A Fortune 100 Auto Manufacturer, involved in manufacturing, distributing, and sale of automobiles replacement parts, was looking to optimize and manage the rate of inventory turnover in order to improve the quality of finished goods and ensure a steady rise in financial performance.
The biggest challenge faced by the manufacturer was providing workers access to up-to-date information on the stock automobiles so that accurate management of inventory workflows could get easy. To overcome this problem, the company empowered its workers with a mobile app, which captured the condition of each automobile before it entered the warehouse, and automatically alerted specific vendors in real time to remedy quality issues. Though this led to efficient inventory management, it failed to have much of an impact on the company’s financial prospects. It took them a while to find that the malaise lay in its data collection process which relied heavily on manual paper forms, emails and spreadsheets. The scope of their app solution was soon expanded to automate data flow and in no time the manufacturer realized huge gains with increased work hour savings, enhanced on-time shipments, and less inventory rework.
But the above incident is a one off story, as most enterprises having an app for their workforce have failed to realize their investments along expected lines. A recent report commissioned by an industry magazine has stumbled upon the primary reason for this failure: inability of organizations to identify and align their mobile initiative with key performance indicators. It’s true, the absence of a learning curve has made it difficult for enterprises to adapt to the fast pace of mobility. But we believe the malaise lies deeper – in the inability of organizations to bridge the gap between micro-level and macro level KPIs. In this blog, we will analyzing the two levels of KPIs and how integrating the two would help organizations develop a more mature app strategy.
The enterprise mobility evaluation process unmistakably requires a two pronged approach – one which takes obvious factors i.e. macro-level KPIs such as cost savings, increased revenue, waste reduction, speed of process etc. into account and the other, which factors in soft metrics or micro level KPIs such as time on specific tasks, error rates, number of calls to tech support, customer satisfaction etc. It is only when both these levels are given due weightage, that it is possible to create solutions which can elevate the overall effectiveness of a business process. For example, mid-level management may only be concerned about micro level KPIs because their primary concern is to increase the efficiency of front line workers. Senior level executives, on the other hand, would want to know the overall impact that mobility has on the business such as an increase in revenue. An enterprise mobile initiative can be effective only if it accommodates both these requirements.
In the above mentioned auto warehouse case, the emphasis was on the macro-level KPI of speeding up the process. The manufacturer overlooked the micro-level requirement of time taken to complete a specific task. Consequently, the mobility initiative fell flat on its face. Once the shortcoming was identified, developers examined all the micro steps involved in documenting the task and set benchmarks, based on which the solution was created. The upgraded mobile app obviated the need to use spreadsheets, and eliminated issues like documentation errors and loss of critical documents. This helped the company realize the complete benefits of mobility.
What Enterprises Need to be Careful About
While operating only with macro level KPIs increase the risk of failure, banking on wrong KPIs can be equally disastrous for enterprises. Often lag indicators such as, sales per employee, sales/cost ratio, etc. are picked up as key indicators and aligned with the mobile initiative, thus dooming it to failure. An indicator can be called a KPI only if it impacts a number of the factors upon which an organization can achieve its goal. For instance, “Customer appointments per week for the next quarter” can be a more realistic KPI than sales per employee. This indicator has an impact on critical success factors such as customer satisfaction, revenue inflow and demand planning. In other words, KPIs lie deeper in the organizations processes and enterprises need to make an effort to identify them instead of relying on a few standard KPIs.
The other area where enterprises go wrong is in having too many macro and micro KPIs. This usually happens when organizations with multiple departments require a different set of indicators for each department or when local vision and goals has to fit in with mainstream goals. Ideally, enterprises must choose anywhere between 5 macro to 3 micro level KPIs and ensure that the two levels of KPIs support each other. Unless this happens aligning KPIs to your mobile drive can only lead to failure.