Supply chain management involves a chain of processes that enable value addition in the conversion of raw materials into finished goods. Discovered in Germany, the term ‘supply chain management’ hasn’t undergone many changes in its definition since the 1990s. It involves several channels, middlemen, processes, machinery, manual labour and net working capital which aid in the completion of raw materials into goods of value.This process augments the processing efficiency by controlling the average time taken to manufacture and produce finished materials. These goods, in turn, need to be sent through several distribution networks to the final consumers.
An analysis of the supply chain of a company can solely determine the efficiency of operations, probable losses, contingent liabilities and would also help in taking relevant management decisions. Being such a significant process, using OKRs with respect to the supply chain can definitely assist in greater profitability and operational efficiency in an organization.
While engineering OKRs can greatly give an entire new perspective to the management of a company’s engineering department. Setting the right Supply chain OKRs can often be confusing. So, here we’re going to list out some of the best supply chain OKR examples that you could use to manage the supply chain department of your company. When these objectives meet your key results, we assure you that you would have the reputation of managing the performance of your company’s supply chain in the best way.
Be prepared to implement your OKRs based on these 10 objectives to attain effective performance management of all your supply chain needs.
Example 1
While managing your inventory, you may often be left with excess stock in the warehouse or face scarcity of available raw materials. Therefore, it is important to optimize the stock order process to have a successful supply chain.
Objective : Inventory Management
KR 1 : Decrease order processing time from 48 hours to 24 hours
KR 2 : Reduce lead time for reorder level during the high season in Q4 from 7 days to 5 days
KR 3 : Reduce customer backorder rate from 3% to 1%
Objective
Maintain optimal inventory
Target Date: Annual-2021
Visibility: All Employees
Key Results
Decrease order processing time from 48 hours to 24 hours
Order processing timeReduce lead time for reorder level during the high season in Q4 from 7 days to 5 days
Lead timeReduce customer backorder rate from 3% to 1%
Customer backorder rateExample 2
Theft or pilferage of inventory may seem unavoidable when the quantity of stock is enormous. But, measures can be taken to minimize such potential losses, however trivial they may seem to be.
Objective : Inventory Management
KR 1 : Increase number of cameras inside the stock godown from 4 to 10 to cover all possible angles for identification of theft
KR 2 : Increase training in safe handling of materials from once a year to 4 times a year
KR 3 : Decrease losses due to poor temperature control from 2% to 0%
Objective
Reduce material losses
Target Date: Annual-2021
Visibility: All Employees
Key Results
Increase number of cameras inside the stock godown from 4 to 10 to cover all possible angles for identification of theft
Number of camerasIncrease training in safe handling of materials from once a year to 4 times a year
Frequency of manual stock takingDecrease losses due to poor temperature control from 2% to 0%
Reporting timeExample 3
Delivery and logistics in a supply chain is composed of various functions. But certain metrics can determine the efficiency of the overall department. This objective focuses on improving shipping and freighting.
Objective : Delivery and logistics
KR 1 : Increase perfect order rate from 92% to 99.5% in Q1
KR 2 : Increase freight bill accuracy rate from 93% to 99.5% in Q1
KR 3 : Decrease shipping and freight cost per unit from $4 to $3
Objective
Improve the efficiency of shipping and freighting functions
Target Date: Annual-2021
Visibility: All Employees
Key Results
Increase perfect order rate from 92% to 99.5% in Q1
Perfect order rateIncrease freight bill accuracy rate from 93% to 99.5% in Q1
Freight bill accuracy rateDecrease shipping and freight cost per unit from $4 to $3
Shipping and freight cost per unitExample 4
Transportation plays an important role in delivering the goods to the intermediaries as well as end users. It is essential to deliver the goods without compromising on the quality as well as time.
Objective : Delivery and Logistics
KR 1 : Decrease the average number of hours for transporting goods from the warehouse to the wholesaler from 15 hours to 12 hours by Q2
KR 2 : Increase on-time shipping rate from 87% to 95%
KR 3 : Increase the number of orders undertaken for 24 hours delivery from 20% to 50%
Objective
Improve delivery time for customers dramatically
Target Date: Annual-2021
Visibility: All Employees
Key Results
Decrease the average number of hours for transporting goods from the warehouse to the wholesaler from 15 hours to 12 hours by Q2
Time taken to reach wholesaler Increase on-time shipping rate from 87% to 95%
On-time shipping rateIncrease the number of orders undertaken for 24 hours delivery from 20% to 50%
Number of orders undertakenExample 5
Great logistics services can satisfy the customers easily. But the question is whether the performance of the logistics services is being done effectively. This objective focuses on improving customer satisfaction through the improvement of logistics services.
Objective : Delivery and Logistics
KR 1 : Provide end to end Traceability of delivery.
KR 2 : Decrease late delivery rate from 20% to 2%
KR 3 : Decrease time for resolving online customer delivery queries from 180 mins to 30 mins
KR 4 : Decrease customer call back response time from 5 hours to 1 hour
Objective
Improve customer satisfaction
Target Date: Annual-2021
Visibility: All Employees
Key Results
Provide end to end Traceability of delivery.
