While there are several different KPIs, a company only needs 10 the most in order to accomplish its targeted results and goals.
Key Performance Indicators (KPIs) are essential for any organization since they measure a company’s overall performance and indicate whether the company effectively meets its main business objectives in matters of departmental processes, products, and productivity. In other words, they valuate a company’s success and efficiency with regard to the specific decisions, activities, and tasks that need to be taken and executed. While there are several different KPIs, a company only needs 10 the most in order to accomplish its targeted results and goals. NetU certainly cares about the progress of businesses and can help you adapt to the changing needs of your industry with the implementation of appropriate financial metrics. In this article, we will discuss 10 KPIs which are necessary for any organization.
Knowing the exact Cost Per Unit of every product is most beneficial for companies who deal with large quantities of the same products, either they are involved in the manufacture or the selling process. Only in this way companies can ensure that they are using cost-effective methods and processes and decide the cost of the products for attaining maximum profitability.
The Lead Time metric is equally important for an organization, as it provides information on the effectiveness of an entire process’ cycle time. For example, it could be measuring how efficiently the supply chain management is, from the placement of an order to its receipt by the customer, and all the in-between stages involved. This directly affects customer service and helps a company manage its inventory better for maximum customer satisfaction.
Another vital KPI is Cash-to-Cash Cycle Time, the metric that measures when the suppliers of the materials are paid and when customers pay, after receiving the product. This KPI helps businesses avoid possible issues that may cause cash flow problems and achieve minimum cycle time.
Inventory turnover ratio, or Inventory Turnover Rate, is a useful ratio that measures the restock rate of company in a given time period, usually in one year. This helps companies to determine when to receive new inventory and get a grasp of the sales from the inventory, hence, measure how sales are going.
What is also critical for a company is to be able to compare how much of the inventory was sold versus the amount of inventory received during the same period from the supplier or the manufacturer. This is called Sell-through Rate, and it allows organizations to measure the effectiveness of their sales in relation to the inventory and, ultimately, avoid paying stock excess inventory.
The GMROI metric, that is the Gross Margin Return on Investment, calculates the company’s return on specific inventory items in order to evaluate which products are, in fact, good investments. Hence, it can be described as an inventory profitability ratio that measures the company’s ability to attain the desirable return.
Apart from knowing how much stock was sold from the company’s inventory, equally useful is to be aware of the lost sales ratio, which refers to the amount of time that a product is out of stock compared to the expected rate of sales for that specific product during that period. Having this information, companies can measure how many sales could not go through because of out-of-stock issues and be alert and forethoughtful on how to avoid this in the future.
Customer satisfaction metric should be one of the top priorities of any organization. For this reason, on-time Delivery Rate, which measures the percentage of orders that arrive on time to customers, is of vital importance for the most efficient supply chain.
Similarly, another key metric that measures the supply chain efficiency of a company is On-time Shipping Rate. This KPI reveals to companies the number of orders that are delivered within the promised shipping window, making sure that customers will not lose trust and keep using the same supplier.
Finally, every organization needs to be able to measure their Perfect Order Rate. Specifically, for a company to reach its customer-centric goals, it needs to guarantee that most orders are shipped without any unforeseen occurrences, such as damage, inaccuracies, or delays. Although a company cannot attain a perfect order rate, the more perfect orders it ships, the higher customer satisfaction and operational efficiency rate it will succeed.
A successful business requires the measuring of company’s performance through the implementation of effective business metrics that indicate its growth or decline. For finding out more on which solutions can help your business grow, visit NetU’s website and contact our expert consultants for any queries.