Richard Dayman
Supply Chain Consultant, Bluefin Solutions
Keeping up with the KPIs
01 Dec 2010
ERP, ERP Supply Chain, Consumer Business
Any organisation that takes its business seriously needs to measure itself.
We’re not talking about meeting the dreaded targets here but measuring and benchmarking yourself against your previous performances, your competition and external Industry measures.
Try to obtain Key Performance Indicators (KPIs) for similar Industries as your own; many are available either from the web, or analyse a company’s annual reports and announcements or financial accounts to get an idea of their supply chain performance.
The supply chain is a cost of doing business but those costs can often be hidden under a warehouse’ inventory dust or buried in aged debt!
Where to start?
If you are measuring the end-to-end supply chain then you should include the 6 headings:
- Procurement and supplier management
- Production performance
- Inventory management and forecasting
- Warehouse / distribution centre
- Freight and transport
- Customer service including accounts receivable
Under those would be the following but not in any particular order:
- Perfect order measure - measures order to invoice E2E to track any error in the supply chain
- Orders on–time and in full (OTIF) ie. delivered on the date and time the customer wanted with no shortages or substitutions
- Demand forecast deviation – shipments vs. forecast
- Production/manufacturing – demand vs. supplied
- Total inventory vs. finished goods/sold skus in last 6 months
- Physical pallets stored vs. target
- Credit notes to invoice
- Number and value of short-payment/deductions/debit notes
- Days Sales outstanding – the AR measure on speed of invoices paid
When to measure and report it
The most important point to the whole KPI story is so often lost or buried under the mass of statistics and numbers. So here is some practical advice.
- The point in circulating KPIs is for the receiver to be able to take action on them!
- Keep the reporting simple – something quick and easy to read in an email or on a Blackberry or iPhone
- Decide what needs to be reported monthly, weekly or daily – don’t swamp people
- Only display 2 or 3 historical periods for comparison
- Send it - don’t put it somewhere where the person needs to go and get it
- Share the KPIs with all your employees continually
Top tip
Ask your major customers how they measure your performance.
Is it your order fulfilment versus their order or is it the number of Invoice errors you cause them?
Once you’ve obtained their KPIs, track them over time and report them against your equivalent – you will be surprised what this tells you.
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