How do you keep track of Supply Chain performance within your FMCG, Brewing or Pharmaceutical business? You do, don’t you? If you are not measuring any KPIs then perhaps you should stop here, read this KPI piece and then pop back and carry on.
You can measure and report in many formats as long as you measure appropriate KPIs for your business. One of the most pointless tasks is calculating and reporting a “KPI” which is in fact worthless and of no beneficial interest. Colleagues in Sales & Marketing usually assume they are immune from KPIs as they gleefully sit back and let the Supply Chain guy take the flak at Board meetings. In reality however, the actions of everyone in the company must be reflected in one or more KPIs. If there is anyone in your business who is not impacting a KPI in some way then perhaps you might consider a round of head-count reduction!
The following is a demonstration example of a Balanced Scorecard of business KPIs. While many are indeed Supply Chain related you need only look at Sales Forecast Accuracy to see how other departments can influence that measurement to a far greater extent. KPIs are designed (usually 2 or 3 per discipline) and presented within the company Scorecard. Target performance threshold levels are agreed (RAG – Red, Amber, Green) and presented monthly within the S&OP process to measure success and target further improvement.
There will undoubtedly be more PIs calculated around the business but those in the scorecard really must be the priorities; those that provide actionable information.
The use of simple colour notation allows business managers to see exactly where problems exist allowing them to focus resources. Conversely, you quickly see what is going well and where you might have to raise the bar to maintain and improve further. (If you are measuring your KPIs at the same level as 5 years ago then that may reflect a business which is stagnating.)
Whatever design you use it does not really matter but:
1. You must measure KPIs relevant to your overall business strategy and performance.
2. You must report them promptly and widely.
3. They must be discussed at the top table, routinely.
4. You must review and delete/insert new KPIs as the business need develops.
5. You must ensure the targets are stretching but achievable as a constant red display is demotivating.
While KPI stands for Key Performance Indicator it could easily be considered as Keep People Interested!
Image courtesy of Enchange.