How to measure and monitor my Supply Chain ?

Many people get confused about KPIs or Key Performance Indicators in Supply Chain operations. Which ones to use?… How many to use?

I have been reading to many article about which are the Key Performance Indicators (KPI’s) that you should measure in your Supply Chain , but rarely I see a key step backwards, which is the definition and alignment with the Company’s strategy and the selection process between lagging and leading indicators to plan correctly, and have the right control panel to reach what we are visioning

KPI’s are values that measure your organization’s success at meeting its objectives and monitor the strategic growth of your company.

KPIs provide insight into business conditions like:

• Product quality
• Service
• Early return on investment (ROI)
• Predictability
• And others

In the selection process you need to select the right mix between leading & lagging.

A leading indicator informs business leaders of how to produce desired results, a lagging indicator?measures current production and performance.

While a leading indicator is dynamic but difficult to measure, a lagging indicator is easy to measure but hard to change.

Leading indicators do this by providing benchmarks that, if met, will be indicative of meeting overall KPIs and objectives. Leading indicators are trickier to measure than lagging indicators. That’s because they tend to be more abstract.

By other side, Lagging indicators are always triggered by an event that has just occurred, and, in that sense, are a little more self-explanatory than leading indicators.

Having said this, you need to choose the right mix between both types of indicators to assure you have the right dashboard that let you follow and monitor the execution and progress of your business strategy.

Also, there is a big temptation to establish to many indicators which doesn’t help at all in monitoring your operation.

Make sure that the ones you select “tie” in with your goals and objectives.

Initially, you need to measure the following processes:

1. Order capture
2. Inventory management
3. Purchasing and supplier management
4. Production/manufacturing
5. Warehousing
6. Transportation

The basics you should start placing to monitor your processes are:

• Delivery in Full
• Delivery on Time
• Delivery In Full on Time
• Cost as a percentage of sales (Logistics or Supply Chain)
• Inventory stock turns in Days.

In addition, cross functional KPIs will help you to provide snapshots of the following end-to-end performance factors:

• Perfect order (the degree of accuracy to which customers’ requirements are being met)
• Inventory levels
• Stock losses and/or damages
• Gross profit
• Cost of goods sold
• Total logistics cost

In determining your supply chain KPI suite then, the key is to identify performance elements critical to those with the power to influence them, and develop appropriate KPIs for that audience.

Also, a level of hierarchy is critical to assure the right monitoring of progress.

If you wish to keep things as simple as possible, you should find that two levels, or tiers, of KPIs are sufficient.

If you want to establish the right KPIs system for your organization, I invite you to follow the recommendations from Logistics Bureau in the following link

https://www.logisticsbureau.com/kpi-key-performance-indicator/

Invest the right time on elaborating and designing your dashboard to assure having the right tool to use!

Xabier Basa?ez