Aircargopedia - Key Performance Indicators (KPI) Definition

Logistics performance index definition.

A Key Performance Indicator (KPI) is a measure of performance. KPIs are commonly used by an organization to evaluate its success or the success of a particular activity in which it is engaged. Sometimes success is defined in terms of making progress toward strategic goals, but often, success is simply the repeated achievement of some level of operational goal (zero defects, highest level of customer satisfaction etc). Key Performance Indicators define a set of values used to measure against. These raw sets of values, which are fed to systems in charge of summarizing the information, are called indicators. Indicators identifiable as possible candidates for KPIs can be summarized into the following sub-categories: • Quantitative indicators which can be presented as a number. • Practical indicators that interface with existing company processes. • Directional indicators specifying whether an organization is getting better or not. • Actionable indicators are sufficiently in an organization's control to effect change. • Financial indicators used in performance measurement and when looking at an operating index. Stages in identifying KPI’s The key stages in identifying KPIs are: • Having a pre-defined business process (BP). • Having requirements for the BPs.

• Having a quantitative/qualitative measurement of the results and comparison with set goals. • Investigating variances and tweaking processes or resources to achieve short-term goals. A KPI can follow the SMART criteria. This means the measure has a Specific purpose for the business, it is Measurable to really get a value of the KPI, the defined norms have to be Achievable, the improvement of a KPI has to be Relevant to the success of the organization, and finally it must be Time phased, which means the value or outcomes are shown for a predefined and relevant period. 1. New customer acquisition 2. Demographic analysis of individuals (potential customers) applying to become customers, and the levels of approval, rejections, and pending numbers. 3. Status of existing customers 4. Revenue generated by segments of the customer population. 5. Outstanding balances held by segments of customers and terms of payment. 6. Collection of bad debts within customer relationships. 7. Profitability of customers by demographic segments and segmentation of customers by profitability. Many of these customer KPIs are developed and managed with CRM software.Faster availability of data is a competitive issue for most organizations. For example, businesses which have higher operational/credit risk (involving for example credit cards or wealth management) may want weekly or even daily availability of KPI analysis, facilitated by appropriate IT systems and tools. This industry is growing with leaps and bounds. That is the reason transportation especially air cargo is realizing the need of KPIs in every aspect of the business. Some indicators are exemplified as under: • Punctuality • Delay Duration • More Ground Time • Availability (technical) • H/I Deferred Items • Aircraft on Ground • Weather Delays • Human Resources • Daily Sales Outstanding. Supply Chain Management. Any business, regardless of size, can better manage supplier performance with the help of KPIs robust capabilities, which include: • Automated entry and approval functions • On-demand, real-time scorecard measures • Single data repository to eliminate inefficiencies and maintain consistency • Advanced workflow approval process to ensure consistent procedures • Flexible data-input modes and real-time graphical performance displays • Customized cost savings documentation (CSD) • Simplified setup procedures to eliminate dependence upon IT resources. Main SCM KPIs will detail the following processes: • Sales forecasts • Inventory • Procurement and Suppliers • Warehousing • Transportation • Reverse Logistics. Suppliers can implement KPIs to gain an advantage over the competition. Suppliers have instant access to a user-friendly portal for submitting standardized cost savings templates. Suppliers and their customers exchange vital supply chain performance data while gaining visibility to the exact status of cost improvement projects and cost savings documentation (CSD). Overall Equipment Effectiveness or OEE is a set of broadly accepted non-financial metrics which reflect manufacturing success. • Cycle Time • Cycle Time Ratio.