1. Key Performance Indicators
and
Drivers of Planning and Budgeting
- Food Business of ITC
Presented by:
Group - 1
Members:
Bishnu Panda
Kailash Gupta
Kalyan Kumar Das
Subhasish Das
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2. Agenda
Overview of Indian Packaged Food Industry
ITC in food division
Key Performance Indicators
Corporate Performance Management Model
Conclusion
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3. 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
consumed 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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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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5. KPIs
Optimize Cost:
Product Improvement:  Inventory Turnover Ratio
 New products introduced per quarter  Interest cost reduction
 % first time right  % Cost of quality
 Standardization of products  Cost reduction %
 Transportation cost as %age of Total Cost
Improve training capabilities:
 Training hours imparted
 Training cost reduction Technology:
 Absenteeism  Improvement, enhancement or additions in
the existing applications
 Deployment of Supplier Portal
Sales and Marketing:
 Time-to-market for new food products Supply Chain:
 Packaged foods export  Inventory stock-out value
 More retail penetration at rural markets  % of Damaged goods
 Packaged food exports  Transportation cost as a percentage of revenue
 Sales forecast fidelity  Average order-to-shipment lead time
 Region-wise and period-wise sales
 Sales by executives
 Days sales outstanding
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6. CPM Model
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7. Strategy Alignment
Strategy
• Rural Penetration
• Inventory Turnover Ratio to be
increased
• Improvement of technologies and
Business systems for operational efficiency
IT Strategy
Strategy • New products to be introduced
• Just in time manufacturing
• Transportation cost to be decreased
• Advertising
• Continuous Innovation
• Hygiene Quotient
Business IT • Demand Forecasting
Infrastructure Infrastructure
Infrastructure
• New Hires
• Potential Modern Retail
• Upgradation of existing IT Infrastructure
and new purchase
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8. Strategy Maps
Gain Market
Training & Share
Hygiene Quality
development
quotient assurance
programs Increase NPM
Just-In-Time Continuous
Hire of sales Increase PAT
manufacturing innovation
executive and Dividends
Enabling Delivering Providing Meeting
People strategic satisfying shareholder
process customer expectations
experience
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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
Steps:
• 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%
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10. Planning and Budgeting (2/2)
Business Metrics driving Budget Process: Process:
• Revenue Quotas Bottom-up: This approach involves all the areas in
• Planned head count company wide the organization to prepare the budget. It is based
• Planned headcount by group/dept. on collection and analysis of actual performance
• Marketing spend data, calculation of next fiscal period budget from
• Overhead rates each dept. The process is iterated to the divisional
• Cost budget per dept. level and eventually to the corporate level.
• Fixed compensation plans
• Variable compensation plans Top-down: An exercise that doesn’t involve all
• Research and development investments 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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11. Budgeting-Pros and Cons
Cons:
Pros:
• Budgets can be seen as pressure devices imposed by
• Budgets provide a means of communicating management, thus resulting in:
management's plans through the organization.
a) bad labour relations
• Budgets force managers to think about and plan
b) inaccurate record-keeping.
for the future. In the absence of the necessity to
prepare a budget, many mangers would spend • Departmental conflict arises due to:
all of their time dealing with daily emergencies. a) disputes over resource allocation
• The budgeting process provides a means of b) departments blaming each other if
allocating resources to those parts of the targets are not attained.
organization where they can be used most • It is difficult to reconcile personal/individual and
effectively. corporate goals.
• Budgets coordinate the activities of the entire • Waste may arise as managers adopt the view, "we
organization by integrating the plans of the had better spend it or we will lose it". This is often
various parts of the organization. Budgeting coupled with "empire building" in order to enhance
helps to ensure that everyone in the the prestige of a department.
organization is pulling in the same direction. • Responsibility versus controlling, i.e. some costs are
• Budgets provide goals and objectives that can under the influence of more than one person, e.g.
serve as benchmark for evaluating subsequent power costs.
performance. • Managers may overestimate costs so that they will
not be blamed in the future should they overspend.
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12. Evaluation
Measure: Insight:
Close and consolidate Goal and performance tracking
Dashboards Forecasting
Balanced Scorecards Business Monitoring
Reporting Business Analytics
MIS Benchmarking
Product/Customer Profitability
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