Managing Supply Chain Performance Indicators (KPIs)
Successful supply chain performance management always has an interconnected and balanced vision of all information related to supply chains. Key Performance Indicators (KPIs) aim to structure information related to different targets.
To achieve efficient and organized supply chains, companies must invest in managing Key Performance Indicators (KPIs) well and effectively. Achieving this goal requires developing a comprehensive and integrated performance measurement approach that starts from the strategic level and reaches the tactical and operational levels.
Here are some points that companies should consider to ensure the implementation of an effective supply chain performance management system:
- Execution rates
- Level of customer service
- Cost rates
- Inventory turnover
- Asset utilization
KPIs are built across different reporting levels and are available as needed. The goal is for performance indicators to allow deep navigation of root causes to identify targeted executive actions.
However, for most companies, the reality is different, as companies aim to implement supply chain performance measurement systems and focus entirely on a specific number of considerations while neglecting others.
Common Mistakes in Building Performance Indicators for Most Companies:
- Performance indicators for supply chains are built in isolation from other departments, thus not being integrated and not leading to their intended purpose.
- Fixed indicators are built that do not change with market conditions, despite continuous changes in surrounding conditions.
- Limited to data aggregation, without a full view of the details due to lack of information.
As a result, they are not comprehensive and do not lead to reaching the real causes of performance problems, and an integrated concept of performance measurement is not implemented.
Challenges in Building Performance Indicators:
Supply chain managers often face complex reports for measuring and analyzing performance, with complexities in defining key performance indicators in addition to details in the company structure that make it difficult to compare supply chain results in general, making it difficult to make appropriate decisions.
The Result:
- Unachievable performance indicators are set.
- Indicators may be achieved, but this does not reflect overall performance improvement.
- Additional costs for rework or redefinition of performance indicators or to meet reporting requirements.
Performance indicators must be coordinated through:
- Being derived from the strategy.
- Linking them to the tactical side if medium-term plans are developed.
- Being executable at the operational level.
Performance indicators include unified core goals to achieve this advanced integration. They include:
- Planning processes.
- Levels of customer service and sales.
- Current inventory management.
- Analysis of supply chain and procurement costs.
Supply chain and procurement reports should provide a balanced view of customers, demand, supply, and financial aspects.
Analysis and Interpretation:
Simply providing indicators is not enough; they must be analyzed and interpreted regularly to understand performance reasons and identify improvement opportunities. Powerful analytical tools should be provided to extract insights and make strategic decisions.
What Sustain Chain Offers?
Sustain Chain offers leading solutions to build integrated indicators to ensure the integration of all aspects towards achieving the target. Sustain Chain guides key performance indicators to decision-makers in supply chains using a comprehensive perspective to improve performance rates. Providing advanced solutions, including dashboards that display a comprehensive range of information about supply chains, with a comprehensive view.
Characteristics of Performance Measurement Indicators Provided by Sustain Chain:
- Harmony and correlation with the strategy:
Building performance indicators that are consistent with the company’s objectives and overall strategies. KPIs should be selected to reflect strategic priorities and contribute to achieving the company’s goals in supply chains.
- Measuring key processes:
Building performance indicators linked to key processes in the supply chain. These indicators should reflect performance in various areas such as planning, operations, shipping, inventory, and procurement.
- Unified indicators:
Building unified, interconnected performance indicators across different levels of the company and its various departments. This unification helps provide a comprehensive and integrated view of supply chain performance.
- Transparency and clarity:
Building performance indicators that are clear and transparent so they can be easily understood and measured by all team members in the supply chain. These indicators should clearly explain the criteria used and the goals associated with them.
- Continuous updating:
Building performance indicators that are updatable and adjustable regularly based on changes in company requirements and market conditions. This helps ensure the continuity of aligning performance indicators with company goals and market developments.
By using these points, companies can develop an effective system for managing performance indicators in supply chains, helping them improve their performance and achieve competitive excellence in the market.