KPIs: In Life & Transportation Management
Four Steps to Establish KPIs for Your Supply Chain
Introduction: KPIs, metrics, goals, deliverables – no matter what you call them we are all given some version of them for our jobs. We set KPIs as a way to monitor and measure performance. It’s a practice with an almost 100% adoption rate and has proven a successful way to ensure goals are set and achieved. If the deliverables are not met then it can be an indicator that changes may need to be made.
Establishing KPIs and creating action plans to achieve the KPI targets is a no-brainer for transportation management and the same should be applied to one’s life. What are your “life KPIs” and how are you measuring your own personal performance? “Where do you see yourself in five years?” is a common interview question, but if you don’t have KPIs in place how do you really know if you’ve achieved what you set out to achieve year-over-year? To truly measure performance in life or transportation management you first need to establish KPIs. For today though, let’s tackle the latter and the importance of setting KPIs to manage your supply chain.
I. The Right KPIs
If the first step is understanding that KPIs are needed to help an organization monitor and measure their supply chain performance, then the next step is to identify the right KPIs for your business. To assist in doing this there are many resources out there from advisory and consulting firms like Gartner , but the organization themselves should know their own business the best and must determine what the right KPIs are for them.
Ideally, they will start by collecting feedback and data from key stakeholders of each department in the company, not just logistics. The departmental silos must be removed within an organization as transportation effects every part of the business and insight from the different groups can be invaluable to ensure the right KPIs are set. If the wrong KPIs are used to monitor and measure the performance of a business the effects could be as detrimental or worse than not having any KPIs at all.
II. The Right Data Source
Once the right KPIs have been established then it must be decided what data source will be used to calculate each KPIs performance. Many company’s try to use an ERP or WMS or even *gasp* Excel as the data source, but the most efficient way to collect and collate data for true transportation management is by leveraging a transportation management system (TMS). The best TMS’ will provide business intelligence that includes dashboards and scorecards that allow a shipper to make quick and confident decisions as they aim to manage a data-driven and connected supply chain.
III. The Right Targets & Prioritization
Once the right KPIs have been established and the data source determined then targets for each KPI must be set and the KPIs prioritized. Historical performance or industry benchmarks are common ways an organization can set their KPI targets, but that should not be the end-all-be-all. Every company, every business is different, which means their KPIs and those targets may need to be different as well.
Again, key stakeholders from different departments should be part of this discussion in not only identifying what the right KPIs are, but also in setting the targets. Prioritization of the KPIs is essential as well as it is expected that there will be conflicting interests between the stakeholders. For example, for on-time delivery, customer service may require that the target be 95%, but to achieve this it will increase the transportation costs by 8%. An organization must understand their business and prioritize their KPIs to find the right balance.
IV. The Right Review
Whether it be in life or transportation management, having the right KPIs will help to ensure success, although that alone will not guarantee it. Every task, project, etc. a person does in life or a company does in managing their supply chain must be aligned with and have an impact on the KPIs that have been identified as the best way to monitor and measure performance. If they do not, then questions must be asked such as why are we working on this project? Or if truly the right actions are being taken, but they don’t have an impact on the established KPIs then the question must be asked, do we have the right KPIs? This continual review will help keep all of the stakeholders aligned and moving in-sync toward achieving the KPI targets.
Conclusion: KPIs, in life & transportation management, are a part of what my own father always tells me, “Plan your work, work your plan.” If you can’t measure it, you can’t improve it; using these four steps as a guide to help in identifying, defining, and setting targets for your KPIs in your life or managing your supply chain will allow for continuous improvement, but now the real work begins – working your plan.
Adam Davis：VP of Managed Services in oTMS, responsible for SaaS TMS, transportation process control and consulting services, with 16 years senior management experience. General Manager of TMC Asia Pacific in C.H. Robinson since 2010.