I interviewed Elias Azerrad who discussed Defining KPIs and Analyzing the Impact of Productivity on Logistics Cost.
Can you first provide a brief background of yourself?
Hi, Dustin. I'm 22 years old. I graduated from one of the Paris universities where I studied economics and management for three years. I'm currently in advanced Master of supply chain at ISLI Bordeaux. it was founded more than 30 years ago and is the oldest European institution devoted to logistics and global supply chain management. And I'm currently working at Rexel Group as supply chain analyst. My focus over the past years has been to develop skills related to supply chain management and data analysis in order to have an overview of the various impacts of the supply chain projects and them leverage.
What are KPIs and how do you definite them?
KPIs is a measurable value that demonstrates how effectively a company is achieving key business objectives. So organizations use KPIs to evaluate their success at reaching targets. So selecting the right KPIs will depends on your industry and which spot of the business you are looking to track. So each department will use some different KPI types to measure their success based on specific goals and targets.
So to be useful, KPIs need to be monitored and reported. So how to constrict and to make a good KPI, so you have to make sure that the KPIs you're choosing is aligned with the strategy goals and objectives of your organization. Then you have to make sure that the KPIs you choose to measure should have data that can be easily obtained and tracked. So either monthly or daily or weekly, it depends on what you want.
Then the KPI should keep everyone on the same page and moving in the same direction. So with all the team, either they're operational, either they're strategic. It also should be reliable and accurate to obtain some result. And the thing is that your business is always growing and changing, and you should evolve your KPIs as well.
What are the impacts of productivity on logistics costs?
So regarding my Master’s thesis, I did like to focus my work on the impact of the logistics costs. So the productivity impacts the logistic costs in many ways. And I decided to focus on the warehouse costs and especially the salaries and benefits. So the productivity is a measure related to three units: time, people, production/action. So my assumption is that in supply chain, that the warehouse has been subject to the variation of the flows. So it means you can't fully control the variation of the flow when you are inside. The only thing you can control is the people who actually work there, and they are the only adjustment variable available to us.
So the salary and benefits represent a major input cost between 50 and 60% of the total of the warehouse costs. So if you can control and readjust these costs, you will considerably reduce your total of costs.
So the objective of my Master’s thesis was to be able the quantify the impact of productivity variation and more precisely, the deviation from given budget in order to allow discussion between top management group department, country, operational teams, strategy team, on Transformation, automation projects and lean.So the human factor is an essential link in the supply chain. And the aim was not to demonstrate that there is too much people but rather to show that the use of temporary workers is a significant cost, and it must not be used to the detriment of training or initiating new methods.
So on the basis of history, I tried to establish a correlation for each country between productivity and the number of employees. So I launched survey about the total salaries to have an overview about how much it costs to the firm with the bonus with the leave sick, and all these kinds of things, for permanent employees and temps. Then I used a mathematical function that could help me to determine the number of people based on activity of last year, for example.
So after that, I compared the model to the reality, and I quantified the gap between the model and the people who actually work there, each months.
So I used the gap and the mathematical function to quantify with the survey that I made on salaries and benefit to determine cost.
I am aware that this method could be skewed with change of product mix, logistics transformation and automation, but it's quite accurate when you compare to the reality.
How are KPIs relevant to your analysis?
So relevant KPIs is you tool optimizing an ongoing activity with the purpose of maximizing the likelihood of achieving the goal for that activity. So when you are writing or developing a KPI, you need to consider how that KPI is related to a specific business, outcome, or objectives.
So KPIs need to be customized to your business situation and should be developed to help you achieve goals. You have to write the objectives. You have to share your KPIs with the stakeholders. You have to review the KPIs so either weekly or on a monthly basis and make sure the KPIs are actionable. So you have also to make sure that to evolve your KPIs to fit the changing needs of the business and check to see that if the KPI is attainable or not.
Thanks for sharing today.
Thank you, Dustin.
About Elias Azerrad
Analyst Supply Chain at Rexel Group // CoFounder & Editor @Tech Crush