I am working on an assignment in which we make an idea of a product. I put cut cost in financial perspective under return on capital. I would like to create KPI leading or lagging both
My KPi are:
percentage achieve in Cut Reduction
Time invested in analysis of product
1 answer
Hello Muhammad,
I was recently writing on the topic in KPI system article. You might want to read it and test your indicators using the checklist provided.
As for the lagging indicator for the “Cost reduction goal” the most obvious one is “$ saved” or “Time saved.” That’s the best way to show top managers that there was actual cost reduction.
As for the leading indicators, they depend a lot on your business context. In your case, what are the key success factors of the “Cost reductions?” The one that you mentioned (“Invest time in analysis of the product”) is a great starting point. There might be also something even more specific, normally manageable costs are produced near process bottlenecks, so you might want to find those bottlenecks first (see the Step 7 of the above mentioned KPI system).
