Key Performance Indicators (KPIs) tell us where we succeeded. However, it is Key Conformance Indicators (KCIs) that determine whether success is repeatable.
Let’s talk about something everyone can relate to—chocolate chip cookies.
I love my mother’s cookies. They’ve been a family staple for years, and in my (entirely unbiased) opinion, they’re perfect. They look beautiful and taste even better. But that perfection isn’t by chance. She’s spent years fine-tuning her recipe. She measures every ingredient precisely, chills the dough (an uncommon process) just the right amount of time, and uses a specific scooper so each cookie is round and thick for the perfect balance of crispy outside and chewy inside.
The other day, after a family meal, she baked a batch. When they came out of the oven, I knew something was different. They looked a little off. I took a bite, and the taste was off as well. I asked what happened. She smiled and said she’d “tweaked the recipe.” Honestly? I preferred the original.
Delicious cookies are the performance metric—the KPI. The recipe and each precise step are the KCIs that shape the final outcome.
KCIs don’t measure results. They measure whether critical decisions and process steps were executed as designed.
We can only achieve the perfect chocolate chip cookie, or the perfect business result, when we perfect the steps that lead to it, and follow them consistently.
Limitations of key performance indicators
KPIs reveal whether the business is operating as the well-oiled machine we expect. In supply chain management, KPIs generally fall into five categories: service, inventory, productivity, cost, and quality. Within those buckets, the specific measures vary by industry, company, and even by the people interpreting them.
Yet all KPIs share one fundamental trait: they reflect the compounded outcome of countless decisions made over time.
Some of those decisions are made directly by people; others are made indirectly through systems and automation that people design and oversee. Human decision-making is inherently imperfect—shaped by bias, inconsistency, and incomplete information.
Those imperfections ripple through processes and accumulate over time. One decision triggers an outcome, that outcome creates new conditions, and another decision follows. The cycle continues, compounding with every turn.
Let’s take an example—On-Time In-Full (OTIF). At its core, OTIF measures the percentage of orders delivered to customers on schedule and in the full quantity expected. It sounds simple, but achieving it requires a long chain of things to go right.
Some time before that order ever shipped, a forecast was created—predicting demand for a specific product, in a certain quantity, at a particular point in time. Raw materials had to arrive on schedule. Production had to be completed per the schedule. Finished goods had to be stored and ready, waiting to be picked, packed, and shipped the moment the customer order arrived.
There are many steps to make the perfect order—complexity that goes far deeper than the simplified “On–Time In–Full” KPI.
Where KPIs end and KCIs begin
KPIs measure outcomes, and while outcomes matter, KPIs are imperfect tools for driving meaningful change. They tell us what happened, not why. More importantly, they are rarely directly actionable.
You cannot simply say “let’s increase service” or “reduce inventory” and expect it to happen. Beneath every KPI are countless decisions, dependencies, and sources of variation.
To improve a KPI, you must change the underlying processes and the decisions within them. These serve as the levers that ultimately shape performance.
That is why process standardization and monitoring are so important. Defined process steps provide structure with consistent, repeatable actions that lead to predictable outcomes. Only when a process is predictable can it be used as a lever to influence KPIs.
Measuring process conformance shows what is actually happening and what needs to change to produce a different outcome, as reflected in the KPI.
This is where Key Conformance Indicators (KCIs) come in. KCIs measure how closely a process follows its standard. The goal is simple but powerful: to ensure that expectations align with reality.
In short, are we actually doing what we said we would do?
It sounds simple, but in practice it is often surprising how much leakage exists within a process.
How a single KCI changed everything
I worked with an industrial manufacturing organization that was struggling with both service and inventory performance. The company operated more than a dozen manufacturing facilities, and one in particular stood out for its poor results, with only about 60 percent of orders delivered on time to the customer commitment date.
The inventory situation was equally problematic. The plant never seemed to have enough of the products customers actually needed, yet it was overflowing with inventory for products that were not in demand.
The central supply chain organization was responsible for overall service and inventory performance and reported monthly to the executive leadership team. That structure made sense since the supply planning team, which sat centrally, was responsible for telling each plant what to make, when to make it, and in what quantity. They had the big-picture view.
Despite their best efforts, service and inventory KPIs remained far below target. No matter how much the planners refined the plan, the results never improved. Something was clearly off.
After digging into the data, the team identified and formalized a new Key Conformance Indicator: Supply Plan Adherence.
Here is how the process worked. Each week, the supply planning team generated a plan that aligned customer demand with production constraints. That plan was then sent to the plant to guide what should be produced, when, and in what quantity.
But that is where things broke down. Although the plant knew what it was supposed to make, it often chose not to follow the plan. Instead, plant leaders made independent decisions about what to produce based on their own performance metrics, specifically absorption targets. To meet those targets, they prioritized fast-moving, high-volume products that kept lines running, rather than producing what was actually needed.
The result was predictable: poor service and imbalanced inventory.
By introducing the Supply Plan Adherence KCI, the organization finally had visibility into whether the process was being followed. It was not. That insight gave them an actionable takeaway: align the process before trying to improve the plan. Once the process became predictable, they could fine-tune it further, such as prioritizing key customers or product groups.
Aligning the planning model with the real world
Let’s be honest: all planning models are approximations of the real world. They rely on input parameters that define the boundaries of what the output will be. These inputs are essential for creating a plan that is both feasible and achievable when implemented. But if the inputs are wrong, the resulting plan can quickly become useless.
Consider a few examples. If capacity is overstated, the organization will constantly fall behind the plan. If lead time between points A and B takes longer than expected, the result will be frequent delays and firefighting. If process yield assumptions don’t match reality, the business will systematically over- or under-produce, leading to excess or insufficient inventory.
Every planning model is built on assumptions, and those assumptions can and should be informed by strong analysis.
E2open developed its Supply Sensing with this principle in mind, using Key Conformance Indicators as a foundation. Supply Sensing monitors processes over time and projects expectations into the future. It identifies and alerts users to specific model inputs that need to be corrected in order to plan accurately. At scale, this allows teams to focus on the few deviations that actually change outcomes.
Using Supply Sensing to monitor KCIs ensures that the model reflects reality and that outputs are achievable.
Conformance is the starting point for better performance
Every business strives to improve KPIs: higher service, lower inventory, lower cost. But improvement does not begin with the metric; it begins with the process that must be measured, managed, and refined. KCIs turn intentions into actions and actions into results. When we focus on conformance first, performance follows naturally.
The question is: Are we following the right steps, and are we performing them as intended?
If you’re looking to improve performance by strengthening conformance, we’re here to help. Contact us to learn how e2open can help you measure what matters, close process gaps, and build a more predictable, resilient supply chain.
