Do you want a generic key performance indicator suitable for any kind of business? It doesn’t work like that.
Those who have already implemented an optimization software in their companies undoubtedly realized that these solutions will only function properly if they are configured with the right indicators, and these KPIs must be defined from the core business of the company.
If you fail to have accurate indicators you might lose the right track. That’s why an alignment between your company’s goals and its KPIs is so important.
Martin Murray, logistics and supply chain expert, explains in his blog that “some companies use a range of metrics that they require their logistics department to adhere to, but do not realize that in doing so, other parts of the supply chain may be negatively impacted.”
Gary Marion, another logistics and supply chain specialist, in his blog states that “every metric gives a slightly different view of your supply chain and your company. Ultimately, it’s up to you to prioritize which supply chain metrics are important and how they will be used.”
It is clear that there are several issues at stake before choosing the right metrics and KPIs for your business.
After looking at the best practices and experiences available in the supply chain industry, we believe these are the essential keys to choose proper metrics for your business:
- Easy to Understand
All your logistics department should be able to understand each and every one of these indicators. This contributes to a more precise collection and review process, and boosts your team’s motivation, as they are able to visualize more clearly the goals of their company.
- Measure what is Important
“Some metrics can look to be important, but when the data is analyzed, the relevance of the metric can be tenuous. It is vital that a performance metric on which business decisions are made, should measure important data,” says Mr. Murray.
- Is It Actionable?
“Metrics should identify and make your company take corrective actions, if needed,” holds Mr. Marion.
“For example – he adds – if a metric shows a number of orders processed per day, then that metric should be measured against a target and identify a corrective action, such as increase the number processed.”
- Easy to Collect
In some cases, companies use some KPIs that require an extra effort to collect, and even move your employees away from their primary tasks in order to account for these indicators. “Avoid these types of metrics and find easier to collect data that can easily be output from your materials resource planning system or other databases,” says Mr. Marion.
So, how are you defining your own logistics metrics? Are they accurate enough? I appreciate your experiences with logistics and fleet management KPIs. You can write a comment below.