Supply Chain Management
An 8-Step Strategy for Effective KPI Development and Implementation
From Chaos to Clarity
www.ohl.com or 877-401-6400
Introduction
Intelligent decisions require quality information. All information should be judged according to five criteria: relevance, accuracy, timeliness, clarity, and visibility. Deficiencies in any of these areas will weaken the decisionmaking process. Ensuring the quality of information is critical for effective supply chain management. Unfortunately, the complexity of the task intimidates many companies into settling for inefficiencies and inaccuracies. As a result, decisions are based on Key Performance Indicators (KPIs) that can be ambiguous, imprecise or even incorrect. A KPI is only as reliable as the information on which it is based. However, there are numerous barriers to extracting quality data for KPIs. Too often information exists in a state of chaos. Data is recorded in different forms in different departments using different software. Calculating a particular KPI might require data from the general ledger, warehouse management system (WMS), enterprise resource planning (ERP) system, a third-party logistics (3PL) partner, and other disparate sources. Adding to the chaos, the data in different systems often will not agree. Achieving clarity is not easy, but the advantages are both extensive and substantial. Effective KPIs strengthen supply chain management in three ways. First, they help identify weaknesses within the supply chain where corrective action is required. Second, they illuminate best practices that can be replicated elsewhere in the supply chain for improved performance. Third, they help evaluate the efficiency of outside agencies and business partners who provide services to the company. No company operates at perfect efficiency. Improvements in supply chain management can result in tens of millions of dollars in annual savings, if the company has the tools to make effective decisions. OHL has developed a
From Chaos to Clarity
www.ohl.com or 877-401-6400
Introduction
Intelligent decisions require quality information. All information should be judged according to five criteria: relevance, accuracy, timeliness, clarity, and visibility. Deficiencies in any of these areas will weaken the decisionmaking process. Ensuring the quality of information is critical for effective supply chain management. Unfortunately, the complexity of the task intimidates many companies into settling for inefficiencies and inaccuracies. As a result, decisions are based on Key Performance Indicators (KPIs) that can be ambiguous, imprecise or even incorrect. A KPI is only as reliable as the information on which it is based. However, there are numerous barriers to extracting quality data for KPIs. Too often information exists in a state of chaos. Data is recorded in different forms in different departments using different software. Calculating a particular KPI might require data from the general ledger, warehouse management system (WMS), enterprise resource planning (ERP) system, a third-party logistics (3PL) partner, and other disparate sources. Adding to the chaos, the data in different systems often will not agree. Achieving clarity is not easy, but the advantages are both extensive and substantial. Effective KPIs strengthen supply chain management in three ways. First, they help identify weaknesses within the supply chain where corrective action is required. Second, they illuminate best practices that can be replicated elsewhere in the supply chain for improved performance. Third, they help evaluate the efficiency of outside agencies and business partners who provide services to the company. No company operates at perfect efficiency. Improvements in supply chain management can result in tens of millions of dollars in annual savings, if the company has the tools to make effective decisions. OHL has developed a