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1.

If you were hired as a consultant to develop these KPIs for WD, how would you assess what KPIs
they should be measuring? In general, what areas of service and cost would these KPIs address?
Be sure to include both internal and customer KPIs.

If I was hired as a consultant to develop KPIs for WD, I would consider following the Supply
Chain Operations and Reference (SCOR) model. The model includes five categories of metrics
including reliability, responsiveness, flexibility, costs, and asset management.

Product Order Fulfillment – KPI that measures the performance of supply chain’s reliability.
Delivering the correct product, to the correct place and customer, at the correct time, in the
correct condition, and with correct quantity and documentation.

Order Fulfillment Cycle Time – KPI that measures the supply chain’s responsiveness. The
velocity at which the supply chain provides products to the customer.

Supply Chain Response Time – KPI that measures the supply chain’s flexibility. The agility of a
supply chain in responding to marketplace changes to gain or maintain competitive advantage.

Cost of Goods Sold – KPI that measures the supply chain’s cost. Tracking the costs associated
with operating the supply chain.

Cash-to-Cash Cycle Time – KPI that measures the supply chain’s asset management efficiency.
This performance attribute tracks the effectiveness of an organization in managing assets to
support demand satisfaction.

2. What KPIs would you recommend for the manufacturing facility? Why?

On-Time Delivery to Commit – This metric is the percentage of time that manufacturing
delivers a completed product on the schedule that was committed to customers. This KPI is to
improve customer experience and responsiveness.

Yield – Indicates a percentage of products that are manufactured correctly and to specifications
the first time through the manufacturing process without scrap or rework. This KPI is to improve
quality.

Throughput – Measures how much product is being produced on a machine, line, unit, or plant
over a specified period of time. This KPI is to improve efficiency.

WIP Inventory/Turns – A commonly used ratio calculation to measure the efficient use of
inventory materials. It is calculated by dividing the cost of goods sold by the average inventory
used to produce those goods. This KPI is to reduce inventory.

Total Manufacturing Cost per Unit Excluding Materials – This is a measure of all potentially
controllable manufacturing costs that go into the production of a given manufactured unit, item
or volume. This KPI is to reduce costs.
3. What KPIs should be used at the distribution center? Why?

On-time shipping – Monitoring the shipment times of all products. The goal of the DC is to
ensure that freight makes into the correct mode of transportation at the appropriate time.

Accuracy in Order Fulfillment – Tracking the accuracy of order processes. Inaccuracies from
speed, error, etc. Errors results in additional costs.

Warehouse capacity – DC need to know optimal and minimal inventory levels to ensure optimal
operativity.

Cycle Time – Total cycle time to track time from arrival of product to the distribution center to
the successful departure of shipments containing the correct product.

Employee Turnover – Due to the nature of the profession, DC employee turnover rates are high.
This metric is needed to track workforce turnover and assist on improvements.

4. How would you measure the revenue and profit impacts of these new KPIs?

KPIs such as on-time shipping and order fulfillment are metrics that signifies service failures with
cost implications and lost sales. Correctly filled orders will be tracked along with service failure
orders. The failed orders could be tracked based on rectified and refused orders. Rectified
orders could incur additional handling costs where refused orders will incur lost sales revenue.
These KPIs will impact the overall profit margin, ROA, and return on stakeholders’ equity on the
income statement. By tracking these KPIs, decision makers can implement improvement
strategies.