What are KPIs and why are they so important to facilitate effective business decision making ?

Sales Performance KPIs

Sales Performance KPIs

Key Performance Indicators or KPIs as they are commonly referred to, are measurements of individual business performance metrics.  For example all businesses will want to have an up to date view of the level of sales intake and overall sales order book value.

KPIs can be generated for any performance metric that you can think of.  For example suppose a business has a sales team of 10 sales execs.  As part of the sales strategy to grow the business, you ask the sales team to undertake regular sales prospecting (10 new prospects each per week).  You could then create a KPI to measure how many prospects have actually been contacted versus the target.

Using a combination of KPIs will also allow businesses great insight into business performance issues which may exist.  For example you may see that the sales order intake KPI is below target for yet when you check the prospecting KPI you see that only half of the sales team are actually carrying out the prospecting resulting in a short fall of new business.  The point is that if you don’t capture the information in the first instance then you cannot take corrective action.

So What KPIs Should Your Business Capture?

The answer to this really depends on your business and what you provide.  For example if you are a hotel then you would want to closely monitor the room occupancy levels.  A restaurant would want to keep close tabs on the number of covers and the sales of each dish.   A car dealership will likely want to now how many cars they have sold.  In addition they may have a target for the sale of extended warranties for example.

We have worked in a range of different manufacturing businesses giving us strong commercial awareness.  Here is a list of common KPIs for different functions within a manufacturing business:

Sales

  • Opportunity Pipeline Summary
  • Quote conversion ratio
  • Sales order intake (current month) & (year to date) vs Sales Budget + variation
  • Order book value
  • Order arrears
  • Sales by product group
  • Sales by customer
  • Sales by country
  • Profit margin analysis

Purchasing

  • PO Value Raised (current month) & (year to date)
  • Purchase order book value
  • Purchase order book arrears value
  • Purchase order book goods received not invoiced value
  • Summary of purchase values by product group
  • Summary of purchase values by supplier

Production

  • Work in Progress (WIP) Value
  • Completed Stock Value
  • Number of Pending Work Orders
  • Qty of Work Orders in Arrears
  • Value of stock added to WIP
  • Value of labour cost added to WIP
  • Value of Subcontract cost added to WIP
  • Summary of Time Bookings by job
  • Summary of Time Bookings by employee
  • Summary of non charge time bookings
  • Costs of completed work orders vs Sales Price (actual vs planned)
  • Number of accidents (current month) & (year to date)
  • Employee Absence Ratio

Stock Control

  • Overall Stock value
  • Value of Goods Received into Stock
  • Value of Goods Shipped to customers
  • Value of stock written off
  • Stock value by product group
  • Stock value by location
  • Stock value by supplier
  • Allocated stock value

Quality Control

  • Customer delivery performance (ontime vs late % ratio)
  • Customer rejects qty and value
  • Supplier delivery performance (ontime vs late % ratio)
  • Supplier rejects qty and value
  • Internal quality – scrap qty / cost
  • Internal quality – rework qty / cost
  • Internal quality – delivery performance (ontime vs late % ratio)

Finance

  • Invoiced value (current month) & (year to date)
  • Credit notes qty and value (current month) & (year to date)
  • Sales budget vs forecast analysis
  • Order intake vs value shipped ratio
  • Allocated stock value

How Do I Capture These KPIs Automatically?

Business Intelligence Reports can provide automated business reporting that will generate KPIs either individually or within a custom dashboard which contains multiple related KPIs.  For example a sales dashboard, production dashboard or quality dashboard.  Providing the underlying information is available within the database then we can help.

So What Are The Benefits of KPI Business Intelligence Insight ?

Commercial Benefits of Business Intelligence Solutions

Commercial Benefits of Business Intelligence Solutions

Hopefully this post clears up some of the ambiguity around what KPIs are and how they are used.  For more information around KPI reporting and BI dashboard development please call 0800 8044 310.  Alternatively request a FREE BI consultation for your business.

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