"A performance indicator or key performance indicator (KPI) is a type of performance measurement."
Using key performance indicators (KPIs) and performance measurement techniques to evaluate and improve supply chain efficiency, effectiveness, and customer satisfaction.
Supply Chain Management (SCM): SCM includes the coordination and management of all activities that happen within the supply chain network. It includes inventory management, sourcing, logistics, and production planning.
Performance Metrics: Performance metrics are used to evaluate the efficiency and effectiveness of supply chain processes. They can be qualitative or quantitative.
Key Performance Indicators (KPIs): KPIs are a subset of performance metrics that are crucial in measuring and managing success. Examples include inventory turnover, lead time, and cash-to-cash cycle time.
Service Level Agreements (SLAs): SLAs are agreements between two parties that outline the level of service that will be provided. They are important in supply chain performance measurement as they ensure that expectations are met.
Performance Dashboards: A performance dashboard is a visual representation of KPIs and other metrics designed to provide an overview of performance in real-time.
Benchmarking: Benchmarking is a comparison of a company's performance against industry standards or competitors. It can provide insight into areas for improvement in supply chain management.
Data Analysis: Data analysis is the process of examining and interpreting data to draw conclusions. It can be used to identify trends, predict future performance, and improve decision-making.
Lean Six Sigma: Lean Six Sigma is a methodology that focuses on reducing waste, improving quality, and increasing efficiency. It can be applied to supply chain management to improve performance.
Total Cost of Ownership (TCO): TCO is a comprehensive view of costs associated with a particular product or service. It includes all costs associated with the supply chain, such as sourcing, transportation, and warehousing.
Vendor Scorecards: Vendor scorecards are used to evaluate vendor performance based on pre-determined performance indicators. They are important in supply chain management as they ensure that vendors meet performance expectations.
Inventory Metrics: Measures inventory levels, inventory turnover rate, and inventory carrying costs.
Order Fulfillment Metrics: Measures the order-to-delivery cycle time, order accuracy, order lead time, and fill rates.
Transportation Metrics: Measures transportation costs, delivery time, transit time, transportation capacity utilization, and on-time delivery.
Quality Metrics: Measures quality of the product, customer satisfaction, and defect rate.
Cost Metrics: Measures costs involved in the supply chain, including shipping costs, handling costs, warehousing costs, procurement costs, and production costs.
Sustainability Metrics: Measures the sustainability of the supply chain, such as greenhouse gas emissions, energy consumption, and waste.
Risk Management Metrics: Measures supply chain risks and evaluates the impact of disruptions on the supply chain, such as natural disasters, supplier bankruptcy, and political instability.
Capacity Metrics: Measures the available capacity of the supply chain, including production capacity, warehouse capacity, and logistics capacity.
Supplier Performance Metrics: Measures the performance of suppliers, including on-time delivery, quality of goods, and price.
Revenue Metrics: Measures the revenue generated from the supply chain operations, including sales, profits, and return on investment.
Strategic Metrics: Measures the effectiveness of the supply chain strategy, including alignment with business objectives and the ability to meet customer demands.
Demand Forecasting Metrics: Measures the ability to accurately forecast demand, including forecast accuracy, forecast bias, and forecast variance.
Lead Time Metrics: Measures the time required to produce, ship, and deliver products, including manufacturing lead time, delivery lead time, and replenishment lead time.
Productivity Metrics: Measures the productivity of the supply chain, including labor productivity, equipment utilization, and throughput.
Compliance Metrics: Measures compliance with regulations and standards, such as safety regulations, environmental regulations, and trade regulations.
"KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it engages."
"KPIs provide a focus for strategic and operational improvement, create an analytical basis for decision making, and help focus attention on what matters most."
"Success is simply the repeated, periodic achievement of some levels of operational goal (e.g. zero defects, 10/10 customer satisfaction), and sometimes success is defined in terms of making progress toward strategic goals."
"What is deemed important often depends on the department measuring the performance – e.g. the KPIs useful to finance will differ from the KPIs assigned to sales."
"Various techniques to assess the present state of the business, and its key activities, are associated with the selection of performance indicators."
"These assessments often lead to the identification of potential improvements, so performance indicators are routinely associated with 'performance improvement' initiatives."
"A very common way to choose KPIs is to apply a management framework such as the balanced scorecard."
"The importance of such performance indicators is evident in the typical decision-making process (e.g. in management of organisations)."
"Should they make their analysis on the basis of faulty or incomplete information, the predictions will not be reliable and consequently the decision made might yield an unexpected result."
"Therefore, the proper usage of performance indicators is vital to avoid such mistakes and minimize the risk."