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Hrmn Key Performance Indicators

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Colby Miller

Article Extra Credit

April 23, 2019


        Key performance indicators (KPI) are a common tool used in supply chain management that aim to capture the performance of a company’s supply chain efficiency. It is some kind of metric to tell us how effective and efficient our employees, or processes are. Using KPIs correctly ensures that you are always measuring the activity of your business against a non-changing, static, benchmark. KPIs are a benchmark that can be adjusted. Maybe you just created a new position at your company and you set a number of performance objectives, or KPIs, that the employee needs to meet. If the employee is consistently falling short of meeting these objectives, it indicates that the benchmark needs to be adjusted or that the employee is not working out. Either way, KPIs show you when the standard is not being met as well as if the standard is being exceeded.

        An important trait of a KPI is that it is a metric focused on a key element of the business. These metrics should be ones that can be realistically monitored and reacted to on an ongoing basis. Determining realistic KPIs is done by identifying who has the power and requirement to influence them. An operations supervisor in a warehouse can use a KPI to track the performance of his material handlers. Using a standardized time that it should take an employee to load a pallet is an example of a metric that goes into a KPI that tracks the efficiency of your employees. An operations supervisor has the ability to ensure his employees meet these standards. This would not be appropriate for a district manager who manages several facilities in a region. He or she is not at the facility on a daily basis. This tactic of determining realistic KPIs can help limit the number that are tracked.

        Creating a hierarchy of KPIs is also useful in determining what your key activities are that need to be tracked. Let’s say a distribution center is focused on moving product in and out of the warehouse as efficiently as possible. You can then break down this activity into a couple layers of activities that make up the entire process. This will help you determine what processes need KPIs and which do not. The first level should contain KPIs that are monitored at the executive level of your company. Such as the efficiency of product flow in the distribution center. The second level should contain more specifics such as how long does it take for a truck to pull into the dock and get ready for pallets to be loaded. These levels help make up the entire process and give you a detailed view on why your performance is at a certain level.

        KPIs are effective tool when used properly. With some critical thinking about what the businesses key activities are and what make up those activities, you can create KPIs that will help you track the efficiency of your business.



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