Key Performance Indicators (KPIs) are a simple and effective way of measuring business performance. They enable CEOs to build a greater understanding of the relative performance of their firms against key business issues driving the supply chain and enable managers to identify under-performance. And, by raising awareness of similar business issues across the supply chain, KPIs can identify areas of common improvement.

In partnership with the Builders Merchants Federation, British Woodworking Federation and the Trussed Rafter Association, TRADA Technology’s Business Solutions Group carried out a DTI-sponsored research project under the Partners in Innovation Programme on KPIs for the timber industry with some interesting results.

Changing supply chain

The starting point for the project was the changing structure of the timber/construction supply chain and the need to understand a number of critical business issues affecting both client and supplier. There was a need for organisations to gain a wider appreciation beyond the immediate customer. It is rare for firms within the timber industry, for example, to be actively interested in their customers’ customer – many importers sell to merchants, but do not always understand the needs of builders.

There were three primary objectives: identify a set of critical, relevant business issues as KPIs; establish a mechanism and process by which the data within the KPIs would be collected, collated and analysed; and produce and disseminate the first set of generic and segment-specific timber sector KPIs.

As the project developed, it emerged that the key issues affecting businesses involved financial management, customer interface and operational procedures, with customer satisfaction at the top of the list.

Manufacturing companies had a strong interest, too, in developing productivity measures.

Range of information

Initially, gathering data across the sectors involved was not easy – not least because managers in SMEs, which abound in the timber industry, do not collect data. But the process highlighted the range of information available and the fact, for example, that in the trussed rafter industry there is no common way of measuring performance. Fabricators may talk about the ‘equivalent fink’ truss as an industry average, but no-one clearly can define it. The KPI project has for the first time provided a base line from which measurable industry standards can be developed.

The resultant timber KPIs, developed alongside the Movement for Innovation pan-construction indicators, are divided into three parts:

Generic KPIs – applicable to any type of timber-related business:

  • customer satisfaction – relative satisfaction; how easy it is to use a supplier; how well does the supplier understands customer needs?;

  • reliability of services;

  • quality of aftersales service;

  • staff product knowledge – comparative staff performance; actual staff product knowledge;

    &#8220It is important to keep pressing on with your work on the KPIs as our industry needs to know how it is performing amongst itself and against other industries. Only then will fabricators realise that there are other values to maximise in addition to sales, in order that they achieve the best returns possible”

    Michael Smith, managing director of David Smith (St Ives) Ltd
  • accidents – based on HSE data.

    Joinery sector KPIs:

  • orders completed on time;

  • sales per employee;

  • value of credit notes as a percentage of sales;

  • accidents (days lost per staff member).

    Trussed rafter sector KPIs:

  • productivity – sales divided by employee hours;

  • average price per truss;

  • truss complexity.

    The KPIs were launched at a series of workshops in November 2002. A positive attitude developed among the delegates, which in turn generated a strong debating platform where the KPIs and their application were openly discussed. The majority of managers were interested in becoming involved in sector-specific benchmarking clubs and in providing information.

    Marketing and promotion

    Obviously the primary benefit of benchmarking is that measurable action can be taken as a result, but other benefits can also accrue. For example, the outputs can be used as part of a company’s marketing and promotional activity, to help identify the quality of a business compared with its peers.

    In addition, for companies that are working towards ISO 9000 or already registered, the timber KPIs can be used as part of the process for proving continual improvement. The KPI process in the timber industry is still in its infancy and more work is needed but support for this first project was encouraging.

    Michael Smith, managing director of trussed rafter fabricator David Smith (St Ives) Ltd, said: “It is important to keep pressing on with your work on the KPIs as our industry needs to know how it is performing amongst itself and against other industries. Only then will fabricators realise that there are other values to maximise in addition to sales, in order that they achieve the best returns possible.”

    To find out more about KPIs or to participate in further studies, contact Phil Becker on 01494 569600 or e-mail pbecker@trada.co.uk.