Three objectives to guide your business' KPI's

Many data analytics vendors give users the ability to measure everything but offer little guidance. This can be overwhelming for new users. It is very important to determine the metrics that really matter to your business. To get you started, your business should establish critical metrics, and then teach you how to quickly identify areas of concern to meet the unique needs of your business. 

We have learned three objectives that serve as guideposts to help you decide what to measure. These guideposts are also a rubric to make sure that each functional area of the business is aligned toward overall success. In other words, every area of the business, like sales, inventory management, operations, and finance, is measuring core Key Performance Indicators (KPIs) that contribute to the overall success of the business. The three key objectives are improved customer experience, optimizing growth, and increasing profitability. Excelling in these three areas will drive your business goals. Each of these objectives drives and supports the others and creates a framework for success.

1. Improve customer experience

When considering how to improve customer experience, it may be helpful to begin asking the following questions. What is the experience of your customer base? How would you measure that experience? Do you know what factors might be impacting your customers’ experience? Do you know how to measure those factors?

Customer experience is critical to increasing your market share. However, this is difficult to do if your customers are leaving because they are dissatisfied. So, how can we make sure our customers have a great experience and want to keep us as their supplier? First, customers want their orders on time. It might be they need their order delivered to a job site so they can complete their work.

In this case, a key metric is 'delivery in full, on time' (DIFOT). A gauge on your dashboard can quickly show you what percentage of your orders are delivered in full and on time. In just a few clicks you can go from a high-level summary to a detailed analysis of your data to see DIFOT rates by warehouse, category of products, individual products, and more to pinpoint the problem. Is it a shipping problem from a particular warehouse? Is there a problem with a product category? Do I have enough product in stock? This is a key element to a positive customer experience. To be sure you always have the right product in stock, create a KPI to measure 'stock outs' or priority items out of stock.

2. Support company growth

When considering ways to support the growth of your company, begin with the following questions: What are your top growth opportunities for new customers or new products? Are you aware of your biggest opportunities? Where might you have some risks? Can you quickly list these risks and opportunities? Growth is the key to business success. If you’re not increasing your share of the market, or at least keeping up with your competitors, then eventually you’re going to be out scaled. Maybe you have enough market share for the immediate future, but if you’re not striving to grow, then you are likely to be overtaken by your competition.

It is important for sales managers to be alerted to 'customers in decline'. By having market analysts monitor customers whose sales have been declining for the last few months, your sales team will be able to quickly intervene before the sale is lost. Begin with the customers with the highest sales values to prevent the greatest losses. Another important alert is new customers and the product categories and individual products they are purchasing. The purchasing manager should pay attention to the sales trends for new products to ensure there is always enough stock on hand. 

3. Enhance profitability

What can you do today to move the needle on your profitability? This is a core objective for every business. In the beginning, a small company must focus its efforts on gaining volume. However, once a company has matured, it is in a position to make small, subtle changes that will have a tremendous impact on profit. 

Improving profitability usually involves making small changes in highly repeated business processes, adapting to your environment. For instance, strategic price increases can improve your profit margin without risking sales volume. Improving delivery processes can reduce the cost of each truck leaving the warehouse. Minimizing deadstock frees up cash that can be used on other profitable investments. To monitor profitability, your sales manager can create a KPI to monitor margin trends, deadstock, and low turns.

When measuring the right KPI's, your sales team will know which customers are at risk. Your accounting team will know to keep an eye on those customers’ accounts receivables. Your warehouse will know how they’re performing against on-time delivery targets. In this way, each area of your company can work to meet the same three objectives to drive your success.

Source: Phocas Software