10 Ways KPIs Combat Disruptions
It’s essential to measure performance to create a competitive advantage and prepare for unpredictable events. Therefore, I have put together my “10 commandments” of key performance indicators (KPIs) to mitigate supply chain disruptions.
1. Make Sure KPIs Align with Overall Business Goals. What are your specific goals? Are those goals limited by staff hours or company finances, for example? If a key performance indicator cannot be tied to a specific company initiative, it may not be worth tracking. In some cases, KPIs force an organization not just to measure how a strategy is performing but to decide what their approach is in the first place.
2. Keep Track of KPIs. Do company leaders agree that the KPI is important and must be tracked? If so, what tracking measures will you put in place? It is important to track and focus on improving specific KPIs, which allows management to make better decisions and helps your business gain competitive advantages.
3. Have Clear KPI Goals. After the top leaders confirm which KPIs to track, now comes the fun part: getting to work! One way to ensure you monitor what you need to improve/solve is to have meaningful measures with precise intended results.
4. Input Quality is Key. There’s nothing worse than creating a KPI and having everyone question the validity of the inputs. If the information has a high level of variability, you are at risk of solving issues that aren’t actual issues.
However, quality inputs—or KPIs that lead to creating values (examples are the amount, type, or quality of resources)—produce better outputs or goods and services that can be measured in quality and quantity.
5. Have a Consensus on Measurements. A KPI needs to be measurable, but everyone should agree on the measurements. Are they financial? Based on customer feedback and experiences? If everyone agrees on the measures, the results or output cannot be questioned.
6. Have a Set Target. Set an attainable goal and ensure buy-in. Suggest SMART targets (Specific, Measurable, Attainable, Relevant, Time Based). The “A” is essential because it shows whether or not certain targets can be achieved. Use visuals to monitor progress for set targets.
7. Be Accountable. There should be one owner; if there’s a team, there should be one team leader. Too many people involved can derail projects and waste time and resources. KPIs are not always successful, and that is OK. It is the lead’s job to present results; then the team collaboratively decides if the KPI is worth pursuing or not.
8. Engage Employees. If you are looking at “freight transport efficiency,” you can establish a cross-functional team to create and monitor the KPI. If it’s critical to the business, getting different opinions never hurts. Plus, it gives employees a sense of being essential and valuable in the company and helps them learn what drives other departments.
9. Be Accessible. Results must be accessible to everyone, and preferably in a live format. If not, they should be published on a schedule. They should be mobile-friendly, with several visuals. If it’s a high-level KPI, such as freight transport efficiency, make sure users can drill down to see how their specific piece of the puzzle affects the numbers. Should you drill down by logistics coordinator? Region? Carrier? Customer service rep?
10. Tie it All Together with an Effective Overview. Balanced scorecards help businesses determine the financial, customer, internal business process and learning/growth perspectives.
Implementing KPIs that result in small changes at one layer of an organization can create a “butterfly effect” that leads to significant improvements in other layers, netting the benefits of decreased operating costs and a more robust bottom line.