by You know very well that supply chain key performance indicators (KPIs) are needed to measure how well the supply chain is doing now and find ways to improve it in the future.
Even if you have KPIs, they won’t be useful if you don’t set goals for each one.
If you already have KPIs that are tracked regularly and goals that are challenging to reach, that’s great. It will push you and your team to always get better at what you do.
And how do you feel when you reach that goal? Nice, right? Satisfied?
So, does that mean you can stop trying and think you’re already the best? Of course not.
Out there is where the real competition is. Your rivals are out there trying to beat you in the race.
So what should you do?
One of them is that you need both inward and outward KPI axes. This time, we will talk about that.
Before we do that, make sure you have also joined the scmguide telegram channel, where I share a lot more information about supply chain management. You will also get the most recent blog posts from this site.
Table of Contents
What are external KPIs
You already need to track and manage KPIs. Such as On-Time Delivery to Customers, Stock Levels for Raw Materials and Finished Goods, Lead Time, and other KPIs. Targets have also been set.
The question is whether you will automatically win the competition if you meet or even beat these goals.
The answer is that it doesn’t mean you’re going to win.
You may have surpassed your KPI goals, but that only applies to what your company has done. What about the needs that people have? Where the competition actually happens. Is what you’ve done good enough to win the competition?
Let’s take a simple example. You have set a goal of delivering to customers on time 95% of the time. And now you’re at 95.5%. You did better than expected.
But when you get out there, you find that the average company in your field has a 98% On Time Delivery rate. Even if you do well on the inside, you still can’t beat the competition. 98% of customers who are used to On Time Delivery have not been able to get what they want. Customers today are getting more and more picky, so your accomplishments will look bad to them.
Here is where you need external KPIs, like a map of where you stand in your industry’s competitive landscape. You have to be able to answer the question, “Where are you now with all your accomplishments?” Are you the best in your class, in the middle, or even in the worst 10%?
If you know where you stand among your competitors, you will know where your supply chain performance should take you. You no longer want to reach the company’s internal goals. Instead, you want to win the competition and take the market from your competitors.
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How to put both internal and external KPIs on a graph
To figure out where you stand on the competitive map, you need to compare yourself to other companies in your field. You can get this information from different groups of companies in your field.
Once you have all the information you need, make a graph with your internal performance on the X axis and how you compare to your competitors on the Y axis. This is what the graph will look like.
From the graph, it’s easier to tell if what you’ve already done is enough to win the competition or if you still need to work harder.
Create a strategy to win the competition
Once you know where you are on the competitive map, the next step is to find ways to move up and be better than your competitors.
Look at the processes that are running at your site right now. Look for space where you can improve on what you’ve already done. Include all functions that have to do with it.
After that, agree on the goal you want to reach with the help of all of these functions.
So, everyone will be moving in the same direction and won’t have to worry about the KPIs of their own departments.
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Conclusion
It’s good to have internal KPI goals. But you also need to remember that there is real competition out there.
Make changes so you can beat the other competitors. But you should also keep in mind that your competitors are also always getting better. So, it’s not enough to just be good. To be better than your competitors, you have to be very good. Even more work is needed for that.
Check your KPIs along two dimensions. Both inside and outside.
Make sure you meet your internal goals, but also make sure they are enough to beat the competition.
Hope it helps!
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