From lagging indicators to leading indicators: design of a leading indicator dashboard for Philips Lighting

KPI (Key Performance Indicators) such as customer service level and stock level are commonly used in industry to measure the supply chain performance. Supply chain managers have a decided preference for these "lagging" indicators since they only measure the final outcomes that result from their initiatives. Although useful in many ways, these lagging indicators often do not provide enough information to guide future actions and ensure overall supply chain efficiency. By contrast, leading indicators can be used to monitor the effectiveness of supply chain management system and give advance warning of any developing weaknesses before problems appear. The nature of the relationship between lagging and leading indicators dictates that in order to be good at the first one you must initially excel at most of the second ones. The goal of this project is to design a leading indicator dashboard for Philips lighting and make the supply chain replenishment process more transparent and proactive. This report presents a conceptual design of leading indicators dashboard where the cause-and-effect relationship between leading indicators and lagging indicators is illustrated. Then several tools are developed to measure and analyze each leading indicator. Guidelines are provided for managers and operators to monitor and evaluate the stock replenishment performance on an ongoing basis and, if necessary, take corrective action. The leading indicator dashboard is implemented from different perspectives to satisfy the needs of different stakeholders. With leading indicators, everyone in the organization can see their scores and understand how their individual performance contributes to the overall performance of the organization. As more organizational leaders become familiar with leading indicators, there will be a growing trend towards using them to enhance transparency and accountability in value chain and supply chain.