How to Improve and Fulfill Your Supply Chain KPIs
By Israel Rosales on Oct 22, 2015
There is a golden rule in process improvements:
“You can only improve a process if you can measure it.”
If you don’t measure before and after implementing a change in a process, you can’t quantify the impact of the change. That’s why we define our KPIs (Key Performance Indicators) in order to have a set of indicators to focus on. Improving these indicators will direct our business processes towards reaching our improvement goals.
The major KPI for most companies is Profitability, which is revenue divided by the investment of the company, (revenue is the difference between sales and costs).
How can Supply Chain activities improve profitability for a company?
- Decreased costs – this is the classic historical objective of Supply Chain Managers; to keep the cost as low as possible, while maintaining or improving the service level for internal or external customers. But it is not the one to focus on any longer.
- Decreased investments – this has become more and more relevant in the last decade, as it’s not just about revenue anymore. The focus has turned to profitability, and getting the most revenue from the smallest investment. Investments are a dividing factor in profitability, so reducing investments will have a bigger effect in profitability than the same reduction in cost.
- Improving sales – Supply Chain hasn’t traditionally focused on adding value, but in the last 10 years there is a trend demanding Supply Chain to become more strategic, add value and increase sales. Supply Chain managers can do this by improving service levels to increase customer satisfaction.
Below you will find a KPI Relationship graph, where we have included some of the KPIs that will affect the three global KPIs that translate into profitability factors:
- Customer Service => Sales
- Total Delivered Cost => Costs
- Supply Chain Investments => Investments
*Keep in mind the graph is just a representation of some of the more important KPIs, but doesn’t cover all the possible and specific KPIs of every industry at all levels.
How can Winshuttle’s Lean Data Management approach help you improve your KPIs?
Customer Service KPIs (KPI value to be increased)
This group is divided in three subgroups:
Demand variability: indicators that will measure the variability of the demand
Supply Variability: these KPIs reflect the variability of supply from vendors
|Conformance to Lead Times||Increase||
Performance to plan: measuring the actual execution against the operations plan
|Adherence to Distribution Schedule||Increase||
|Adherence to Procurement Schedule||Increase|
|Adherence to Manufacturing Schedule||Increase|
|Adherence to Transportation Schedule||Increase|
|Adherence to Warehouse Schedule||Increase|
Cost KPIs (KPI value to be decreased)
This group is divided in two subgroups:
Inventory: indicators that will measure inventory costs
Operating Costs: KPIs that reflect the cost of the activities of the process
Investment KPIs (KPI value to be decreased)
This group is divided in three subgroups:
Infrastructures: indicators measuring the investments in physical locations
Inventory: KPIs that reflect the investment of all stock on the shelves of the warehouse
Equipment: measuring the investments in machinery, spare parts, tools etc.
|Spare Parts Inventory||Decrease||
|Machinery Useful Life||Increase||
Applying Winshuttle’s Lean Data Management to KPIs
Winshuttle allows companies to fulfill these KPIs from two main angles:
- By improving the quality of ERP data, companies can expect different benefits, such as:
- Removing a source of errors for forecasting and decisions.
- Eliminate ERP data errors in spare parts data that could affect production. Only having spare parts that the operations really need, no more, no less.
- Improvements in Plant Maintenance operations and increasing the useful life of machinery.
- Streamlining business processes will:
- Reduce the overall cycle time by removing waste around the process.
- Instead of manual or email based processes, Winshuttle allows companies to streamline workflow processes that removes rework and delays from the processes.
- For example, stock can be managed with cleaner and better materials information which will eliminate ERP data errors that could have meant higher/lower inventory levels. This also leads to smaller warehouses.
In summary, the Winshuttle platform utilizes lean applications that streamline data collection, data validation and data movement. Using existing investments, these lean applications are built iteratively in short cycle times, to help you meet and exceed your KPI goals, and improve process efficiency.
Want to learn more about improving your supply chain processes? Our SCM luncheons are coming to a city near you:
About the author
Israel has a degree in Computer Engineering from ETSII in Seville and an Executive Master Degree in SCM (Supply Chain Management) from ICIL Madrid, where he is also a part time lecturer for Lean Manufacturing. After 10 years in the SAP SCM arena, he joined Winshuttle in 2012 and is currently Enterprise Solutions Manager, specialized in Lean, SCM and Master Data. When he's not solving ERP problems, he shares his life with his wife, daughter and two dogs.
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