Unlocking the power of data-driven decision making
While demand for transport and logistics services is at an all-time high, businesses looking to maintain profitability and achieve business growth must negotiate a complex cocktail of market risks. In an industry where margins are being squeezed, and many SMEs face tough competition from their larger counterparts, harnessing the power of data and technology is essential if firms are to make intelligent strategic decisions. Crucially, firms must realise that not all business is good business – identifying the most profitable opportunities and driving efficiencies within their fleet often holds the key to longevity and success.
Keep sight of KPIs
Business leaders should aim to collect and harness data, tracking a set of key performance indicators (KPIs) which span four business critical areas: Operations, sales and marketing, resource management and finance. There are a number of systems available that can improve business’ access to data, however, exploring the application of digital accounting software, telematics and customer relationship management (CRM) tools is a good place to start.
From an operational perspective, businesses should aim to gain sight of their own performance and delivery efficiency, as well as utilising live traffic information which can then be fed back to drivers, allowing them to circumvent traffic and avoid congestion. If certain clients are not receiving the highest standard of service, this issue can be addressed by a member of the customer care team and a solution (whether this be new route or delivery schedule) proposed to the client before it negatively affects the working relationship.
Although its use is on the rise, the gathering and analysis of telematics data can prove extremely useful in improving resource management. Knowing exactly how many vehicles are on the road, where, and the manner in which employees are driving (speed, fuel use, braking) allows businesses to calculate truck utilisation, load efficiency and driver safety.
Identify target clients
Industry margins are slim, so with this data in hand, businesses must now move to identify which customers have the potential to maximise profitability. This process should begin by asking one simple question - for my business, what does an ideal client look like?
An ideal client profile will most likely include information about the timing, location and nature of delivery activities. For example, a firm might calculate that a target customer would require collection from within 50 miles of the depot, involve the delivery of full loads, its products would be stackable, they would provide backloads for collection (so that freight is carried both ways), the delivery point would be within 200 miles and the sales value per route would be in excess of £50,000 per annum. A key factor to consider is which potential clients might require a wider range of services offered by the business; spanning haulage, warehousing and logistics and air and sea freight services.
As well as logistical qualities, other subjective characteristics should also be examined. The nature of the client relationship is key, so businesses should be sought that provide accurate information, communicate their needs well and have scope for future growth. In addition, credit checks should be completed, and preference given to customers who pay on time – failure to do so could dent cash flow and significantly impair financial performance.
Once the target client blueprint has been completed, businesses can then rank their current customer base using these pre-agreed criteria, and collate this information with current profitability levels. Profitable client relationships which offer scope for future growth should be nurtured, while those that are not turning a profit should be examined – either the delivery schedule or fee structure should be amended, or if this is not possible, a replacement customer sought. It is important that business leaders detach turnover and profit, seeking business opportunities on suitability rather than size.
Although market conditions within the transport and logistics industry remain challenging, businesses that use data to make key business decisions can take steps to increase profitability, efficiency and growth. By targeting clients that meet a defined set of practical and pragmatic criteria, firms can capitalise on an increased demand for their services and pave the way for a successful future.
Mark Perrin is head of transport and logistics at national accountancy firm of the year, Menzies LLP. The firm recently authored a comprehensive guide into how businesses can unlock the power of data,
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NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”