Mastering Supply Chain Performance: Measuring What Matters

The way we measure can be just as important as what we measure. Over the years, I’ve seen how the right Key Performance Indicators (KPIs) can transform an organization. However, I’ve also witnessed the confusion and inefficiency that can arise from overcomplicated KPI systems. Let’s simplify this.

Consistent Measurement and Accuracy: Finding the Sweet Spot

Consistent measurement is the cornerstone of effective KPI systems, driving the accuracy necessary for informed decision-making. When KPIs are measured the same way each time, organizations can track performance reliably and make meaningful comparisons over time. This consistency eliminates confusion from fluctuating measurement methods and ensures everyone in the organization is aligned.

Accuracy ensures these consistent measurements truly reflect business performance. It’s important to distinguish this from precision, which is influenced by how much and how meticulously we collect a measure’s data. If you ask me, I treat accuracy as more important than precision. Partly because precision is more costly than accuracy, but mostly because it doesn’t make sense to measure something inaccurately, with high precision. But we can still make sound decisions when we measure something accurately, with moderate precision, so long as we are staying consistent.

The Power of Consistency

It might seem obvious, but the value of consistently measuring performance, even if the initial measurement isn’t perfect, can be easily overlooked. Here’s why:

• Reliable Data for Decision-Making: Let’s take the example of headcount. You might see a reduction of 50% on an 8-hour shift, going from 5 people to 4. But wait! Those 4 aren’t actually working 8 hours – they’re pulling 12-hour shifts! So, your headcount went down, but your total labor cost likely went up. Dig deeper and understand the context. A simple metric like “number of people hired” becomes more meaningful when paired with “total labor hours.”
• Identifying Real Trends: Fluctuating metrics make it difficult to see the bigger picture. Did your sales really jump 20% one month and then drop 15% the next? Or is this just a result of inconsistent tracking? Consistent measurement helps identify real trends. You can track progress over time, pinpoint areas for improvement, and measure the effectiveness of implemented changes.
• Unrealistic Targets vs. Continuous Improvement: Setting an unrealistic target like 99% inventory accuracy might sound impressive on paper, but it’s not helpful. Does this tell the whole story? How can you improve if you’re already tracking for unrealistic targets? Focusing on continuous improvement is far more valuable. By consistently measuring with the same method, you can track progress over time and celebrate even small improvements that move you closer to a realistic, achievable target.
• Benchmarking Against Yourself: It’s tempting to compare your performance to industry benchmarks or competitors’ KPIs. However, these can be misleading. Every company operates in a different context. Instead, benchmark against yourself. Track your own performance over time and focus on beating your own previous records. Consistent measurement allows you to see how your own efforts impact KPIs and identify areas where you can optimize internally.

The Right Information for the Right People

Numbers don’t lie, but they can be misinterpreted. Let’s say the CFO sees a rise in inventory due to a planned marketing campaign. Without context, they might panic. This is where clear communication comes in. By encouraging open communication across departments, everyone understands the bigger picture.

Not everyone needs access to every metric. The CFO doesn’t need to see the nitty-gritty of daily order fulfillment, and the COO doesn’t need to sweat over every inventory fluctuation. However, everyone should be able to access and understand the KPIs relevant to their role. This fosters a culture of ownership and accountability.

Dashboards become powerful tools when everyone interprets data consistently based on the chosen KPIs. Each department can have their own tailored view, presenting clear and concise information for quick analysis and informed decision-making.

The Bottom Line

Consistent measurement, coupled with selecting the right KPIs for the right people, empowers everyone in your supply chain to make data-driven decisions. This fosters a culture of ownership and accountability, allowing your organization to continuously improve and achieve its goals.

Stephan Lauzon is a seasoned expert in supply chain management with a proven track record of driving operational excellence. His ability to simplify complex processes and deliver tangible results has made him a sought-after leader in the industry. Stephan’s expertise in supply chain performance has transformed numerous organizations, enabling them to make informed decisions and achieve sustainable growth.

At LIDD, we work with companies to streamline their supply chains and achieve better results. Our team, including Stephan, focuses on practical solutions that make a real difference. Whether it’s improving warehouse management or optimizing inventory, we help businesses operate more efficiently.

Want to improve your KPI strategy and boost your supply chain performance? Get in touch with LIDD today. Our experts, including Stephan Lauson, can help you simplify your KPIs, ensure accurate measurements, and drive meaningful improvements. Visit our website at LIDD or contact us directly to learn more. Let’s make your KPIs work for you and unlock your business’s full potential.