By Gary Girotti, Vice President, Transportation Practice, Chainalytics LLC
Monday, October 26, 2009
A client once said to me, “We have no way to know if we are getting better or worse in transportation. All we know is if costs are going up or down.” No wonder. With fuel ranging between $45 and $147 per barrel, rates dropping 15% on some lanes, and the never-ending cycle of network and operational changes taking effect, these ever-changing transportation variables make it hard to evaluate cost improvements. No doubt transportation “performance” has historically been nebulous at best.
I was encouraged last month as I attended CSCMP. Several companies have implemented significant transportation business intelligence (Trans BI) approaches to measuring performance and are putting these new capabilities to good use. As one company dubbed it: accountability enabled by actionable reporting.
If you are wondering what the difference is between Trans BI and conventional metrics, you’re not alone. The most important thing to grasp is that the information is much more precisely and meaningfully displayed with a well-designed BI tool than in traditional reporting. With traditional reports, companies measure inbound transportation spend at a summary level. In many cases, a user will find no abnormities, and no reason for further monitoring. However, with Trans BI, companies can more precisely measure — like evaluating costs for each vendor’s inbound lane. In one example, a company used Trans BI to examine its inbound lanes, finding 3 lanes with costs much higher than targeted, lanes undetected by a summary report. In this case, the utilization opportunities resulted in over $849,000 savings, eliminating 31 trucks per week. I can tell you the users were ecstatic to say the least. For those of you wanting additional details on this example, I have included it in a presentation that I shared at the annual CSCMP conference in September.
In the spirit of fair and balanced reporting, a skeptic could argue that the same information could be made available with standard reporting, so why the additional Trans BI? It is partially true. You can get more precise information with regular reports, but the problem with regular reports is that they are far too unwieldy to manage and understand. Imagine reviewing this detailed information for hundreds or thousands of vendors — it simply cannot and certainly would not be done. With the use of Trans BI dashboard technology, one can browse through the views, progressively clicking into problem areas, and quickly find operational areas that require monitoring and correction.
What does this mean? As one client shared: this gives them “metrics as we go.” Isn’t that a wonderful image? Normal metrics, at best, explain why something happens, but are too slow or too high level to actually enable change. Trans BI quickly manages more precise information with alerts that enable a user to step in and make operational changes in a matter of days.
We are seeing many more opportunities, and you will see several listed in my CSCMP presentation. But I honestly think the strategic benefits you see in the presentation are more important than tangible. As a result, I will be re-writing my Best Practices template to include Trans BI. I think Trans BI is as important to sustaining best-in-class performance as benchmarking, regular procurement events, and TMS. What do you think? Please let me know at firstname.lastname@example.org.