Every single element of the distribution world is built on—and generates—data. Payment data, customer data, vendor data, inventory data, and so much more—it’s not just a question of “how do you keep track of it all” but also “how do you combine it to make decisions?”
Added to this, as businesses grow and invest in new technologies like the Industrial Internet of Things (IIoT), and so does the sheer amount of data you need to track, measure, and manage, making it even harder to make sense of it all.
What are KPIs?
KPIs stand for key performance indicators, defined by Investopedia as a set of quantifiable measures that a company uses to gauge its performance over time. These metrics are used to determine a company’s progress in achieving its strategic and operational goals, and also to compare a company’s finances and performance against other businesses within its industry.
These indicators go beyond the basic topics of revenue and costs, measuring how well your business is performing and providing intel on both the positive and negative activities happening within your organization. These could be financial or operational and historical or predictive, depending on who needs what information.
Financial and Operational KPIs
For distribution firms, the profit and margins of the business is just as important as your shipping times and inventory trends, as one is often based on the other. For this, companies need to track both financial and operational KPIs:
Many KPIs are financial, as finance is the common language of general business management in distribution and all other industries. Common financial KPIs in every industry monitor sales, costs, margins, cash flow, and asset utilization.
Additionally, operational KPIs are measurements that managers and executives use to focus in on specific activities and interests relative to transportation schedules, inventory, on-time delivery, backorders, customer service and more.
Historical and Predictive KPIs
Paired with financial and operational metrics, distribution firms need to look forwards and backwards, for which they use historical and predictive measurements.
Historical KPIs measure activities that have already happened. Historical KPIs can be set up with alerts and warnings that monitor and detect exceptions, calling attention to issues through graphic characteristics like traffic lights (green = all okay; yellow = an indicator that something is not quite optimum; red = cause for concern) or “push” alert messages sent via email or text.
Predictive KPIs take leading indicators and turn them into projectionable information, helping decision makers to predict where they are heading and steer the organization. Predictive KPIs for distribution may use economic indicators, demographic trends, or specific industry indicators like housing starts (indicator of future demand for plumbing fixtures, windows, carpeting, furniture, etc.) or health trends (future demand for medications or supplies), for example.
Why All This Matters: Leveraging Key Performance Indicators in Distribution
For distribution firms, everything needs to come together at the right time, and too often, it can be hard to find problems without an overall picture. Harder yet, if businesses rely on manual processes, they will not be able to see any of these in real time, making it a challenge to not only see where you stand but how to improve. Luckily, with the right product, you can automate processes and easily show your processes and KPIs on a dashboard.
If you are looking to understand what you should know, how it affects your business, and how you can use this information, a new Acumatica guide can help.
The entire guide, titled “Key Performance Indicators for Distribution,” explores a wide range of topics pertaining to the distribution industry and highlights the following and more:
- What historical and predictive KPIs can tell you about your business.
- Which three distribution KPIs to track most closely.
- Why out-of-the-box KPIs aren’t enough to improve performance.
- How to systematize your KPI process.
- The ideal number of KPIs to track on a daily basis.
Distribution Business Made Smarter with Acumatica and Cortekx
The right data at the right time in the right hands can make a huge difference for your short- and long-term operations. If you’re looking to centralize your data, educate your people, and ultimately work smarter, get to know more about Acumatica, customized and implemented through the ERP experts at Cortekx.
Cortekx has been successfully implementing ERP solutions since 1995 and our mission is to help you find and implement the right software with the right configuration for your needs, team up with you and your staff to work together to bring about change, and realize that change as it positively impacts your bottom line. Get to know more about how we work, how we can help, and contact us for a free consultation.