KPIs

11 Golden Rules for Meaningful Supply Chain KPIs

11 Golden Rules for Meaningful Supply Chain KPIs

In an attempt to help you keep your supply chain organisation from analysis paralysis, metric manipulation, or measurement misnomers, I decided to use this post to share nine important guidelines, or golden rules, for benchmarking your business and monitoring performance using meaningful supply chain KPIs. Golden Rule #1: Meaningful KPIs Require a Meaningful Strategy I’ve written many posts on this blog about the importance of having a supply chain strategy aligned with the overall business plan, and why it is a mistake to have misaligned strategies. I’ve also described some of the issues that can arise from such an error. However, it’s a topic worth touching on again, as an unclear or misaligned supply chain strategy will make it difficult for you to develop meaningful KPIs. Your supply chain strategy should be the basis for your KPIs, but for that to be possible, the strategy must be clear, understandable, and aligned with the business plan. With these conditions assured, you should be able to identify (broadly) the areas of measurement that will steer your organisation towards its goals. Golden Rule #2: Don’t Meddle or Manipulate If you want meaningful supply chain KPIs, you need to live with the numbers they reveal. 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, it is manipulation), is when performance issues arise which result in shipment delays. 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 delivered on time. Of course, contacting the customers is the right thing to do, but when it is the shipper and not the customer, who initiates a change in the delivery schedule, there is no way it should be recorded as “on-time delivery.” Late is late, even when it is with a customer’s permission. Golden Rule #3: Put Yourself on the Outside, Looking In 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 useful, your service KPIs should reflect how...

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