The aim of this research is to define (or set) organizational key performance indicators (KPIs) in the precision machine industry using the concept of core competence and the supply chain operations reference (SCOR) model. The research is conducted in three steps. In the first step, a benchmarking study is conducted to collect major items of core competence and to group them into main categories in order to form a foundation for the research. In the second step, a case company questionnaire and interviews are conducted to identify the key factors of core competence in the precision machine industry. The analysis is conducted based on four dimensions and hence several analysis rounds are completed. Questionnaire data is analyzed with grey relational analysis (GRA) and resulted in 5–6 key factors in each dimension or sub-dimension. Based on the conducted interviews, 13 of these identified key factors are separated into one organization objective, five key factors of core competence and seven key factors of core ability. In the final step, organizational KPIs are defined (or set) for the five identified key factors of core competence. The most competitive core abilities for each of the five key factors are established. After that, organizational KPIs are set based on the core abilities within 3 main categories of KPIs (departmental, office grade and hierarchal) for each key factor. The developed KPI system based on organizational objectives, core competences, and core abilities allow enterprises to handle dynamic market demand and business environments, as well as changes in overall corporate objectives.