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5 Critical Metrics for Effective Business

Everyone wants a better-run business, but sometimes it's hard to know where to begin. Metrics are, by far, the best launch pad to use to move the organization forward.

By defining and using clear metrics, supply chain organizations are able to drive improvement and apply resources, in the form of people, time, and money, to the activities and programs that will get the organization where it wants to go. The key to developing strong metrics is focusing on creating measurements that support the strategic goals of the organization.

But where to start? It's simpler than you might imagine. Every business can benefit from a close look at the following measurements:

  1. Financial metrics: Make sure you have, at the very least, a quarterly plan in place. A yearly plan is ideal, but a quarterly plan is a good starting point. Track against your plan. NOTE: As I have mentioned previously, looking at financials in aggregate is not a helpful exercise. Rather, look at your financials on a granular level.
  2. Business metrics: Determine what makes your customers happy and what enables your organization. Track these. Soon, you will know what you should do more of and what should be cut back.
  3. Customer metrics: Determine the who, what, when, and why of your customers. Knowing what matters to them will help you understand how to serve them better.
  4. Vendor metrics: Determine the who, what, when, and why of your vendors. Relationship management and partnering can only be built on a strong foundation.
  5. Quality metrics: When it comes to quality it is important to look at anything and everything. That is, the quality of your products, the quality of your relationships with your clients, the quality of work your employees produce… Start tracking all of this.

Develop tracking methods for each of these five metrics. Archive everything you find out. Learn by studying the results on a regular basis. You'll start understanding how to drive the direction of your organization. You'll develop a focus for your organization and your performance. You'll be able to make better decisions and drive performance.

Although most (if not all) of the material will be used internally, you should make sure that it is “external facing ready.” What you are creating is a database that you can query when you need it. In the end, you'll have, at your fingertips, a decision database to run a better business.

3 comments on “5 Critical Metrics for Effective Business

  1. SP
    September 8, 2013

    So much agree. Metrics are important in bringing an organization up and profitable. Cost cutting, customer satisfaction, project deliveries,quality all parameters are measured via metrics. It becomes so easy for the decision makers if data is in metrics form.

  2. Susan Fourtané
    September 9, 2013

    And don't forget the quality of the data collected, and the quality resulting of its analysis.

    -Susan

  3. Hailey Lynne McKeefry
    September 10, 2013

    Of course, all of these metrics can be broken down more granularly. I recently read a Forbees article that put forth these ten as the most important of the business metrics, for example:

    1. Sales revenue.
    2. Customer loyalty and retention.
    3. Cost of customer acquisition.
    4. Operating productivity.
    5. Size of gross margin.
    6. Monthly profit or loss.
    7. Overhead costs.
    8. Variable cost percentage.
    9. Inventory size.
    10. Hours worked per process.

    of course, some of these are pretty obvious but some are less so (#4, #10 to me).

    So does anyone else want to take a run at which “sub metrics” are most important to the supply chain?

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