5 steps to leveraging transportation data as an efficiency driver in your supply chain.
Updated: Sep 2, 2019
By Mark Marvin
1. Start with historical data.
When comparing all costs associated with supply chain operations, the Journal of Logistics Management identified transportation as the largest cost in a normalized supply chain (2016). With transportation representing 29.4% of the cost, it’s uniquely positioned to be a focal point for efficiency and optimization.
Historical analysis can be conducted by services in use, spend by service type, carrier utilization vs. commitment, contractual rate compliance, etc. By conducting the foundational work using historical data, you’re creating a baseline from which optimization can be made and measured.
2. Create data driven use cases.
Use cases should represent ongoing opportunities to assist in cost control. When creating these use cases, make sure they are focused not only around cost avoidance but empowering timely decisions-making to enable cost savings.
You may look at contracted rate compliance by identifying all occasions of non-compliance where a carrier over or under charges on a lane. Or, you may identify occasions where a contracted carrier does not meet their capacity, forcing the use of secondary carriers at higher rates. Each of these use cases, backed by the historical data previously gathered, hone the team’s focus on solving a particular problem.
3. Use data visualization to your advantage.
Once data-driven use cases are developed, data visualization should be used to communicate project statuses and enhance collaboration. When multiple members of the team are able to interact with the data in a way that is intuitive and actionable, the odds of implementing sustainable change increase tremendously. Whether you are using static dashboards or something more advanced like the Tada platform, users can get a real-time, connected view of their operational KPIs and the impact of initiatives when compared to historical data.
4. Conduct a thorough gap analysis.
Start with the Voice of the Customer (VOC). This should include outlining all Critical Customer Requirements (CCRs) and the interrogation of all data associated with the CCRs. If all CCRs are being met, no gap exists.
After you’ve conduct a proper VOC, establish the Voice of the Business (VOB). This process should determine at what cost to the business are all CCRs being met. To determine if the cost of the business is in control and product margin is being realized, you’ll need to identify the critical success factors required to meet your business plan. Interrogation of the critical success factors identifies the three following gaps in order of magnitude:
Outbound transportation cost is 7% higher than expected
Outbound expedite cost is 10% higher than expected
Inbound transportation is 3% higher than expected
5. Implement your findings and establish a service contract.
With the gaps impacting the business identified, it’s time to move to solution. Each gap is stratified, analyzed, and a root cause is identified. Create a plan of action to aid the business in recapturing margin and eliminate all cost drivers. With an agreed upon a solution and detailed implementation plan, you are ready to establish an equitable service contract.