The Perfect Order – The Danger of Aggregate Metrics
What gets interesting – and I think a bit misleading – is when you aggregate these metrics to come up with a single perfect order index, the “POI”, by multiplying all the individual KPIs together. Some have argued that this makes sense, because looking at just individual KPIs could “lull you into a false sense of security.” Perhaps.
But looking at an aggregate index like POI can cover up specific issues in your supply chain performance. For one thing, the underlying factors could be shifting around significantly from month to month but with no overall change to the composite POI. You would have no sense if some metrics were trending better while some were simultaneously trending worse. What’s worse, you could be implicitly assuming that all of the component metrics carry equal weight, which is almost never true.
Bottom line: There’s just no getting away from looking at the individual metrics and their interactions to have a clue as to what is happening in your supply chain.