A Catalyst for Supply Chain Profitability

COVID 19 and Key Performance Indicators

Its day #umpeenth in the COVID-19 lockdown in Ontario. I am mostly OK with staying close to home, but the severity of the “essential” only travel is starting to wear pretty thin on me – especially as I am a fisherman and this is usually the time of year that I do my bear impersonation and climb out of the cave and into the sunlight. But I am very worried at the ravages this lockdown order is doing to the economy.

 I have been maintaining a chart of the daily new COVID 19 case counts for the province for at least 10 days now. It looks like this the day I wrote this:

Every morning I post the updated count on my Facebook page as a way of sharing information with those who feign or are truly are interested in this relatively useless piece of information. I say relatively useless because it really only tells us one thing – what is the daily count of identified cases for the province in which I live. It at least provides some trend we can latch onto to help us identify how our attempts to control this scourge is progressing. But it doesn’t tell us how many people are infected – because we know that there is a greatly inadequate level of testing being performed –. We can only test those who are for all intents and purposes already seriously medically impacted by the disease.  In effect, we are verifying what we have already deduced – that an individual with serious respiratory condition is indeed infected with COVID. We don’t know how many people are asymptomatic. We don’t know how many people have mild, non-debilitating COVID.  We don’t know how many people are post-COVID (we only count those who had it severely and have recovered). So we really don’t have any understanding of how widespread this disease is. And, because of this our response to stifle its spreading is to throw a blanket on the entire population – and by so doing, suffocate the economy, the mental health of millions and effectively terminate thousands upon thousands of small businesses, and with them millions of livelihoods.

And as I have been maintaining this almost useless data byte, it has struck me how similar this is with how some companies operate when it comes to the analysis of their financial and operational health. The charts they follow are sales growth, and the bottom line profit generated. They don’t look at what parts of their operations are bleeding slowly and inexorably away, eating into margins and compounding their impact over time; not measuring actual operational costs against targets and benchmarks that ensure profitability is maximised.  We have to be able to make the connection between the asymptomatic carriers in our operations to our overall company infection rate. What does your driver turnover cost? Do you track the advertising,  hiring, reduced performance,  increased supervision, higher incident rates, lower fuel efficiencies, lower customer satisfaction, higher repair rates, parked vehicles – financing and other per diem costs like insurance-, outsourced operations that should be internally serviced, higher insurance rates? These are just a few of the costs that need to be tracked as relates to hiring. What about the cost per mile, and the total cost of ownership of assets?  What about your gross margin on new business? Do you account for all the costs incurred to service a new account – hiring, training, financing receivables, sourcing support networks? All of these elements are Key Performance Indicators (KPI’s). If you don’t have any KPI’s, then you are flying blind.  It’s the equivalent of the news on COVID today. We don’t know what the information means beyond the most fundamental fact that case numbers are going up, or down. If you have the wrong KPIs, you may be tracking just the people who we already know have COVID – we just wanted to confirm it. The equivalent of looking at the bottom line:  Going up, or down?  If our health system had the right KPI’s we could open up the economy by isolating only those people who are currently contagious. Everyone else, whether they have recovered and are no longer transmitting or have not been exposed to it, can go back to work.  And, we can watch as the percentage of the population who is infectious slowly decreases and reaches 0. And so it is with the key elements in your operations.

Which way would you rather operate your company?