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09/04/2023 Praxis Business School 1
Key Performance Indicators and
Drivers of Planning and Budgeting - Food Business of ITC
Presented by:
Group - 1
Members:Bishnu PandaKailash Gupta
Kalyan Kumar DasSubhasish Das
09/04/2023 Praxis Business School 2
Agenda
Overview of Indian Packaged Food Industry
ITC in food division
Key Performance Indicators
Corporate Performance Management Model
Conclusion
Indian Packaged Food Industry
• India's packaged food industry is likely to double by 2015 to touch $30 billion from the current $15 billion, with a CAGR of 15%-20%, says ASSOCHAM study.
• Main categories of packaged food are bakery products, canned processed food, frozen processed food, meal replacement products and condiments.
• Drivers for growth: Economic growth and rise in disposable income Changing demographics Changing urban lifestyle Supermarkets and hypermarkets increasingly popular Domestic and multinational companies drive growth Strong desire among consumers to maintain a healthy lifestyle Growing awareness of functional ingredients such as herbs, minerals, vitamins, omega fatty acids and
probiotics• Metropolitan city residents are the largest consumers of processed food, where urban residents consu
med 78% of all packaged food in 2011, with rural residents consuming just over 22%.
• 82% of workforce prefer packaged food viz. processed dairy products, frozen ready-to-eat foods, diet snacks, processed meat and probiotic drinks rather eating outside.
• Competitive Landscape consists of players viz. HUL, Nestle, ITC, Pepsico, Dabur, Cadbury, Haldirams, Britannia, Godrej and Parle Agro.
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09/04/2023 Praxis Business School 4
ITC in food division
• Entered the food business in 2001 with Kitchens of India as a brand under RTE segment.
• Launched in Confectionery, Staples and Snack Foods segments in 2002.
• Food business is over Rs 2,500 crore in size with an impressive growth of 25% in 2011 over 2010.
• Ranks third after HUL and Nestle.
• Market leader in flour, second in confectionery, salt and packaged snack, and third in biscuits.
• Renowned brand like KoI, AASHIRVAAD, Sunfeast , mint-o, CANDYMAN, Bingo.
• Net Turnover at `21167.58 crore INR grew by 16.6% in 2011 primarily driven by a 23.1% growth in the non-cigarette FMCG business.
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KPIs
Product Improvement: New products introduced per quarter % first time right Standardization of products
Optimize Cost: Inventory Turnover Ratio Interest cost reduction % Cost of quality Cost reduction % Transportation cost as %age of Total Cost
Improve training capabilities: Training hours imparted Training cost reduction Absenteeism
Technology: Improvement, enhancement or additions in
the existing applications Deployment of Supplier Portal
Supply Chain: Inventory stock-out value % of Damaged goods Transportation cost as a percentage of revenue Average order-to-shipment lead time
Sales and Marketing: Time-to-market for new food products Packaged foods export More retail penetration at rural markets Packaged food exports Sales forecast fidelity Region-wise and period-wise sales Sales by executives Days sales outstanding
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CPM Model
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Strategy Alignment
• Rural Penetration• Inventory Turnover Ratio to be
increased• Improvement of technologies and
systems for operational efficiency• New products to be introduced• Just in time manufacturing• Transportation cost to be decreased• Advertising• Continuous Innovation• Hygiene Quotient• Demand Forecasting
Business Strategy
IT Infrastructure
IT Strategy
Business Infrastructure
• New Hires• Potential Modern Retail• Upgradation of existing IT Infrastructure
and new purchase
Infrastructure
Strategy
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Strategy Maps
Training & development
programs
Hire of sales executive
Gain Market Share
Increase NPM
Increase PAT and Dividends
Quality assurance
Continuous innovation
Hygiene quotient
Just-In-Time manufacturing
Enabling People
Delivering strategic process
Providing satisfying customer experience
Meeting shareholder expectations
09/04/2023 Praxis Business School 9
Planning and Budgeting (1/2)
Pressures impacting the planning and budgeting process:• To improve the accuracy of the budget• To improve agility to adapt as conditions change• Provide cost control• Reduce time to prepare and finalize budgets• Need for increased visibility throughout the process
• Target setting for the next fiscal year at 20% more compared to the last fiscal.• Business Planning: Stores in rural India to be reached
Internal system upgradation Product development Booking advertisements slots in media Health and nutrition factors
• Financial Planning: Top line growth - 20%-25% with price inflation of 5%-10% and bottom line growth - 12%-15%
Steps:
09/04/2023 Praxis Business School 10
Planning and Budgeting (2/2)
Business Metrics driving Budget Process:
• Revenue Quotas• Planned head count company wide• Planned headcount by group/dept.• Marketing spend• Overhead rates• Cost budget per dept.• Fixed compensation plans• Variable compensation plans• Research and development investments
Process:
Bottom-up: This approach involves all the areas in the organization to prepare the budget. It is based on collection and analysis of actual performance data, calculation of next fiscal period budget from each dept. The process is iterated to the divisional level and eventually to the corporate level.
Top-down: An exercise that doesn’t involve all areas of the organization. Members of senior management involve in the budget creation based on set of goals and then communicated to the organization.
Blend of the above two approaches.
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Budgeting-Pros and ConsPros:
• Budgets provide a means of communicating management's plans through the organization.
• Budgets force managers to think about and plan for the future. In the absence of the necessity to prepare a budget, many mangers would spend all of their time dealing with daily emergencies.
• The budgeting process provides a means of allocating resources to those parts of the organization where they can be used most effectively.
• Budgets coordinate the activities of the entire organization by integrating the plans of the various parts of the organization. Budgeting helps to ensure that everyone in the organization is pulling in the same direction.
• Budgets provide goals and objectives that can serve as benchmark for evaluating subsequent performance.
Cons:
• Budgets can be seen as pressure devices imposed by management, thus resulting in:
a) bad labour relationsb) inaccurate record-keeping.
• Departmental conflict arises due to:a) disputes over resource allocationb) departments blaming each other if targets are not attained.
• It is difficult to reconcile personal/individual and corporate goals.
• Waste may arise as managers adopt the view, "we had better spend it or we will lose it". This is often coupled with "empire building" in order to enhance the prestige of a department.
• Responsibility versus controlling, i.e. some costs are under the influence of more than one person, e.g. power costs.
• Managers may overestimate costs so that they will not be blamed in the future should they overspend.
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Evaluation
Measure:
Close and consolidateDashboards
Balanced ScorecardsReporting
MIS
Insight:
Goal and performance trackingForecasting
Business MonitoringBusiness Analytics
BenchmarkingProduct/Customer Profitability
09/04/2023 Praxis Business School 13
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