Developing key performance indicators for supply chain: an industry perspective

Purpose - Measuring or monitoring supply chain performance reveals the gap between planning and execution and helps companies to identify potential problems and areas for improvement. However, it is recognized that developing key performance indicators (KPIs), or metrics, is very challenging and a set of practical guidelines is not readily available for companies and supply chain management (SCM) practitioners. This paper seeks to offer a practical approach to performance measurement and to present a list of essential KPIs.Design methodology approach - This paper offers insights from industry in the area of supply chain performance measurement and a practical approach to developing performance metrics.Findings - The experience from, and the review of, industry standards and best practices in supply chain performance measurement suggest that "less is better" as to developing performance metrics. Companies should focus on only a small list of KPIs which are critical for their operations management, customer service, and financial viability. Potential KPIs should be developed for each of the supply chain operations-reference (SCOR) model's four meta-processes (plan, source, make, and delivery) and need to be hierarchically grouped such as primary and secondary metrics.Practical implications - The paper offers a background of why performance measurement is necessary for SCM success, pragmatic guidelines for designing and implementing performance metrics, and critical KPIs with the definition, examples, and computation mechanism.Originality value - Despite the importance of performance measurement for successful SCM, many companies wonder how to put performance metrics in place and make them work in practice. This paper offers an industry-oriented, practical approach to performance measurement in SCM contexts and proposes key performance metrics which can be easily adapted for different businesses.