Key performance indicators (KPIs) are like your company’s car dashboard, telling you how fast you are going, how hard the motor is working and how efficiently your operation is being run. These practical and objective measures track progress toward a pre-determined goal or against a standard of performance. The import-export world has its own particular set of KPIs, and these should be a focus point for C-suite execs, directors, supply chain managers, procurement managers, customs regulatory and compliance mangers, trade consultants, and foreign trade agency pros.
KPIs need to be “SMART,” insist supply chain consultants with Logistics Bureau—specific, measureable, achievable, relevant and time-phased. They also need to tie in with your company’s goals and objectives and—this is critical—manageably sized, as in not an encyclopedia-thick compendium of KPIs.
For supply chains, KPIs will probably be focused on delivery in full, delivery on time, delivery in full on time, cost as a percentage of sales, and inventory stock turn in days.
Use KPIs to Improve Compliance Operations
Metrics can be used to identify process gaps that can affect import and export compliance, says an export compliance officer with international trader Shipping Solutions.
“In addition, you may identify other possible inefficiencies affecting the supply chain such as the influx of expedited freight—which could indicate supplier fulfillment problems or a higher percentage of entries requiring entry documents or intensive exam at a specific port of entry,” the company added.
Examples of these kinds of KPIs can include:
- Number of exports by country
- Method of transportation
- Number of automated export system entries
- Transit times
- Percentage of exports requiring an individual validated export license
- Export order processing times
Customize Performance Indicators to Meet Your Specific Needs
While the import-export world will have its own brand of KPIs, general metrics from the business world can still apply, says performance management consultant ClearPoint Strategy. Some customer-focused metrics include:
- Customer lifetime value: narrow down which channel gets you the best customers for the best price
- Customer acquisition cost: divide total acquisition costs by the number of new customers in a specific time frame
- Customer satisfaction and retention: this could come from old-fashioned satisfaction surveys or the percentage of customers repeating a purchase
- Net promoter score: query your customers quarterly to see if they’d recommend you to a friend
- Number of customers: a simple way to gauge your success is to track whether you attract more customers than you lose
Don’t Overdo It
Metrics are fun, but too much of a good thing can drag you into a data swamp—well-meaning managers may find they are spending more time measuring work than they are actually working. For KPIs, there is in fact a law of diminishing returns.
“The number of KPIs is directly related to the number of strategic objectives a company/organisation has,” says business management consultant Intrafocus. “The number of strategic objectives is dependent on the resources and time available to meet the objectives set. Given that just about everyone in a company/organisation has a ‘day-job,’ the time left to focus on strategic objectives tends to be small.”
Intrafocus pegs the magic number at more than 12 and less than 36.
A blogger for The Strategic CFO suggests even fewer—perhaps just six to eight: “By performing an analysis of the most important business activities that drive profit and cash flow, you can then develop a set of true key performance indicators. Look for the 6-8 numbers that really drive the bottom line.”
Too many, notes Forbes, can induce analysis paralysis.
“To satiate the intellectual curiosity that yearns for more information (and therefore stalls progress), set yourself parameters for what you need to know (now) and what you’d like to know (in the future),” said one opinion writer for the site. “If the information you have now answers the call, it’s time to move forward.”