5 KPIs for Sales & Operations Planning for Manufacturing Finance

If you're working in manufacturing finance, the term Sales and Operations Planning (S&OP) likely sounds familiar. S&OP is the sweet spot where operations, sales, and finance come together to ensure everything from inventory to production aligns with market demand. But how do you measure success across a process with so many moving parts? The key is using the right KPIs — key performance indicators — to track, analyze, and optimize your process.

Here, I'll walk through five critical KPIs for S&OP in manufacturing finance. These KPIs will help your business drive efficiency, improve profitability, and strengthen its position in a competitive landscape.

1. Forecast Accuracy

When you think of most types of financial planning, including S&OP, forecasting is likely one of the first things that comes to mind. After all, the ability to predict demand accurately is the backbone of S&OP. Forecast accuracy measures how closely your predicted sales align with actual sales. In fact, this KPI is the guiding star that helps your finance team allocate budgets. Accurate forecasts also ensure manufacturing operates efficiently — neither underproducing nor wasting resources.

Why it matters: In manufacturing, even a small variance in forecast accuracy can have a big impact. If forecasts are too optimistic, you might overproduce, leading to excess inventory and increased holding costs. If forecasts are too conservative, you might lose sales opportunities or miss critical customer delivery windows. Both outcomes hurt your bottom line.

Accurate forecasting ties directly into cash flow management, inventory planning, and customer satisfaction. The better your forecast, the smoother the entire operation will run. If you’re achieving a high percentage, your team is hitting the mark. Aim for around 90% – 95% for best results.

2. Inventory Turnover

Inventory is a major cost driver in manufacturing finance, so you’ll want to closely monitor how well it's managed. In this context, inventory turnover ratio comes into play. Inventory turnover measures how many times your stock is sold and replaced over a given period. This KPI not only indicates how efficiently your manufacturing process aligns with demand but also closely relates to working capital.

Why it matters: Slow-moving inventory ties up valuable capital that can be better invested elsewhere. On the other hand, turning over inventory too quickly could signal stock shortages, leading to missed sales and production delays. Striking the right balance ensures your S&OP process keeps both cash flow and customer satisfaction in check.

A higher turnover rate generally indicates the efficient use of resources. However, context is key — too high a rate might mean you're not stocking enough to meet demand. Most companies aim for a turnover ratio between 5 – 10, but the right target will depend on your industry.

3. Gross Margin Return on Investment (GMROI)

GMROI is a favorite among finance teams because it links inventory management with profitability. By doing so, this KPI measures the return you're getting for every dollar invested in inventory. GMROI essentially prompts the following question: "Are we making enough money on our inventory to justify its cost?"

Why it matters: In manufacturing, your inventory is more than just materials sitting on shelves — it’s capital tied up in a potential future sale. GMROI ensures your S&OP process balances inventory levels and profitability, preventing unnecessary costs. This KPI is great for helping the finance team and operations make data-driven decisions about inventory stocking and sales strategies.

A GMROI greater than 1 means you’re selling your inventory for more than it costs, while a ratio below 1 indicates you’re losing money. Keeping this ratio healthy is a solid indication that your S&OP process is aligned with profitability goals.

4. Order Fill Rate

The order fill rate measures the percentage of customer orders fulfilled on the first shipment. In essence, this KPI is a direct indicator of how well your production and inventory planning are working together within the S&OP process. A high fill rate indicates you're getting products to customers quickly and efficiently while a low rate might signal issues such as or production delays.

Why it matters: A high fill rate helps ensure customer satisfaction/retention and reduces the need for expensive rush production or expedited shipping, which can eat into margins. Plus, maintaining a high fill rate can create a ripple effect throughout your supply chain, reducing disruptions and enhancing operational efficiency.

Strive for a fill rate of 95% or higher. This rate is often considered world-class and shows a well-optimized manufacturing and distribution process.

5. Days Sales Outstanding (DSO)

DSO measures how long it takes for your company to collect payment after a sale has been made. In manufacturing finance, this KPI is crucial as longer collection periods can strain cash flow. Tightly aligned operations and sales indicates you’re not only producing what you can sell, but also collecting the money promptly to reinvest in the business.

Why it matters: DSO can reveal a lot about your company's financial health and the effectiveness of your credit policies. A high DSO might indicate that you're extending too much credit to customers or that inefficiencies exist in your invoicing or collection processes. On the flip side, a low DSO suggests that your cash flow is strong and your operations are humming along efficiently.

A good benchmark for DSO depends on your industry, but generally, anything below 45 days is considered healthy.

Conclusion/Learn More

Sales and operations planning is like the conductor of a symphony, bringing all departments together to ensure harmony between production and demand. Accordingly, the right KPIs not only help you keep track of performance but also give you actionable insights to optimize your S&OP process.

If you’re looking to implement or improve your S&OP, focus on the five KPIs detailed above — forecast accuracy, inventory turnover, GMROI, order fill rate, and DSO. Doing so will keep you on the path to success. These performance indicators will not only help your manufacturing finance team align with broader company goals, but also keep cash flow strong, inventory lean, and customers happy.

Ready to fine-tune your manufacturing operations? Let’s talk about how we can help your S&OP process work smarter, not harder. The right financial software can provide the real-time data and insights you need to stay ahead of the game.

To learn more about how OneStream can help streamline financial processes for manufacturing, check out our 6 Steps to Leading at Speed in Manufacturing white paper.