Finding the metrics

Establishing key performance indicators provides the metrics a company needs to measure and improve operations.

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 12/12/2006

For a company to really improve its operations, it has to have metrics about its current operations. For that reason, establishing key performance indicators, or KPIs, is an important first step.

“You can’t manage what you can’t measure,” says John M. Hill, principal with ESYNC and a materials handling industry veteran. “Intellectually, people understand this. In reality, maybe 20 to 25% of the companies I look at are doing a decent job of performance monitoring.”

Establishing KPIs doesn’t have to be complicated, Hill adds. “Every company with a computer knows how many orders they process in a given time, how many lines and individual items made up those orders, and how many hours they worked to fill those orders,” says Hill. “That information alone will give you some basic metrics as a starting point.”

Hill suggests companies establish KPI’s in three areas:

1. Internally, it’s important to know how many orders are filled complete on the first pass through the warehouse, whether the order was filled accurately and shipped on time, and how long it took to fill the order.

2. It’s also important to measure the performance of suppliers: How often do they ship complete orders that are delivered on time and without damage. “Retailers understand that the performance of their suppliers impacts how efficient they are in their warehouses and distribution centers,” says Hill.

3. Also, measure what it costs to service your customers, Hill adds. “I have one client that calls this the hassle to serve,” says Hill. “It’s important to know what it costs to pick orders and perform value-added services right down to the carton level.”

To learn more, attend John Hill’s session on materials handling at ProMat 2007, on Monday, January 8 at noon in Theater A on the show floor.