Question

A Logistics Team has been tasked with improving the capability of the company to deliver their goods on time around the world in order to create a Competitive Advantage. The costs must be no higher than the average costs for the market in which they work, but they are seeking a 20% improvement on reliability of delivery in order to reduce inventory levels and improve their standing in the market as the most professional. The Procurement function is tasked with reducing the purchase costs by 15%. With the enhanced logistics capability the company believes the sales force can get a 10% price premium in their markets.What would you recommend the KPI and the major metrics should be?

Answer 1

'Metrics' refers to the measures which are useful in the evaluation and monitoring of different parts of a business. On the other hand, KPI stands for Key Performance Indicators, which are considered as a subset of metrics and helps in measuring highly specific and critical areas of a business. Successful KPIs facilitate that separate departments are in line with the overall business metrics through continuous monitoring of the efficiency. In the given case, the likely metric would be net profit margin and its related key performance indicators would be as follows-

1) Lower production costs and higher sales revenue through higher pricing for it's goods or services.

2) Lower inventory holding cost due to enhanced reliability of the delivery system