Have you ever thought about it? What is the single most crucial KPI for your enterprise, or your supply chain? What is the biggest single factor limiting your ability to achieve more of your goal? What single metric stands between you and making more money tomorrow than you are making today?
For 15 years (1983 through 1997), Sandy Alderson was general manager of the Oakland Athletics, a Major League Baseball team. After coming across some other writings by Eric Walker, a former aerospace engineer-turned-sports writer, Alderson started thinking about that very matter for his team.
In fact, Alderson commissioned Walker to write a pamphlet on baseball strategies and tactics that touched on the matter of crucial KPIs (even though the term was not used in the pamphlet). Here is what Walker said:
Analyzing baseball yields many numbers of interest and value. Yet far and away--far, far and away—the most critical number in all of baseball is 3: the three outs that define an inning. Until the third out, anything is possible; after it, nothing is. Anything that increases the offense's chances of making an out is bad; anything that decreases it is good. And what is on-base percentage? Simply yet exactly put, it is the probability that the batter will not make an out. When we state it that way, it becomes, or should become, crystal clear that the most important isolated (one-dimensional) offensive statistic is the on-base percentage. It measures the probability that the batter will not be another step toward the end of the inning. 
Unlike the sports of football or basketball, there is no time clock governing baseball. Time, in baseball, is measured only in “outs.” In every inning, each team gets three outs. And, as Walker keenly observed: until the thirds out, anything is possible; but after it, nothing is possible.
There are only two (2) system-level (enterprise-level) KPIs that matter—in the long run:
Interestingly, these two KPIs are inextricably linked. Almost without exception (in fact, I cannot think of any exceptions in the long-run), companies and supply chains that suffer from poor on-time performance, ultimately suffer from low return on investment, as well.
Time is the Crucial Factor
Return on investment (ROI) is, of course, measured over time. While the investment part of the equation may remain relatively static, the “return” part—the profit—is garnered over time.
Even more to the point, on-time performance is directly related to the clock on the wall and the calendar that hangs beside it.
On-time performance affects ROI both directly and indirectly.
Poor on-time performance may affect profits (and, hence, ROI) directly through lost orders. But it can have lasting effects on ROI in other ways, as well. Lost orders may lead to lost customers. Lost orders and lost customers lead to increasing sales and marketing expense in attempts to make up for the revenues lost and customers disaffected. Greater discounts, required to recapture lost sales and lost customers may cut into margins. All of these lead to long-term reductions in ROI—over time.
If we take this baseball analogy a little further, we can draw a rough equivalence between on-base percentage and on-time performance.
Every day your company and its supply chain have a certain number of opportunities to “get on base” (deliver on-time) or “get an out” (fail to deliver on-time). While there is still time in the day, some things may still be possible. Once the clock expires, nothing is possible—you can no longer deliver “on-time.”
Increasing Your On-base Percentage
If time is your crucial limiting factor to “winning” or “losing,” then two simultaneous objectives should be the concern of supply chain managers:
- Effecting strategies and tactics that improve the odds of on-time performance while, at the same time…
- Holding investments (e.g., inventories, technologies) to a minimum
These two, working together, satisfy the demands of two system-wide KPIs: on-time performance and return on investment.
You Might Need a Partner
Many of the firms with which we come into contact in our consulting business have realized that time is there real constraint. Their executives and managers are so occupied—day-in and day-out—with the activities of normal routines and ongoing firefighting that they do have neither the time nor the energy to effectively work toward ongoing improvement.
In such cases, working with a consulting partner capable of rapidly bringing focused attention to those few changes that will improve your odds of “winning” through on-time performance and increasing ROI can pay-off handsomely. Many times the changes required for early and rapid improvements have nothing to do with technologies, at all. Instead, seeing things in a new light and taking the proper steps toward changes in policies, procedures, and tactical execution can bring about dramatic improvements with little or no additional investment.
Time and management attention are crucial limiting factors for your success. Rapidly uncovering ways to improve your odds of success can lead to huge gains. Start today!