In Consideration of KPIs and Performance Management
Before a project team begins their journey seeking transformation with an enterprise technology selection and implementation, we guide our clients to consider the concepts of KPIs and Performance Management.
Key Performance Indicators (KPIs) are the specific measurements and metrics that are relevant to your specific industry and production process. Obviously, KPIs vary from business to business and industry to industry. The key to using KPIs effectively is to ensure that the metric reflects your organization’s processes and activities central to its current and desired future performance.
As we’ve noted many times here on Ultra’s blog, business success depends on the ability to measure and react to KPIs.
KPIs and Performance Management Example
As an example, we worked with an industrial manufacturer in a recent client engagement by taking the time to create simple, timely metrics that directly related to the activities being performed and which have a connection to the lifeline of the business. In this specific case, metrics included Overall Equipment Effectiveness, production volumes and inventory turnovers. By assessing the processes and identifying these metrics, the company was able to track what matters and improve performance in the areas that were most important to success.
This certainly is a significant topic, not only for the Ultra team but for every engagement we’ve taken on over the last several decades.
One of my previous blog posts for Ultra provided a deep dive into manufacturing performance metrics.
In the post, I noted that setting manufacturing performance metrics is the process of collecting, analyzing and/or reporting information regarding the performance of an individual, group, organization, system or component, and for our purposes, a manufacturing organization.
In the work our independent ERP consultant team does in the field, we put the focus on this important steps of looking at KPIs and how they can help lead to business performance improvements.
To achieve effective performance management, the correct manufacturing performance metrics must be well defined, understood and routinely used. Continued business success requires appropriate performance measurements.
KPIs and Performance Management – What’s the Goal?
Executives and managers need to make timely and accurate decisions to improve the operation of the organization and relationships with their customers.
Successful companies are focusing on solutions that provide timely accurate information to users in improving operational performance. Benefits of this include:
- Improve executive visibility to operational drivers.
- Replace “gut-feel” decisions with “fact-based” decisions.
- Understand operational lifeline drivers of performance and how to measure them.
Through the years, various industry research has determined that among Best-in-Class companies:
- 82% have at least one year of experience in managing operational KPIs and how to use them.
- 52% use reporting capabilities and information from their ERP systems.
- 100% have improved customer renewal rates by 4.7% year-over-year vs. a decline among non-Best-in-Class.
A Strategic Approach
As an ERP consulting firm serving manufacturing and distribution teams, we’ve found that a strategic approach to setting KPIs involves the following steps:
- Identify the key operational areas of the company that needs to be measured to improve success to the customer.
- Identify which areas will benefit most from developing and using KPIs to make improvements to the process.
- Create a link between the metric being used and a strategic lifeline of the company.
Taking the time to work through this approach is proven to help drive business process transformation.
Thinking KPIs and Business Performance? Learn More
As an independent ERP consultant firm, Ultra’s mission is to help manufacturers and distributors achieve the full advantage of your technology tools and processes. Our goal is to unleash your business performance potential and maximize the benefits of your investment.
To learn more about how Ultra can add value to your company and assist in linking KPIs and business performance, contact us today.
Software selection and implementation processes often present challenges of their own. To steer you around trouble and help you drive success, Ultra’s experts compiled a list of pain points and solutions to be aware of as you embark on this journey.
Jeff is the founder of Ultra Consultants, a well-known voice in the ERP consulting industry and an expert on ERP solutions for discrete and process manufacturers. Over the last 40-plus years, his companies have helped more than 2,000 organizations improve their business processes, select ERP software and implement advanced solutions.