example, if your total revenue last quarter was $1M over 25,000 orders, your AOV would be $40. This puts you just below the industry average in the U.S. With more research into pricing, there is likely the opportunity to adjust and launch yourself above that average. To further utilize this KPI, calculate it for wholesale orders separate from retail orders.
3. Distribution Cost as a Percent of Revenue
Wine industry leaders know that the cost of distribution is a significant part of the overall budget - and this cost continues to climb. If you embrace tighter controls and gain a real-time view of data related to distribution costs, you can keep them from getting out of hand.
You’ll want to monitor the distribution cost as a percent of revenue, identify a reasonable threshold and look for opportunities to improve. Look at options such as packaging materials, which carrier you are using and how to adjust delivery schedules to cut down on costs.
4. Fill Rate
The fill rate is the number of orders out of your total orders that reach their ultimate destination in full and on time. This is a critical measurement for understanding whether you’re fulfilling the expectations of your customers and identifying where you might need to make improvements. You want this metric to be as close to perfect as possible, though not at the sacrifice of your own profitability.
5. Tasting Rooms and Wine Clubs
Over the years, tasting rooms have become greater sources of revenue for wineries. The average winery now gets nearly one-third of its total revenue from tasting room sales. Wine clubs are nearly as important, clocking in at almost a quarter of revenue for the average U.S. winery.
Tracking KPIs related to this point-of-use consumption is critical for many, including:
- Seasonality
- Staffing costs
- Trends over time
These metrics help wine industry professionals discover inefficiencies, opportunities and risks in the most pivotal processes of their business. They represent critical areas of operations: production, equipment uptime, distribution, fulfillment and tasting room and restaurant metrics.
Businesses can act on their discoveries, finding ways to reduce inefficiencies, pursue growth and optimize profitability. They can use data to understand where and why waste occurs to reduce it, better forecast inventory to further reduce waste and achieve more consistency in production.
How do Industry-Specific Offerings Amplify Success with KPIs?
Industry-specific tools mean you can monitor the metrics that are most important – and often unique – to your business. They’ll help you reduce the clutter of hundreds of potential metrics to the most critical KPIs, and they’ll deliver data to you and other users in convenient, easy-to-use, repeatable formats. You can then use those KPIs to monitor and optimize your operations and profitability.
It’s much the same as any Business Financial Software and Business Intelligence (BI) combination would provide – but having an industry-specific package reduces customization and manual data entry for those metrics, processes and regulatory activities that are unique to the beverage industry. You’ll be able to spend more time on your products, customers and growth goals, and less time on administrative and regulatory work.
For example, Enavation Cloud: VinPoint Wine Management is a turnkey offering for wineries that combines the capabilities of Business Central and Power BI and adds industry-specific functionality. VinPoint tracks and delivers data points that are unique to the wine industry, from bottling to shipment.
With this offering, you can:
- Track inventory movement against excise tax class and code
- Report financials by brand varietal and vintage
- Analyze inventory levels by varietals, brands, vintages, etc.
- Manage product allocation of noteworthy vintages
No matter what type of beverage your business is producing, you cannot afford to run it blind without monitoring KPIs. With the right technology upgrade and Cloud-based offering, you can integrate these analytics into your daily routine without disrupting the time spent on perfecting your craft. Contact an Enavate VinPoint expert to discuss which offering is right for your business.
