Home' MHD Supply Chain Solutions : MHD May-Jun 2015 Contents THE IMPORTANCE
OF MEASURING THE
PERFORMANCE OF YOUR
KEY COST AND PROFIT
DRIVERS, AND HOW
TO GO ABOUT IT USING
(BI) AS AN ENABLER
n order to manage your business
successfully day-to-day, or strategically
through business planning, it is crucial
you get visibility of what is happening in your
business. Visibility is a large part of governance
of your company. More importantly, we need
visibility in terms of performance measures.
It can be a challenge to obtain performance
measures and agree on what indicators we
should measure in order to measure the
variables that drive cost.
Let’s firstly acknowledge that many businesses
are well invested in operational systems and
processes that are managing and data-capturing
(e.g . warehouse management systems or
transport management systems). Most businesses
also hold other important data in other systems.
We must look to utilise the growing data asset we
have within our businesses.
But are we all too busy keeping our heads
above water on the operational demands, so
that we are unable to focus on transformed
information that could provide real commercial
performance measures and prizes? These
measures could in fact be telling us that
we should not be as busy on some of our
operational demands, as they may in fact have a
negative commercial impact. It could be telling
us of commercially poor performing warehouses,
staff, clients or products.
In summary, focusing on operations is
not enough. We must be informed from a
commercial performance perspective if we are
going to manage effectively, and then identify
the specific operational areas on which to focus.
So how do you go about transforming all this
data into informed performance measures for
1. Identify firstly the variables that effect your
primary cost and profit drivers (e.g . in a 3PL,
these can be your staff, products/product
types, transaction types, clients/client types).
2. Identify the expected costs (KPI) of
all transaction types and variables per
3. Identify the cost model per KPI for actual and
expected (KPI) cost allocation.
4. Identify the data sources you will need
to combine to obtain accurate true
5. Define what data you need and request
interfaces from source systems.
6. Design a BI approach taking source data,
transforming it into expected and actual
7. Design how managers/users will want to see
the transformed data through aggregated
charts and tables.
It is important to understand that many
system providers are suggesting they are
offering BI, but in fact they are very likely only
offering data analysis and reporting to their
own database. BI for your company should
be considered independent to a system
provider, and instead take data from multiple
data sources/systems and transform into an
optimised interactive BI experience. It should be
able to outlive your WMS, TMS, ERP, etc.
My strong view is:
1. What you can’t see or measure, you can’t
2. It is important you have easy visibility and
measures of performance to your key cost
and profit drivers.
3. It is important to get measures to the primary
variables that effect these performance
measures (e.g. worker, product, client).
4. It is important to understand both actual
vs. expected KPI performance as well as
5. It is important to identify and quantify areas of
6. It is important to see trends in performance in
time to react early enough.
7. You have an incredible data asset that you
can utilise to measure performance and
provide BI analytics.
8. Use a BI and performance measuring expert
with commercial and operational industry
skills to help you.
Stuart Popplewell from 4GM has spent
over 15 years in logistics and warehousing,
and is a specialist in business intelligence
and performance measuring. For more
information call +61 419 996 189 or email
PERFORMANCE MEASURING AND THE
ROLE OF BUSINESS INTELLIGENCE
MHD SUPPLY CHAIN SOLUTIONS — MAY / JUNE 2015
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