In today’s supply chain, developing the “right” metrics that improve results are critical for a company’s health.   Everyone asks, “What are the Key Performance Indicators (KPIs) that I should measure to improve my supply chain?”

It’s best to first ask:  What do our customers want? What will cause them to buy more goods from us? What will they pay more for?

Companies often measure too many KPIs and, after exhaustive analysis, still find that business results are falling short.  Others rely on subjective analysis, which may or may not be accurate.  For instance, “I’m seeing damaged product, so our damage rate must be high.”  Without measurable data, these kinds of assessments can lead down a blind alley. 

I would recommend a “less is more” approach when developing your logistics KPIs.  Once again:

• What do our customers want?
• What will cause them to buy more from us?
• What will they pay for? 

I would then move these questions into the following categories:

1.  Cost.  How are you reducing your costs to pass on savings to your customers?   How are you driving a culture of innovation so that all associates are adding value?   What lean programs are you using to improve the way you work?  What metrics should you track to ensure cost reduction?
2. Performance.  How are you moving goods and services to market faster?  How are you reducing inventories?   What metrics identify performance and the impact on customers?   
3. Cash.  How are you developing a “Cash Is King” initiative?  What metric best improves your performance in this area?
4. Quality.  It’s the moment of truth…Does your product or service meet the customer’s expectation?   What metric is the best indicator of customer-perceived quality?  

Develop your dashboard, then make sure your entire organization understands your KPIs and why each is “key” to delivering real value for the customer.   This will align your team so that everyone knows what winning looks like. 

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