Data is pouring out of your logistics operation — it’s time to use it
The following is part one of a two-part post detailing the key ways data can be used to improve any logistics operation.
Logistics is a ‘data-rich’ function. Each shipment contains valuable and actionable information that companies can use to reduce their shipping costs and improve the service they provide to customers. The problem is few companies are using this potential to their advantage.
The reasons for it may vary, but clearly there is a large missed opportunity for companies. With all the talk about big data, it’s hard to image any logistics professional unaware of the value of data and data-related tools like KPIs and dashboards. So why are most companies failing to use the data they already have?
Realistically, this failure is likely a lack of tools or simply not knowing where to start. Getting company buy-in to invest in the time and technology that can enable a logistics operation to use its data is not easy. Neither is finding internal employees with the skillset to make good sense of it.
But, the point can’t be lost that there is real value in the data from every logistics operation. To help you get started, here are three ways any company can use the data it already has to improve how the entire company, not just shipping, functions. Each will likely also open doors to additional opportunities that may not be obvious initially.
- Improved Profitability
Every shipment comes with a cost, of course. But shipping and supply chain expenses are often what make or break a company’s profitability. Metrics of the cost to service customers provide valuable insight in many ways. Obtaining this insight starts with identifying what’s important to measure, and then setting benchmarks. It’s this baseline that enables the impact of data-driven changes to be understood and improved upon.
This type of cost management is especially complex in the ecommerce space, where customers often expect fast, free (or at least VERY low cost) shipping on orders. This forces companies to use shipping cost as a loss-leader a lot of the time. But, just because a company knows it’ll lose money on shipping does not mean costs don’t matter. On the contrary. When money is lost on every shipment, understanding margins becomes even more important.
As another example, measuring freight cost as a percentage of sales is a way to identify potential low-margin or money-losing customers. Shipping costs are always dependent on a lot of variables, like distance and weight, but these are more easily quantified and predictable. There are other customer-specific costs that are often not tracked or understood, like accessorials or additional handling. These are things often not considered on an individual customer basis but go al ong way in determining profitability of customers – or those that have a negative margin.
Data can be used to support strategic business decisions, like comparing different shipping scenarios. Optimizing the location of suppliers, as well as manufacturing and distribution points, has a big impact on shipping costs. Shipping history data can be used to analyze the impact on logistics costs of changing suppliers. Or, the potential benefits of adding an additional fulfillment warehouse to ship customer orders from.
Looking closely at cost data enables a company to develop several other important insights. In part two of this post, we’ll explore two additional ways companies can use data from their logistics operations to improve their entire operation.