You’ve heard of supplier rationalization and “rightsizing” the supply base. What about too many KPIs on the supplier scorecard? I’ve mentioned the problem of measuring too many KPIs in previous posts. In 11 Reasons Why Supplier Scorecards Fail, I list measuring too many KPIs as a reason for failure. In Supplier Scorecard Metrics: Easy vs Meaningful, I discuss how KPIs can proliferate on scorecards just because they are available, not because they are particularly meaningful. What could be the downside of too many KPIs? Isn’t the more KPIs the merrier? I know of a manager who had 80 KPIs on her scorecard. She found that it was impractical to manage that many metrics. The scorecard looked impressive. But the company found it impossible to get actual results with this huge list of metrics.
What are some ways to reduce the number of KPIs on a supplier scorecard to the most meaningful? How do you decide which KPIs to get rid of? Here are four approaches.
1. Look at each metric and test the extent to which it relates to your firm’s goals, objectives and strategies. If the metric is not directly related, it should not be on the scorecard. Supplier metrics need to support your overall objectives and help you achieve your goals. Otherwise, they are taking up resources and space.
2. How realistic and achievable is the item being measured on the scorecard? Is it something that is likely to be achieved in your company? For example, if you are measuring supplier contract compliance, but have no solid means of determining compliance (or at least one that doesn’t require armies of people), then the metric needs to be rethought. Stretch goals are great. But until the business processes and resources are in place to achieve these goals, the metric isn’t ready to be on the scorecard.
3. What is the cost/benefit of the KPI vs the resources required to create the KPI? The effort to obtain the data should be commensurate with a KPI’s usefulness and ability to be actionable. If a KPI is more trouble than it’s worth, it falls into the category of “data for the sake of data” and should be eliminated.
4. How actionable is a KPI? If you look at it and cannot think of ways you can connect it to supplier performance improvement or to the improvement of the customer-supplier relationship, then it may no longer belong on your supplier scorecard.
When it comes to KPIs, sometimes less is more.