Supply Chain KPI
Accurate Measurements and Meaningful Metrics - One Way to Improve
It seems that everyone is talking about key performance indicators (KPIs) today. And it’s understandable, given that productivity, savings, and waste stream are squarely on everybody’s radar screen.
Instead of huddling around the water cooler though, people are gathering by the new hot spot — the KPI dashboard — to talk about the state of the supply chain. The buzz over KPIs can reveal a lot about the health of your operation.
But KPIs also can signal a need for change and improvement. Consider the following:
- Your business has changed or you modified certain parts of your business.
- You question whether the data is complete or even accurate.
- You’re not seeing progress in the areas that were pinpointed for improvement.
A change may or may not be necessary. So before doing anything, it’s important to make sure that you’re measuring the right areas and achieving the desired results. To do so, follow these six steps:
Define what drives your business.
Your organization must determine the metrics that your leaders and customers value the most. Don’t get overwhelmed by all the possibilities. Identify items that can be “levers” in the business, such as percentage of on-time pick-up and delivery, exception-free shipments, cost per lb./mile, out of stock rate, and order-to-delivery cycle. KPIs vary from company to company and department to department based on organizational goals. Select the metrics that are most vital to your organization and start to manage them.
Extract data and create reports.
The biggest challenge many companies face is accessing data. However, with an enterprise resource planning (ERP) system or a transportation management system (TMS), you can create the reports necessary to identify trends and assess the health of your supply chain.
Although they may limit the types of data you can track and export, ERPs are still a useful tool in gaining visibility to potential trouble spots in your supply chain. A TMS provides visibility to events the system captures, from order entry to order updates, carrier activity, and other subsequent actions, through delivery. A TMS offers a customizable suite of services to meet all the demands of your business and lets you focus on your core competencies. GENCO’s TMS features:
- Web-based order entry and electronic load tendering.
- Web-based track and trace and event management.
- Freight consolidation and optimization.
- Web-based domestic and international shipment visibility.
- Carrier management and rate database.
- Customized reporting and data analysis tools.
Confirm data integrity.
Nothing can weaken your supply chain quicker than inaccurate data. It’s imperative to get the right data so you can make effective decisions. If you create reports that are inaccurate, nobody will rely on them and you won’t be able to hold people accountable for results. Invest the necessary time up front to capture the data and ensure its accuracy.
Prepare analysis and make decisions.
The saying "What gets measured gets managed" seems tailor-made for the supply chain world. Measurements alone will not be the solution, but if you don’t measure, you have virtually no chance of making an improvement. The solution can be found in the corrective actions that you take and the resulting improvements. Identifying trends and deviations can prevent needless costs and service problems.
Establish goals and objectives and communicate them.
Identify the weak areas in your supply chain and develop a strategy to strengthen them. The goals should be aggressive yet obtainable and be supported by senior leadership. People or departments should own the process improvement and take responsibility for achieving the targeted results. Supply chain managers need to encourage and support process changes, and the frontline team must commit to making the adjustments.
Don’t make measurement a one-time event. Make sure there is accountability and that people keep their focus over time. Monitor your results, and continue to raise the bar to consistently manage your supply chain to new levels.
All supply chain professionals are responsible for ensuring that their logistics solutions produce the desired results. But if change is a possibility and your dashboard lacks the essential data necessary to make key decisions, re-examine your KPIs and metrics. By identifying inefficiencies, you’ll be able to make the critical adjustments necessary to succeed in today’s marketplace.