Key Performance Indicators (or KPIs) are widely used in Supply Chain Management and are incredibly important in monitoring performance as organisations battle to move goods and services from point of origin to the consumer. But how effective are these organisations at setting and tracking KPIs which actually monitor their supply chain’s performance? And how often do they actually get used in providing feedback and ultimately driving performance improvement?
Here is Nine Feet Tall’s take on why KPIs are so important to the performance management of supply chains:
KPIs allow more accurate decision making
KPIs allow quick and accurate decision making. Managers can make decisions based on fact, not just opinion. The success of supply chains is normally based on fine margins, having accurate KPIs allows managers to take the emotion away from decision making and get straight to the point quickly and effectively.
KPIs can help manage employee expectations
A supply chain is made up of a number of different job roles. Using KPIs, managers can clarify the expectations of each link in the chain. KPIs can focus and incentivise an employee by saying ‘this is how we will measure your performance’, which allows employees to adjust their behaviour accordingly.
KPIs promote consistency
Measuring the right things in a supply chain promotes consistency in performance. Not measuring KPIs presents the risk that certain areas of the supply chain’s performance can fluctuate and impact overall performance without managers understanding the root cause.
KPIs help articulate performance simply
Supply chains are usually incredibly complex and difficult to explain to non-operational management. Using a small number of effective KPIs, supply chain managers can easily distil overall supply chain performance to a few numbers which are easy to articulate and understand.
KPIs focus your attention in the right places
Having an effective suite of KPIs allows managers to understand which parts of their supply chain is performing well and more importantly which parts are not performing so well. Once a KPI surpasses an agreed tolerance it can trigger further deep-dive analysis in that area to identify the cause, facilitating effective problem solving and then accurate monitoring of performance improvement as the issue is resolved.
There are loads of benefits to using KPIs and in our next blog we’re going to look at what you need to consider when implementing them. Nine Feet Tall have the privilege of working with a number of organisations, in a variety of sectors and in our experience when it comes to tracking performance, it really is…you are what you measure.
