Key performance indicators (KPIs) are essential tools to help organizations stay on track and fuel ongoing growth. Whether applied to how well an employee is getting the job done or the effectiveness of a new product release, KPIs are essential tools to help measure results and guide next strategic steps.
Here, we’ll take a look at a recent report about how supply chain KPIs have evolved since the COVID-19 pandemic — and seven steps one expert says supply chain leaders can take to boost the power of KPIs to fuel business success.
The Logistics Professional’s Guide to KPIs
In its recently released report, The Logistics Professional’s Guide to KPIs, RXO — which touts itself as “a leader in asset-light transportation solutions” — describes how supply chain KPIs are “always evolving.”
Conducted in collaboration with third-party research firm Qualtrics, the goal of the study was to “equip shippers and carriers with current industry benchmarks for critical transportation metrics – from on-time delivery to primary tender acceptance.” For the survey, 1,000 industry experts were polled about how they are setting KPI standards and changes to their benchmarks in the post-pandemic era.
“KPIs are essential for effective supply chain management and continuous improvement, and they’re always evolving,” says Ben Steffes, VP of Solutions & Strategy at RXO. “Shifts in consumer demand and an influx of technology are driving this change, in combination with the dynamic and fragmented nature of the freight market. To optimize performance, businesses need consistent measurement and reporting. We released this study to help shippers and carriers benchmark their standards against how their peers approach KPIs today.”
RXO says the new guide is an update to The Metrics That Matter, a research study published by Coyote Logistics (now part of RXO) in 2022 and reveals how the approach to evaluating and managing KPIs has changed for shippers and carriers. Such changes include:
- More data-driven shippers — “86% of shippers reference their logistics KPIs at least weekly (up from 79% in 2022), with 45% of shippers referencing them daily (up from 32%).”
- Increased need for standardization — “87% of shippers and 90% of carriers agree there should be set KPI industry standards, up from 78% and 74% in 2022, respectively.”
- More lenient performance benchmarks — “Industry performance standards for core transportation KPIs (on-time performance, payables, tender acceptance, etc.) are generally consistent with 2022, but underlying data shows a tendency to be a bit more forgiving.”
- Benefits for being a shipper-of-choice — “95% of carriers said inefficient shipping practices impact the rates they give to shippers, and 99% of carriers take a shipper’s KPI expectations into account before agreeing to move a shipment.”
“Managing supply chain data is incredibly important, but it’s not easy,” Steffes says. “What technology to use, which metrics to track, where to set benchmarks, how to leverage data to drive action – modern logistics professionals grapple with all these challenges. This study, with insights from 1,000 industry peers, offers a great tool to check their strategies against.”
For further details, please read the full study.
7 steps to boost the power of KPIs
In a recent article for Supply Chain Management Review, Sasha Pailet Koff says there are specific steps supply chain leaders can take to “transform KPIs from static metrics into powerful tools for success.”
Koff is the founder and president of So Help Me Understand, former senior vice president of Digital Supply Chain at Dell, and co-chair of the Digital Supply Chain Institute.
“In today’s fast-evolving digital world, supply chain management has become increasingly complex, requiring leaders to adopt well-defined key performance indicators (KPIs) to drive strategic objectives,” she writes. “While KPIs are essential for tracking performance, their effectiveness depends on how they are selected, aligned, and integrated into an organization’s operations.”
To help boost the power of KPIs to drive more effective transformation, Koff recommends seven key steps for supply chain leaders.
1. “Align KPIs with strategic objectives.”
Start by defining “strategic objectives” and “core priorities” and then ensure KPIs are appropriately aligned with them, Koff says — and don’t dilute the process by trying to track too many KPIs at the same time.
“While leaders may aspire to achieve multiple objectives simultaneously, a lack of focus can dilute effectiveness,” she writes. “Therefore, a clear prioritization framework must be in place to ensure alignment throughout the organization.”
2. “Ensure KPIs are measurable and actionable.”
If KPIs are unclear or “too abstract,” effective measurement can be difficult.
“Leaders must establish KPIs that provide a concrete way to track progress and drive action,” Koff explains. “If a KPI lacks clear measurement criteria, it will fail to guide decision-making or improve operations.”
To support that dynamic, she underscores the importance of having the right capabilities for data collection and analytics to ensure efficient KPI tracking: “Without accurate and real-time data, even well-defined KPIs lose their effectiveness.”
3. “Regularly review and adjust KPIs.”
Instead of allowing KPIs to be “static,” Koff says ongoing evaluation and refinement is needed to adapt to an evolving business landscape: “KPIs should function like a ‘smart GPS’ — guiding decision-making while allowing for course corrections when necessary.”
She describes lack of regular KPI re-evaluation as “one of the biggest mistakes organizations make,” since failing to do so puts them at risk of “losing relevance as market conditions change.”
4. “Promote employee engagement and buy-in.”
Koff says it’s important to get everyone in on the act, since “effective KPI implementation requires buy-in from employees at all levels.” Specifically, she underscores the importance of helping employees understand how what they do impacts organizational metrics as a whole.
“Employees who feel disconnected from company-wide KPIs are unlikely to see their importance or take the necessary actions to influence them,” Koff explains, noting the importance of “aligning employee incentives with KPI success” to fuel engagement.
“If incentive structures are misaligned, employees may resist changes that would benefit overall performance,” she writes.
5. “Celebrate success and encourage a culture of learning.”
To support ongoing motivation and reinforce positive behaviors, Koff says it’s important to be generous with recognition and celebrate success.
“Transformational success in supply chain management often follows a nonlinear path, with failures occurring before breakthroughs are achieved,” she explains. “Organizations that cultivate an environment where employees feel safe to experiment, learn from failures, and contribute new ideas will ultimately drive continuous improvement.”
6. “Foster horizontal connectivity between departments.”
Instead of the vertical silos so common in traditional organizational frameworks, Koff underscores the critical importance of the “horizontal connectivity” that’s a better match for the “interconnected business landscape” companies work within today.
“Success should not be confined to one vertical within the supply chain; rather, organizations should focus on joint success across departments,” she writes. “To achieve this, leaders must ensure that KPIs are designed to promote cross-functional collaboration.”
7. “Use KPIs as a tool for continuous improvement.”
Instead of “rigid performance benchmarks,” Koff says KPIs should be deployed as “dynamic tools” that support ongoing learning and improvement.
“Leaders should use KPIs to identify areas that require attention, encourage collaboration, and drive strategic decision-making,” she explains, underscoring the importance of cultivating a “mindset where KPIs are used proactively to enhance agility, improve efficiency, and achieve long-term business goals.”
