Why your supply chain KPI’s probably suck
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Any mention of Supply Chain KPI’s usually results in people running from the hills –
“Not more measurements! what about the day job”
“My numbers are bad this month – how do I tweak them so I don’t look bad”
“I’m wasting time producing charts no-one reads”
“We’re reporting on the same stuff”
“We’re not focusing on the right stuff”
“Our methods of measurements are flawed”
Sound familiar?
Most companies get the idea of KPI’s. Key Performance Indicators are a good thing. They allow a business to track how they are doing against objectives. However most companies don’t execute them correctly – check out our top 5 list of why your KPI’s might suck.
1/ Metrics are not relevant
While there are some core QCD metrics that most companies operate (QCD = Quality, Cost & Delivery) understanding what needs to be tracked and how it relates to corporate objectives is key. Tracking metrics that don’t add value is a waste of time. For example – Tom comes up with the idea of tracking the number of red boxes in the warehouse. Great, we can gather the numbers and produce a chart and track it but what’s the value of the measure in the first place? It might be interesting but if it doesn’t result in you taking action then what’s the point?
2/ Metrics don’t have a target
Most companies I’ve worked for have tracked supplier delivery performance in some form. Some have realised that poor delivery performance has a knock on effect (more buffer stock, compressed customer lead times, etc) they recognise that if they don’t achieve a certain performance ratio – customer output becomes affected – this becomes a target – let’s say 90%. The important thing is that it’s not just a number it actually translates into real performance of your business something tangible.
3/ KPI’s should be quick to generate
This is what many businesses find difficult. You should not spend weeks generating KPI’s. Phew, that was good to get off your chest, right? Now that is easier said than done, you may might not have the IT Ninja skills to find out how to extract data out of that legacy MRP system but it pays for you to find the way. In many cases part of the battle is getting the data cleansed, many organisations take data out and then manually review data (correcting known data integrity problems along the way) – this is time consuming and non-value add. Have a thorough strategy about how your company data will support your KPI’s and focus on making data accessible, easy to interpret and the one version of the truth.
4/ Metrics don’t result in actions
Plan, Do, Check, Act. Go google it and then come back. OK – done that? Good. KPI’s are part of a continuous improvement ideology. Presenting numbers does not fix things. Remember those targets we talked about in 2? OK so how did we do? Why did we miss the target? What can we do better next reporting period? Think about a RAIL (rolling actions list). Every time you review metrics think about – ok next month we’re gonna do this….Tom has got this action to complete by the 15th of next month which will drive improved numbers. Also – think about things strategically – what will get you your biggest bang for buck? Resources thin on the ground? Thought so…make sure they focus on the right actions then!
5/ Continuous improvement
Too many times staff fail to see the value of metrics because they do not understand how they fit into the bigger picture. KPI’s are just for management they are for everyone. It’s as much as how you promulgate information as it is about how you collate it. Key Performance Indicators should be part of a wider continuous improvement ethos that strives to do better. Data in to few hands is worthless, in the right hands it’s gold-dust.
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