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How Metric Hierarchies Affect ROI

Welcome back to our series on Using Metrics to Avoid a Performance Black Hole. Please read the first two blogs, How Process Improvements Affect ROI and How Supply Chain Affects ROI. Today we're going to talk about metric hierarchies.

Metrics are an important tool for the effective tracking of process improvements or the identification of problem areas that might require attention. There are an unlimited number of metrics a business can use, so to pick the ones that are best for your business, focus on the metrics that will contribute to improving your bottom line and customer satisfaction – the numbers that matter most from an ROI standpoint.

Here's how metric hierarchies affect ROI:

Metric Hierarchies

Metrics often possess relationships and interdependencies that are best organized and tracked with a metric hierarchy. A metric established to maintain low inventory levels, for example, would go hand-in-hand with a metric to reduce storage needs and one to lower the tax liability of on-hand materials.

Another department might implement a metric to measure customer order fulfillment times, which could lead to another metric of improving the availability of inventory for rapid picking and a metric to reduce the time it takes to build an order and ship it.

Making Metrics Successful

The only way for metrics and their hierarchies to be successful is through good communication – all concerned parties should understand the goals and turn their focus toward achieving them. Sometimes, a hierarchy might generate a direct conflict and you'll need to make adjustments to arrive at a compromise that best fits the business's overall goals.

How an ERP Can Help

After you've diagnosed performance problems, a good enterprise resource planning (ERP) system can help you create and organize metric hierarchies. The ERP also offers a structured method that allows for the evaluation, analysis, and monitoring of those metrics. Like any goals, you should review and fine-tune your metric hierarchies on a frequent and consistent basis to ensure that you're making the right measurements and that the metrics continue to support your overall goals as a business.

Southeast Computer Solutions has consultants well versed in the establishment of metrics and their relationships in meaningful metric hierarchies. Our supply chain experts can help you structure performance measurements to diagnose problem areas efficiently. Contact us today to see how our team of professional consultants can add value to your organization.

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About Southeast Computer Solutions

Southeast Computer Solutions is based in Miami, Florida, and has additional operations in Mexico. For over 30 years, we have positively impacted the success of small and mid-sized businesses with effective business management implementations that improve our clients’ operations. We listen, we are accessible, and we care. Learn more by visiting our website or calling 305-556-4697.


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