Leveraging Customer KPIs

It’s widely upheld that a champion team will always beat a team of champions. A champion team play together for one goal, whilst a team of champions plays for individual glory or outcomes.

In the workplace, a team of champions is likely to create division and hostility between functions, not unity. It can foster a culture of blame or indifference, with individuals being preoccupied by internal conflicts and achieving their own results, rather than being focused on external factors that drive overall company performance.

Can you imagine how this unnecessarily impacts on your profitability?

Let’s say a logistics manager gets a bonus this year because he spent only $900,000 on “unplanned” warehousing, well below his target KPI for overall cost. In fact, the $900,000 cost came almost entirely from one large customer missing their obligation to take all finished goods after a 12-month holding period.

The manager was focused on making his one big KPI and getting his bonus. The detail about the cost coming predominantly from one customer was not pulled out in the $900,000 overall cost report.

By failing to have a customer-based KPI in logistics, the business missed important information that could have reduced a large overhead cost and the opportunity to invoice incremental revenue during this financial period.

Compare that to having, in addition to the existing KPI for overall warehousing costs, a customer KPI in place that states no one customer can occupy more than 20-25% of unplanned warehouse space at any given time. Then hold logistics accountable for both KPIs and encourage them to share this information with customers.

With those measures in place, the logistics manager can sit down with the customer’s account manager and have a conversation about the total cost to serve being disproportionately high as a result of their warehousing needs. The logistics manager says, “We’re holding too much stuff for you, and we need your help to meet our KPI of customer storage space.”

They then can work together as a team to ensure the KPIs are met. Accountability is instilled on both sides, with the customer getting what they pay for and the supplier having better and more accurate reporting, which leads to stronger margins and larger bonuses truly earned.