KPI’s – The building blocks for your BI tool

The past few years have seen a lot of traction for Business Intelligence (BI) tools in the market. Many of these tools come as add-on modules to an ERP or Transport Management System (TMS) or a Warehouse Management System (WMS) or any Supply Chain Planning & Execution system. They are also available as separate off-the-shelf products (on-demand as well as on-premise) which require interfaces with the existing applications. They come with fanciful names like ‘Cockpit’, ‘Control Tower’, ‘War Room’ etc.

BI for most companies is a cool tool – pretty graphics, latest technology, drag-n-drop reporting and power dashboards.

But with the implementation euphoria over, many companies gradually realize that the application does not live up to its promise. The type or depth of information required is not available from the tool. The ‘key’ metrics needed to analyze operational or financial performance are missing. Suddenly, the ROI for the project seems to go bust and the BI endeavor is labeled a failure.

What could be the reasons for the fiasco ? The technology was right, the architecture was correct, the data modeling was perfect and the interfaces were complete. The problem in many cases is that the Key performance indicators – the KPI’s were incorrect or insufficient.

Companies implementing a BI solution should realize that KPI’s form the building blocks of the project. What you need to measure, what you need to analyze, what you need to take a sound business decision are all dependent on what you identify and define your KPI’s to be. Unfortunately many BI projects lay too much emphasis on the technical side of the project. ‘Standard’ built-in KPI’s in the software are taken as a base and the project begins in full steam.

What needs to be realized is that KPI’s will differ from company to company. While one company would like to track number of cases picked per warehouse per day, another may want to drill down to cases picked per shift per warehouse or per person per warehouse.

KPI’s are at the heart of a performance management initiative and are meant to provide strategic measures of success or failure. The success of any BI initiative is thus dependant on an effective strategy for defining, tracking, and acting upon KPIs.

Here are some tips for successfully aligning your KPI’s with the BI expectations:

1) Be clear on what you want to measure. Define and re-define your performance metrics until they are in agreement with all stakeholders. Without a commonly accepted definition of a KPI, no one will support or use it.

2) Be clear on how you want to measure. The ‘formula’ to measure the metric can be perceived differently by different stakeholders of the same company. Have a holistic approach.

3) Be clear on why you want to measure. Remember that the first letter in KPI stands for ‘key’. Focus on specific areas that do not necessarily represent the whole business. At the end of the day, it is these key metrics which should help you in taking a sound business decision.

4) The buy-in and involvement of employees at mid level is as important as senior management commitment.

5) The importance of KPI visibility throughout the organization cannot be understressed. Performance is greatly improved when more people have access to KPI information and have the ability to act on it.

6) Constantly review your KPI’s. KPI’s are dynamic just as business is. Your BI tool needs to be constantly updated with new data elements which will help you analyze your performance.

 
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Mr. Pradeep Chaudhary works as ‘Domain Consultant – Logistics’ for the Transportation vertical of Tata Consultancy Services, a USD 6 billion + IT company headquartered in India.
He can be contacted at pradeep.chaudhary@tcs.com