Tracking the Supply Chain KPIs that Matter

Tracking the Supply Chain KPI’s That Matter

If we’re being honest, much of our point of view, habits and style as leaders is a direct result of the environments we “grew up” in. Our early positions at companies, and those mentors that took us under their wings, showed us the way by passing along their methods, including the supply chain KPIs to track. And a small number of us held positions that were recognized as supply chain leaders where we could share best practices through robust training programs. Companies like Toyota, Danaher, and General Electric seem to conger a deeper level of awe in industry and job interviews.

Impact of Company Lifecycle Stage

When I first transitioned from a large automotive OEM to advising middle market industrials, I realized the hard way that not all supply chain metrics transfer seamlessly, which can be a humbling experience for many, as we switch industries and companies more frequently today. A few years, and a number of experiences later, I can say with confidence that a company’s lifecycle influences the ideal supply chain metrics. It matters if a company is in a stage of startup, growth, maturity, or renewal. Further, a company’s products may be in different lifecycles, like electric vehicles being in the startup stage, while internal combustion engine vehicles are in maturity.

Leaders tend to separate themselves in the art of aligning and evolving the best metrics with the company and product lifecycles over time; however, there are right and wrong approaches to selecting and driving supply chain KPIs. Extreme applications of our engrained teachings can lead to unfortunate results. For example, Toyota, known for lean and optimizing inventory levels, increased their inventory levels of microchips much higher than the industry average heading into the microchip shortage of 2021. The result of this adjustment to their KPI for maximum inventory costs allowed their team to achieve their overarching company goal: the consistent flow of vehicles pulled to the marketplace. Toyota’s proactive micro adjustments to their supply chain KPIs avoided costly plant downtime unlike their peers.

Are We Biased Deciding What to Track?

This begs the question, do our “professional experiences” bias us toward leaning more on metrics that we’re more comfortable with at the risk of supply chain performance? In my experience the answer is yes. This doesn’t mean we should throw out all that we’ve learned when taking on a new leadership position, but it does mean that we should be aware of what is comfortable and strive to focus on the business problems the company is trying to solve. Simply put, we need to focus on our company’s strategy and then align the appropriate supply chain KPIs that best advance that strategy.

If, for example, we were to transition into a VP of Supply Chain role at an automotive Tier I supplier, simply tracking the same five KPIs as your predecessor, or the ones that led to your success in your prior role, might not be the be a recipe for success. If your industry is going through rapid disruption like the mobility space is, you may want to focus on a few non-traditional metrics that better position the company to drive business outcomes.

It’s Time to Mix Things Up

Many Tier I suppliers are striving to compress the time it takes to develop and launch new innovative modules for vehicles. Traditional KPIs such as tracking total cost reductions could generate results, but probably not the disruptive results company leadership is after. It could be time to mix it up and track more granular cost versus targets. By setting cost targets early during new product development, and setting the goal of delivering modules at or below cost estimates, the company could better reinforce its desired results of accelerating innovation.

Much of the art of leadership is taking high-level goals and making them contextual for various team members. This often involves breaking down larger company goals, like accelerating time to market and aligning our supply chain KPIs to best support them. Another example could be empowering Directors with Agile project and task management software that allows them to track the average number of tasks their teams complete monthly. Tracking this metric could kickstart a supply chain productivity boom that leads to waste reduction of internal processes. Importantly, the KPI would align with the corporate goal of accelerating time to innovation.

Tracking the Supply Chain KPI’s That Matter

We need to be purposeful with the KPIs we choose to track and prioritize. Challenge yourself and your team to take a hard look at the KPIs you’re tracking. Are your current KPIs legacies from the past? Do your KPIs enable your current company goals? Big data and analysis tools have opened new opportunities to slice, dice and present data. This ability, although exciting, can also be crippling. After all, data isn’t what any leader is after. Data is just a means to an end, which is better information from which to make better decisions that drive better business outcomes.

-William