A KPI, or Key Performance Indicator is a value (or a mark), which allows you to evaluate how good you are doing. It gives you the opportunity to know if you are reaching your target.
As stated in the previous post (link), when you set your targets/goals, you have to set your indicators at the same time as they will give you the final status at the end, and it will help you to know, throughout the process, whether you are reaching your target or not.
When defining your KPIs, the simplest way to do so is to go through your “5 W’s and the H”, let’s go through an example together:
- What (what is your objective) : Reduce the delivery lead-time by 30%
- Who (who is responsible for this indicator to improve) : The Transport Director/Logistics Director
- When (When you expect to achieve your objective) : 2 years
- Where (Where helps you to define your scope) : On the UK Market
- Why (This might be answered by, what is a risk of not doing it) : To be the leader on express delivery
- How (Try to be top level on this one) :
- Reduce handling time in the warehouse by 1 day (this must be measured)
- Change the Transport 3rd party company able to deliver customer in 2 working days (this must be measured)
When you take all of this, you have the scope, the objective, the background and enough information to be able to set your KPIs. From the What to the Why you have your main KPI, your final indicator. The How is the trickiest one as you can go at the lowest level, and each of them must be measurable, and are KPIs as such.
A KPI must be clear enough to be communicated easily, within the organisation, or even to stakeholders.