Track the LogisticsDecrease late delivery rate from 20% to 2%
Late delivery rateDecrease time for resolving online customer delivery queries from 180 mins to 30 mins
Time taken to resolve queriesDecrease customer call back response time from 5 hours to 1 hour
Customer call back timeExample 6
Purchase department carries out major functions in a supply chain like the timely delivery of required materials for further processing. Also, this department directly deals with the suppliers. It is important to set good OKRs in the purchase department for a great supply chain.
Objective : Purchase department
KR 1 : Decrease average supplier defect rate from 2% to 0.25%
KR 2 : Decrease emergency purchase ratio from 5% to 3% per quarter
KR 3 : Decrease the average purchase order cycle time from 5 days to 2 days
Objective
Improve performance of purchase department
Target Date: Annual-2021
Visibility: All Employees
Key Results
Decrease average supplier defect rate from 2% to 0.25%
Supplier defect rate Decrease emergency purchase ratio from 5% to 3% per quarter
Emergency purchase ratio Decrease the average purchase order cycle time from 5 days to 2 days
PO cycle timeExample 7
The manufacturing and production department in every supply chain needs to have frequent quality control checks and inspections to see whether the goods produced fulfil the requirements of the organizational standards.
Objective : Manufacturing and Production
KR 1 : Increase employee utilization rate from 95% to 99%
KR 2 : Decrease production run setup time from 25 minutes to 20 minutes
KR 3 : Increase manufacturing capacity utilization rate from 70% to 80%
Objective
Improve manufacturing and production efficienc
Target Date: Annual-2021
Visibility: All Employees
Key Results
Increase employee utilization rate from 95% to 99%
Employee utilization rateDecrease production run setup time from 25 minutes to 20 minutes
Production run setup timeIncrease manufacturing capacity utilization rate from 70% to 80%
Manufacturing capacity utilization rate Example 8
The manufacturing and production department in every supply chain needs to have frequent quality control checks and inspections to see whether the goods produced fulfil the requirements of the organizational standards.
Objective : Operational efficiency and environmental sustainability
KR 1 : Increase Sustainability index from 70% to 90%
KR 2 : Reduce carbon inefficiencies from 8% to 3% in a year
KR 3 : Reduce waste from “recycle-reuse-refurbish” materials from $500K to $100K in a year
Objective
Include sustainability as a facet in supply chain operations
Target Date: Annual-2021
Visibility: All Employees
Key Results
Increase Sustainability index from 70% to 90%
Sustainability indexReduce carbon inefficiencies from 8% to 3% in a year
Carbon inefficienciesReduce waste from “recycle-reuse-refurbish” materials from $500K to $100K in a year
Value of recycled materialsExample 9
Even if inventory management operates efficiently, they can base their data only on the forecasts made by the purchasing department. Therefore, it is important to ensure that the forecasts are predicted accurately.
Objective : Purchase Department
KR 1 : Reduce maximum variance from actuals on Order forecast from 6% to 0.25% in Q1
KR 2 : Reduce maximum variance from actuals on the Material forecast from 13% to 5% in Q1
KR 3 : Reduce mean absolute percent error from 11% to 4% in Q1
Objective
Develop forecast accuracy in supply chains
Target Date: Annual-2021
Visibility: All Employees
Key Results
Reduce maximum variance from actuals on Order forecast from 6% to 0.25% in Q1
Maximum variance from actual data on order forecast Reduce maximum variance from actuals on the Material forecast from 13% to 5% in Q1
Maximum variance from actual data on materials forecastReduce mean absolute percent error from 11% to 4% in Q1
Mean absolute percent error (MAPE)Example 10
Supply chain consists of various sub processes and is an all inclusive design that may give rise to frequent situations with unexpected outcomes. This objective focuses on how to manage such risks in the supply chain.
Objective : Supply Chain Risk Management
KR 1 : Deploy existing data and use simulation to identify possible negative outcomes
KR 2 : Creation of optimization routine and scenario-based supply chain model
KR 3 : Increase digitalization of the entire supply chain from 75% to 90% by Q1
Objective
Reduce vulnerabilities to exogenous shocks across the entire supply chain
Target Date: Annual-2021
Visibility: All Employees
Key Results
Deploy existing data and use simulation to identify possible negative outcomes
Number of negative outcomesCreation of optimization routine and scenario-based supply chain model
Optimizing scenario based supply chain modelsIncrease digitalization of the entire supply chain from 75% to 90% by Q1
Digitalization of supply chain processesConclusion
Improving the organizational supply chain process with such OKRs can contribute a great way towards building brand awareness, customer loyalty, reputation as well as increase the profitability of the organization. Every step of the manufacturing process or retail process should be linked directly with the supply chain in order to obtain the desired results. Try implementing these OKRs in your company’s supply chain to improve the performance of your employees, tangible assets and other resources. Try reading some of the other great OKR examples on Customer experience OKRs, Banking OKRs,Sales OKRs, Marketing OKRs, HR and Engineering OKRs.