Example on How to Build a SMART RACE High-Impact KPI

One of the important KPIs for any business is delivery performance. But “Delivery Performance” (DP) is only valuable if it's clearly defined and strategically aligned. Here's how to turn it into one of your most powerful KPIs.

✅ FIRST CLEARLY DEFINE YOUR KPI

Define the Scope

First, be crystal clear on what is included in your measurements:

·        Do you include ex works shipments?

·        Should internal stock transfers be measured too?

Define the “level” for calculating

·        Are sales order items the basis for measuring delivery performance or do you want to measure at the level of sales orders?

Define “On-Time” and do it precisely!

Ask:

·        Do you measure against the requested date or the confirmed date? Or is the date linked to the planning strategy of the product?

• For make-to-stock (MTS), it might make sense to use the requested date, whereas for make-to-order (MTO), the confirmed date could be used.

·        How are early deliveries treated: are they considered as perfectly on time or penalized?

• How do you handle backorders or split shipments?

• What is the policy for “week orders”?

Define “In-Full”

What qualifies as a complete delivery?

·        Will tolerances be used? And will they be scaled by the quantity size?

·        Does "in-full" include labeling, documentation, or packaging?

·        Are substitutions allowed?

·        Are overdeliveries penalized?

Align this with your planning strategy—just like you did with “on-time.” Must the requested quantity be used for MTS products and the confirmed quantity for MTO?

✅ THEN SPECIFY THE “SMART”

S – Specific: the goal should be clear and unambiguous.

• E.g.: “Our target is that 90% of our customer order items are delivered on-time and in-full” (according to the definitions specified earlier)

M – Measurable: the progress should be tracked with data.

• E.g.: “Our delivery performance will be tracked via our logistics dashboard”  

A – Achievable: the target should be realistic given capacity, resources, and constraints.

• E.g.: “Increasing our delivery performance from the actual 78% to 90% will require extra logistical resources in the warehouse and in transportation”

R – Relevant: the goal must align with business priorities

• E.g.: “Improving our delivey performance from 78% to 90% will lead to better customer retention, more customer loyalty and a better service quality strategy”

T – Time-bound: set a clear deadline or timeframe.

• E.g.: “Achieve 90% delivey performance by the start of Q3 2026”

✅ FINALLY MAKE IT “RACE” READY

R – Referencable: the KPI must be benchmarkable against our own internal history or against  industry standards.

• E.g.: “In our branch of the industry 88% is considered as the Olympic minimum. Therefore, we have set it to 90%”

A – Actionable: the KPI should lead to decisions or trigger improvement actions.

• E.g.: “If our delivery performance drops below 86%, weekly logistical review meetings will be held to identify the root causes and to take the required actions to bring to at least 88%”.

C – Consistent: the KPI must be measured the same way over time to ensure comparability, accuracy and reliability.

• E.g. In our company, the delivery performance KPI will be based on the sales related data contained in our SAP system. The SAP source data will be pulled in every night into Power BI via an automated process, so every day new delivery performance related data can be reported on without manual intervention to guarantee consistent reporting.

E – Easily explainable: the KPI should be clear to everyone — from warehouse staff to senior management.

• E.g. our delivery performance for make-to-stock materials indicates the percentage of sales order items that were delivered before or on the requested delivery date at our customer, with a delivered quantity of 95% or more of the quantity requested by our customer.