Top Supply Chain KPIs for 2018: Practitioners Weigh In

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For procurement and supply chain professionals, a refresh of their organization's key performance indicators (KPIs) have undoubtedly been on the brain since before the winter holidays.

Now that we’ve leapt into 2018, many realize it’s time for less thinking and more action.

In a recent LinkedIn discussion forum, Denny Morrison, a supply chain manager at Mackenzie Pulp Mill Corporation in British Columbia, shared her top KPIs in key business areas:

  • Financial: EBITDA, cost savings (negotiations), implementing more pricing agreements
  • Customer: Zero stock out, on-time goods delivery
  • Internal Business Process: Inventory accuracy, [10% reduction in] inventory holding, managed spend as percentage of total spend
  • Organization: Overtime control, supply chain training hours (average hours training per people/per year)

“I believe 3-4 KPIs per key area are more than ample — and too many [may be] hard to achieve,” she wrote, in soliciting peers’ input on the topic.

Of course, any general set of KPIs must be refined and customized for applicability to a certain individual organization, taking its industry and corporate targets into account, among other things.

Needless to say, however, several other industry professionals weighed in on the issue of supply chain KPIs for 2018.

When it comes to tracking delivery, Barbara Tóth, EMEA commodity manager at the pharmaceutical firm Mylan, mentioned breaking it down a bit further.

“We are measuring not just on-time, but in-full deliveries (quantity tolerances are also taken into consideration),” she wrote. “Procurement cycle time is also a great KPI — you can find many hidden time-consuming processes, which can be [automated]/left out to work faster & better,” she added.

For Kevin Wren, who works in program management at Tennessee Valley Authority, “total savings as a percent of managed spend, inventory turns versus returns (to avoid budget manipulation)” and “small purchase ratio ([which] identifies opportunities for automation)” all make his list.

Nooruddin Tejani, manager of health network group purchasing at a university hospital in Pakistan, agrees with Morrison on managed spend as a percentage of total spend, which takes the top slot in his four most crucial KPIs. Nos. 2 through 4? Procurement operating cost as a percentage of managed spend, overall cost savings and cost savings as a percentage of managed spend.

Others had some holes to poke.

“If you have no direct ability to control EBITDA, then you can't create a KPI for it,” wrote John Weiss, CEO of the Audit Group, a healthcare-exclusive purchasing and disbursement process analysis and recovery firm.

“‘Implementing more pricing agreements,’ is nebulous,” he continued. “Do you want your people creating "more pricing agreements" [which they can do, but it can possibly take up most of their limited time to do so] or do you want them to, "negotiate pricing agreements with our key top 10...vendors resulting in” overall price reductions? Or changes in payment terms from 25 to 40 days? Or freight cost reductions?

To the specificity point, Weiss had some words of wisdom for the group in the form of an acronym. “KPIs need to be constructed as SMART goals: Specific, Measurable, Achievable, Relevant and Time-Bound to accomplish.”

What are some of the key performance indicators you are tracking in 2018 — and why? Leave a comment!

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First Voice

  1. Supply chain solution providers:

    Well, It would be very difficult to execute supply chain without implementing KPIs as every component needs to be constantly monitored while executing the process. Various organisations have designed different KPIs to make effective implementations of supply chain operations.

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