Key performance indicators (KPIs) are common in many industries. These measures show how effectively a company is achieving its business objectives. KPIs should be objective, quantifiable and measurable. Manufacturing companies often use KPIs such as labor efficiency, scrap percentage and days sales outstanding. By “measuring to change,” companies use KPIs to make process improvements to production and operations as changes are indicated.
The goal of using KPIs is to create value for the company. KPIs are a kind of scorecard, so value creation is often linked to customer satisfaction. For example, if customers want on-time delivery, there should be a KPI that measures daily, weekly and monthly on-time delivery. Having a positive trend line for on-time delivery can position the company as a reliable supplier and create a competitive advantage that enables the company to outpace its competitors.