The Importance of KPIs in the Management of your Operation

  • The Importance of KPIs in the Management of your Operation

    The Importance of KPIs in the Management of your Operation

    How to choose the right indicators?

    “What is not measured cannot be improved”

    So says a famous phrase coined some time ago, but it reflects what a logistics operation should have as its objective.

    KPIs help measure the processes that impact our results and are the reason why the correct selection of indicators can help us improve significantly and focus on areas of opportunity.

    There are several important factors to take into consideration when creating KPIs:

    • They must be realistic for the measurements to be coherent
    • They must be specific about what they want to measure
    • They must be relevant, providing meaningful and useful data
    • They must be quantifiable, that is, they must be expressed in numbers or percentages, without subjectivities
    • They must be periodic
    • They must be consistent, that is, deliver objective, real data, free from measurement errors
    • They must be achievable
    • They must be timely, presented when they are required, because many decisions depend on them

    KPIs are an important administrative tool, but just like any tool, they have their limitations. Concentrating on a specific objective is good, but also can lead to one losing focus of other important areas that are not included in the KPI.

    If you have determined your KPIs correctly, they should reflect the most important parts of your company; but, nevertheless, information seen by itself can always be misleading. It is important to keep in mind the general context of the company.

    How to establish effective KPIs

    What KPIs should you use?

    The first thing to do is to identify the most important things in your operation and then then worry about getting the information that will help you prepare those KPIs.

    Most companies currently have too much information available, so an adequate selection of data is important in order to extract what we really need from those numbers.

    What KPIs should you measure?

    Choose KPIs that align with your strategic objectives.

    So, first start by defining this step and then develop KPIs that reflect each of the most important areas.

    How to monitor your KPIs?

    Setting KPIs does not make sense if you do not monitor them constantly and regularly, acting as soon as you notice a problem.

    The indicators, depending on the criticality of the process they measure, should be reviewed monthly at least. If possible, create a centralized board where you collect all the information in one place and where it is easy to update.

    In summary

    you should monitor your KPIs regularly, act when you do not reach your goals, and update your KPIs to make sure they reflect your company’s progress compared to your most important goals.

    Think of these little tips, when you want to define which are the best KPIs to monitor your operation and to really help you take your operation to a next level.

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