Why Leading Indicators are Stronger Than Lagging Indicators for KPIs

By Clinton Jones on July 13, 2016

Business leaders understand financial results – but has your business established leading indicators to predict how those results turn out? Do you have a mountain of lagging financial measures but few or no predictive ones? If your business is continuing to generate reporting KPIs and not develop predictive indicators, you may not be taking full advantage of your data.

Indicators that look back in time

Historical performance indicators are relatively safe, but aren’t providing value in the future unless you regard your business as stagnant and the market as highly predictable.  Successful organizations like high performance finance groups have worked out the best balance of historical and predictive measures. It doesn’t take long to understand that plant and equipment that is not renewed or maintained regularly will eventually deteriorate and fail to generate output efficiently and productively within a given timeframe. The airline industry is able to keep aircrafts in the air continuously because they aggressively perform routine inspections and maintenance on aircrafts. We rarely hear of an aviation disaster or mishap due to equipment failures.

Airplane flying above tropical sea at sunset

Part of this is due to inherent redundancy in designs, a natural aversion to risk and a cautious approach to aviation. However, it’s also because the aviation industry invests heavily in equipment maintenance. Equipment is continuously assessed for performance and reliability and as issues are identified, renewal, maintenance and new inspection plans are introduced. This means predictive indicators for the aviation industry are well-defined, but continuously evolving.

Indicators to make predictions in plant maintenance

If you aren’t able to predict output volumes on equipment, you cannot meet the demands of orders, instructions and other needs. A strong understanding of when equipment is likely to fail is just as important as reporting on the circumstances under which equipment has already failed. Failures can be expensive, and hinder your ability to function as part of the supply chain – which can lead to loss of business. There must be a balance because maintenance and renewals are costly and simply replacing a part because the manufacturer recommends replacement may not be the optimal approach.

Winshuttle provides you with tremendous opportunities in data maintenance, allowing you to not only improve material and inventory management, but also plant maintenance and related activities. A number of large SAP customers use Winshuttle with SAP for everything from full maintenance plant entry in Oil & Gas through keeping trains on the tracks and planes in the skies. Read this interesting Winshuttle white paper on Five Data Management Challenges in SAP Plant Maintenance to learn how Winshuttle is used in managing and reporting not only historical indicators but leading indicators for plant maintenance in SAP. plantmaintennce

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About the author

Clinton Jones is a Director for Finance Solutions Management at Winshuttle where he has worked since 2009. He is internationally experienced having worked on finance technologies and business process with a particular focus on integrated business solutions in Europe, the Middle East, Africa and North America. Clinton serves as a technical consultant on technology and quality management as it relates to data and process management and governance for finance organizations globally. Prior to Winshuttle he served as a Technical Quality Manager at SAP and with Microsoft in their Global Foundation Services group.

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