KPIs to Measure Green Supply Chain Success – kpi supply chain

KPIs to Measure Green Supply Chain Success – kpi supply chain

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KPI guides

Many businesses have adopted better environmental practices, both to please their customers and to save money. After all, many of the things that are considered green practices are, in reality, actions that also increase efficiency and reduce operational costs. One way to begin the process is by creating a green supply chain, carefully monitoring the actions taken to protect the planet to make sure that they do not negatively impact the bottom line.
It wouldn't do any good, for example, to buy alternative-fuel delivery trucks if the vehicles cost so much that the fuel saved over their lifetime would not recoup the additional price. Key performance indexes (KPIs) help determine which green practices can be effectively incorporated into supply chains and which should be avoided.
KPIs may be needed to measure specific practices and sometimes individual equipment. Here are some KPIs which will help monitor a green supply chain's success.

KPIs for Equipment

• Operational Cost Savings — Any equipment that is designed to use less power, whether that be electricity or fuel, should provide some operational cost savings. If, however, that equipment is more expensive than standard models, a method needs to be created to compare the savings over the life of the item to the extra cost.
• Equipment Down Time — Some equipment that is green is also less likely to require repairs. For example, a cooler with better insulation does not need to run as often, thus saving wear and tear on its motor and condenser. When this is factored into the cost savings, the additional price may well be worth it.

KPI for Sales

• Sales Increase — This might seem like a KPI more appropriate for marketing, but since one reason for instituting a green supply chain is to enhance the business' reputation with the public, its success has to be monitored. Remember those alternative-fuel delivery trucks whose operational cost savings did not offset the extra expense of buying them? If an increase in sales can be traced back to them, then they may have a greater value than their cost.
• Sales to Advertising Ratio — If an advertising campaign is built around a company's green supply chain, a KPI will be needed to monitor the success of that campaign. If sales rise as a positive response to the company's environmental policies, then the ratio of advertizing dollars spent should go down compared to increased revenue.

Working up a KPI list can get complicated, but it needs to be discussed and agreed upon at the same time that the company makes plans to develop a green supply chain. Only with the right KPIs in place from the beginning can a business hope to monitor the success of their green supply chain.

What is a Key Performance Indicator (KPI)
How to Develop Key Performance Indicators (KPIs)