Include Key Performance Indicators Along With Financials

Many warehouse and supply chain organizations emphasize the balance sheets and forget about the non-financial aspect of measuring productivity. In order to get a fully encompassing view of your organization, it is recommended that you include non-financial metrics like Key Performance Indicators (KPI). The use of both financial statements and KPIs helps to control performance by measuring any number of indicators within your warehouse or supply chain. It should be targeted, systematic, and have the ability to display the results graphically. One of the most important aspects of using a KPI is to have a benchmark from which to make a comparison. Your numbers will not mean much if you have nothing to compare them to.

To run an effective supply chain, it is recommended that you measure inventory, suppliers, and customer satisfaction. Customer satisfaction metrics include such areas as shipping accuracy, re-orders, customer service response, and overall contentment with service. Inventory metrics can include cycle time, inventory levels, loss from damage, and lead-time. Supplier metrics may include such performance indicators like quality, accuracy of orders, shipping cycle, and defects.

Ultimately, the goal is to create metrics that are as accurate as possible. Better accuracy results in less inventory requirement, shorter inventory to cash turnaround time, and overall better financial performance.

There is no doubt that there is a direct correlation between financial success and the use of metrics to measure both a balance sheet and key performance indicators. It is not necessary to begin with a sophisticated software program if you do not have the financial resources when starting out. Consider using an excel spreadsheet to get started until you can afford to institute a more sophisticated system. The important thing is that you begin measuring performance now.