It is true, you cannot manage what you do not measure. But Key Performance Indicators (KPIs) can be detrimental to an operation if not properly established.

KPIs need to be top-down driven. First and foremost are enterprise KPIs that support an organizations mission. All facility, functional, departmental, and individual KPIs need to support those enterprise KPIs.

Too often, departmental or functional KPIs can work against each other. A PCA consultant once encountered a situation where the plant manager had two conflicting KPIs, both of which affected his bonus. One was “MRO inventory turns,” his facility was best in the company on that one. Another KPI, was “equipment run time,” his facility’s performance here was abysmal. The purchasing agent never bought anything until the equipment went down, resulting in good inventory turns but long wait times to get the equipment back up and running. The business’ major KPI was “orders delivered on time”. PCA changed both the maintenance manager and the purchasing manager’s number one KPI to reflect “orders out the door on time.”

The plant manager fully supported this new concept, but was vehement about maintaining his world-class MRO inventory turn KPI. So the PCA consultant turned the plant’s attention to the obsolete inventory that was on the books. By establishing a process with measurable goals to purge the obsolete inventory, the inventory turns KPI actually increased while supporting the business’ KPI on customer service.