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Supply Chain Challenges, Logistics Technology, Consumer Goods Logistics, Warehouse Operations

The Conundrum of Customer Metrics and KPIs

Kane Logistics | December 12, 2012

"Not everything that can be counted counts and not everything that counts can be counted."  - Albert Einstein

There are hundreds, if not thousands of metrics that are put in place across the supply chain today.  Everyone seems to have a different set depending on the size and complexity of the organization, the mode of transportation, the inventory processes within the distribution centers, the commodities that they manufacture or purchase, customs regulations and duties, etc., etc. 

How is it possible then to identify the right KPIs essential to your business and allow for effective measurement?  Start with the basics:

1.  Map out the area of the supply chain that you are involved in and understand its role within the entire supply chain.

2.  Determine which category(s) will deliver the desired information:

     A.  Quantitative indicators – ones that are numeric in nature.

     B.  Practical indicators – those that interface with existing company processes.

     C.  Directional indicators – these demonstrate the health of the program and whether things have improved or not.

     D.  Actionable indicators – these are sufficiently in the provider's control to affect change.

     E.  Financial indicators – ones used in various areas from cost savings to operating indexes.

3.  Agree on the ones that drive performance as well as understanding.  Metrics and KPIs are useless if you need a Ph.D. to interpret them. 

4.  Keep in mind that these should be aligned with your information needs and your capabilities to deliver the information.  Establish a set period to review the KPIs and then make adjustments.  Rarely do the first set of KPIs end up as the final dashboard. 

Finally, don't hesitate to incorporate subjective KPIs, if they make sense.  Don't wait for perfection.  Build a straw man and tweak as necessary.