In an attempt to help you keep your supply chain organisation from analysis paralysis, metric manipulation, or measurement misnomers, I thought I’d use this post to share three important guidelines for benchmarking your business and monitoring performance using meaningful supply chain KPIs.

 

Golden Rule #1: Don’t Meddle or Manipulate

KPI meddling and manipulation

If you want meaningful supply chain KPIs, you need to live with the numbers as they are revealed. I’ve seen more than one management team create or exploit process loopholes to arrive at better KPI results. It’s a folly to do so and it doesn’t do the managers or the company any favours.

A prime example of this kind of manipulation (and really, that’s exactly what it is), is when performance issues arise which result in shipments being delayed. Instead of concentrating on resolving the issues at hand, the management team starts contacting customers and asking if they will accept a later delivery date or time. If the customers agree, the management team dispatches the shipments and records them as being delivered on time.

Of course contacting the customers is the right thing to do, but when a change of delivery date has been initiated by the shipper and not the customer, there is no way it should be recorded as an “on time delivery”. Late is late, even when it is with a customer’s permission.

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Golden Rule #2: Put Yourself on the Outside, Looking in

Customer Service Reflection

You can come up with a list of service metrics and call them KPIs, but that doesn’t automatically make them meaningful supply chain KPIs. For them to be meaningful, your service KPIs should reflect how your service would be viewed in the eyes of your customers.

For example, if you offer a three-hour delivery time window, you might feel you are providing good service even if most of your deliveries arrive 15 minutes before the time window ends.

Ask yourself this though: Do you think your customers enjoy clock-watching for more than two-and-a-half hours while wondering if their delivery is actually going to turn up?

A more meaningful KPI would be to measure how many deliveries take place during the first hour of the time window.

 

Golden Rule #3: Choose Quality Over Quantity

KPI Quality over Quantity

Sometimes, even if you choose and use meaningful supply chain KPIs, you still struggle to identify and address the priority performance issues. Very often, this is simply the result of having too many KPIs—so many that you can’t see the wood for the trees.

It’s a good idea when first establishing supply chain KPIs, to apply the rule of three. That means picking just three metrics to use as KPIs within each supply chain function or component. Another alternative is to simply restrict your entire KPI suite to a total of around 10. This will save you and your colleagues from analysis paralysis—once you are familiar with your KPIs and everyone is comfortable with them, you can always add some more if it makes sense.

 

In Summary

That’s it … Just three important things to remember which really will make a difference between metrics masquerading as indicators of performance and the real McCoy—meaningful supply chain KPIs. To summarise them in a nutshell:

  • Don’t play around to make the numbers fit
  • Use service metrics that reflect how your customers would see your performance
  • Don’t try to do too much, with too many KPIs, too soon.

Have you seen any of these issues in your own organization, or are there any other tips you’d like to share for making KPIs meaningful? If so, don’t hold back, your feedback and comments are always very welcome here at Logistics Bureau.

 

 

Rob O'ByrneBest Regards    
Rob O’Byrne
Email or +61 417 417 307

 

 

Have you seen our latest Supply Chain Benchmarking promotion? 

Go to this page: http://www.logisticsbureau.com/supplychainbenchmarker/