I remember a whisky distiller that had 36 key performance indicators (KPIs) which occupied a whole wall in the chief executive's office. They gave a comprehensive view of performance, but I doubted he could really focus on 36 measures.
So when we looked at the KPIs for a food manufacturing client recently, we were interested in its measures of performance. They were at the other extreme.
In transport the company looked at the number of deliveries per driver per day. In warehousing it looked at a complex measure of labour productivity that used a formula based loosely on activity drivers such as pallets moved and cases picked. It's a bit like saying we will measure UK PLC's success by measuring (say) unemployment and corporation tax receipts -- and nothing else. So how do you strike a reasonable balance between drowning in two square metres of indicators on one hand and hoping you have covered a complex subject with two or three measures?
We have formulated our own views on KPIs. For transport they are:
- How well are the assets used? This means prime movers and trailers -- hours used per shift and number of shifts/day.
- How full are the assets when they are in use (both outbound and return) by weight carried and/or space occupied?
- How much time does the driver work versus how many hours is he paid?
- What is your staff turnover?
- What is your OTIF (on-time and in full) to and/or from internal and external customers?
And for warehousing they are:
- Pallets per fork truck man-hour
- Cases picked per picker man-hour
- % of pallets spaces in use
- Staff turnover
- Order shipment OTIF
Finally you need a measure of complexity in order to understand why your KPIs may change over time. For transport this is generally consignment size, but it may include geography of demand. For warehousing it is the number of cases per case-picked order line. These controls help you plot the underlying causes of change in performance. The chief executive should see OTIF, staff turnover, item two from transport and item two from warehousing -- and nothing else.
Tim Knowles is Director, ProActive http://www.proactive21.com