Common Key Performance Indicators (KPI's)
Fast forward 10 years and this sort of data is now easily accessible to all at a reasonable price in the form of an MRP / ERP system. A lot of markets in recent years have become very price driven, partly due to the fact that medium to small sized business' are now running their day to day operations more efficiently. The number of KPI's available are nearly infinite, different companies efficiencies come from different aspects of their operations, but there are a few sought after pieces of information that are common and relevant to the majority.
- Quotation capture rates. Have you ever wondered how many quotes you have won and lost for a particular customer? On top of that, have you ever looked into why you lost the job? The answer is quite possibly no. It is easy to assume that if a customer has said no to a quotation that you have sent them that there is nothing you can do about it and that it's out of your hands. This is where KPI's can be of huge benefit. For example, you may find that you are constantly losing quotes that are sent to a particular customer based on the price you are able to offer. For one off jobs there may be nothing you can do about the price that would make any further discounts worth it, but by using KPI's you may realise that you have lost out on several quotes that when added together have a value of hundreds of thousands of pounds. Knowing that you may come to realise that dropping your price per unit further may actually be worth it in the long run.
- Sales Order book. A sales order book is, in theory, a very basic KPI, but one that's sometimes not used to its full potential. The sales generated by a company is what keeps it going, but it can also give you a lot of information back that can help you improve your business further. A common piece of information that is extracted from a sales order book is the actual spend of each individual customer. This in turn can be used for things such as capacity planning. You may have a customer that makes up for a large part of your turnover and so they are the last person you would want to upset. Making their orders a priority when scheduling jobs on the shop floor may be of paramount importance. The sales order book can also be used to identify customer spend within certain geographical areas. You may come to realise that you aren't dealing with many companies within close proximity. If profit margins are tight, dealing with companies close by may be worth looking at as non-manufacturing related costs such as deliveries are naturally going to be much lower. Also, with this information, you may identify that you deal with very few customers in a particular area that has a large industrial estate. Based on that, it might be worth sending a sales rep there in order to try and expand your customer base.
- Purchasing order book and receivers. In the same way that a sales order book gives you information on turnover, a purchase order book will give you information on expenditure. Other than giving you the basic expenditure with each supplier, the purchase order book can also be very useful for other pieces of information that can help determine how and where you purchase from in the future. You may find that you are purchasing the same materials from different suppliers and are therefore quite possibly paying more than you would if you were to buy it all from one supplier. The receiving data can also be very useful and help you determine where future purchases are made. With comparing basic information such as the expected delivery date against the actual delivery date, you'll easily be able to paint a picture of which suppliers are more efficient than others in getting their products to your doorstep on time. Drilling down even further, you may find that certain suppliers are slower in getting certain products to you than others. This may be due to that fact that only a small proportion of their transport fleet is capable of carrying larger items meaning you are having to wait for their trucks to become available.
As mentioned before, the possibilities with KPI's are nearly infinite and I'd never finish writing this blog if I were to try and describe even half of them. The main thing to remember is that they aren't just pretty graphs that snapshot whether you are successful or not at that moment in time, they are pieces of information that can be taken to any degree of complexity and should be considered when making decisions on how you wish to move your company forward.
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MIE Solutions UK Ltd / Sam Hawkes
Page Updated Last on: Nov 23, 2016