Using Metrics to Drive Behavior

October 2014 | Article

Most people would say that the most important metric of any business is profit, but what they don’t understand is that you improve profit by improving the day-to-day health and efficiency of operations. And you can’t improve that by just looking at profit metrics.

By using Key Performance Indicators (KPIs) to measure productivity, quality and deficiencies, you can drive the success of a business and ultimately identify trouble spots in real-time. KPIs aren’t new, but the technology solutions that measure KPIs are.

There are three main KPI indicators:

  1. Lagging KPIs look at history – what happened yesterday or last week or last month.
  2. Leading KPIs look at where to make changes. These are harder to measure but very powerful.
  3. Predictive KPIs look at what you are currently doing and where you are going to end up if you stay the course.

KPIs can be used to address many supply chain and operations challenges to actually change behavior and benefit your business’s bottom line. Inventory to sales ratio, number of stock rotations, number of months on hand, obsolete stock value, number of units produced per man hour, and adherence to schedule are just a small sampling of common KPIs that can be used to improve delivery, cost, quality and safety.

Which KPIs are right for assessing your business differ based on your industry and goals. No matter what type of business you run though, there is going to be a KPI that can help improve your operations and, ultimately, you’re bottom line.

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