What Does Great Look Like in Logistics?

When I was a kid growing up in Brooklyn, the mayor at the time, Ed Koch, was famous for always asking “How’m I doin’?” That’s a question that supply chain and logistics professionals ask all the time too. But understanding how you’re doing and how your performance compares to others in the industry has historically been a challenge. How can shippers answer that question today? What factors and capabilities are important? Those are some of the key questions I discussed with Bill Madden, VP of Logistics-as-a-Service at BluJay Solutions, during a recent episode of Talking Logistics.

Understanding and acting on the right data

In a 2019 Talking Logistics episode with Stephen Husk of BluJay Solutions, we discussed the importance of context in analyzing data. Thus, I began my discussion with Bill by asking him to elaborate on why data context is critical.

Bill summarizes the key aspects as: finding and understanding the right metrics for your business; using those metrics within the context of what’s happening in the market; and converting that intelligence into action and results.

Bill shared an example of his experience in the construction industry in the mid-2000s. As opportunities slowed, he lowered his prices to encourage more business, but it didn’t really help. He learned that other builders were also lowering their prices, sometimes even more than him, but they were also experiencing a slowdown in activity. “I realized for the first time that there are influences in the market that I didn’t have control over,” said Bill. The same applies in logistics and transportation. Putting your own logistics data within the context of what is happening in the broader market is equally important.

Comparing rates

I asked Bill how data context applies when comparing transportation rates. Bill notes that it’s important to benchmark the rates you have with those prevalent in the market to get context on how well you are doing. “It enables you to differentiate the actions you are taking within your business from the external influences,” says Bill.

“For example, when analyzing rates on a particular lane, you may find your rates dropped 8% from the previous year. But if the broader market saw rates drop by 10%, that tells you that your rate performance is not as strong as you believed. So, it’s important to differentiate the actions you’re taking from the influences of the market. Those that can articulate market impacts in an effective way and share that with business stakeholders are better able to explain the benefits of their continuous improvement programs as the market inevitably changes.”

Beyond rates

While the industry tends to fixate in rates, there are a number of other metrics that define performance. Bill states that in addition to rates, shippers should have service benchmarks on their performance dashboard such as on-time performance, compliance with routing guides, and the percentage of your loads falling to the spot market.

Bill shared an example of a client who had increased their primary carrier tender acceptance rate from 71% to 84% over the past eighteen months. The customer thought this was great, especially since their goal was to reach 80%. However, their perception of great changed when Bill showed them that eighteen months ago a 71% tender acceptance rate put them in the third quartile of performance (just a few points away from second quartile). But today the third quartile of performance had increased to a 92% acceptance rate. Therefore, although their internal data showed they had improved, they had actually fallen into the fourth quartile compared to what was happening in the industry. “So context is everything here.”

Bill also points out that changing the variables in one area ultimately impacts other areas. He shared an example of a company whose management wanted a 7% improvement in on-time delivery. By doing a multivariable analysis, they were able to demonstrate that a 5% increase was doable at an acceptable cost, but getting to 7% would require much greater cost. Management agreed and were very pleased when the revised goal was met at less than projected cost.

What does great look like?

First of all, Bill says what great looks like today will be different than what it looked like in the past or will look like in the future. Bill says besides understanding the context behind the metrics, leaders will also understand the operational drivers that impact the metrics. He provided a number of examples of how companies can get to great, so I encourage you to watch the full episode for all of his insights and advice. Then keep the conversation going by posting a comment and sharing your own perspective and experiences.