Why the Wrong KPIs Quietly Derail Supply Chain Transformations in China
"Not everything that can be counted counts, and not everything that counts can be counted”
Perspectives
Improvement initiatives rarely fail during crafting of a supply chain transformation strategy. Instead, they fail because organizations do not execute consistently enough, long enough, and with the right success markers to see those strategies play out.
Based on our analysis of dozens of improvement initiatives across mid-market and enterprise companies with operations in China, we have highlighted a variety of pitfalls from lack of vision to infrequent feedback loops which frequently derail the supply chain transformation process. Here, we examine the risks associated with selecting the wrong KPI’s and how executives need to look beneath the surface to truly measure a transformations’ impact.
Moving Beyond 'Dashboard Decorations': Selecting Outcome-Driven Supply Chain KPIs
Imagine you’re preparing to go on a cross-country trip to a destination you have never visited before. You plot your route, fill your car with gas, and identify areas where you will stop.
Now surely you wouldn’t embark on this journey if your speedometer, GPS, and fuel gauge were not working properly, yet many organizations similarly doom their transformation efforts before they often even start by selecting KPIs which do not accurately reflect changing business conditions. Or worse yet, combine these faulty KPIs with unrealistic expectations disconnected from operational reality.
When companies use improper KPIs or stretch goals that feel more like Hail Mary goals, executives are setting their organizations up for failure and disappointment. In any learning process, of which many transformations are themselves learning processes on an individual and organizational level, there is an optimal failure rate.
If a goal is too easy, it fails to retain engagement. Too challenging, you risk disenfranchisement. In both scenarios, success is at risk.
One such example of selecting an incorrect metric was seen when our firm was asked to audit dozens of suppliers as part of a private equity backed supply chain transformation in China. The project’s goal on the surface was to evaluate supplier quality capabilities using client-specific audit criteria, improve supplier scores above a minimum threshold, and use supplier scorecards to monitor quality performance.
However, after analyzing historical quality data, we found zero correlation between a supplier’s audit score and historical quality performance. Instead the greatest correlation with quality performance was actually with a supplier’s perceived strategic value within our client’s supply chain.
It ultimately came down to whether a supplier wanted to consistently provide high quality performance more so, than their ability to meet those performance benchmarks.
It came down to whether a supplier wanted to consistently provide high quality performance more so, than their ability to meet those performance benchmarks.
Once this dynamic became clear, we were able to shift to understanding the Voice of Supplier, which then exposed communication and alignment gaps between our client and their manufacturers. It was only then in closing these gaps that we were able to drive a nearly 50% reduction in quality defects, which were largely independent from a supplier’s audit score.
The point is that business executives need to look beneath the surface to drive real change. Had we merely focused on improving supplier audit scores, our client most likely would not have seen improved quality performance, because audit scores were ironically not a valid metric to gauge quality performance in this case.
At the end of the day, true improvement initiatives aren’t window-dressing, they need to fundamentally address the core business issues at hand. If looking to improve quality performance, tracking CAPA completion time may be more impactful than quality management system audit scores or using prototype success rates instead of new product development time to market.
Executives need to get into the weeds to identify real markers of success. Even after metrics are selected, leaders should run a quick sensitivity analysis to confirm that a meaningful change in the metric translates into improved business performance and not false signals.
Ultimately, not all KPIs reflect improvement. Some simply measure activity, not outcomes.
How leaders avoid this failure:
If the KPI doesn’t change business results, it’s not a KPI—it’s a dashboard decoration.
Run a quick sensitivity test: If this metric moves 10%, does business performance materially change?
Closing Thought
Selecting the right KPIs is not an academic exercise, it is a leadership decision that directly shapes behavior, momentum, and outcomes. In complex supply chain environments like China, where performance drivers are often opaque and misaligned, surface-level metrics can quietly undermine even well-intentioned transformation efforts.
For organizations reassessing stalled initiatives or preparing to launch new improvement programs, The ABC Group partners with mid-market and enterprise companies to identify outcome-driven metrics, align execution with operational reality, and drive measurable supply chain performance improvements in China and Southeast Asia without adding headcount or capex.