NOTE: This article was originally published on the DC Velocity Blog Logistics Problem Solving on June 2, 2017.
Every company has logistics problems. The most common problem that I hear companies want to solve is understanding how compliant they are with their own routing guide. This includes both outbound and inbound freight. The second most common problem is looking for ways to cut their freight cost.
Many companies will try to solve their logistics problems internally, but for a variety of reasons, they never quite get solved completely. Not surprisingly, the two most common problems that never quite get solved with internal resources, are the same as above.
If you are facing these problems within your company, it is time to find a consultant.
Stale, Incomplete Data Is a Problem in Problem Solving
What keeps shippers from solving these problems? Usually it’s the data. Many times, the shipper goes to their IT department to get the data they need to run an analysis to find out how compliant they are or to look for strategies to lower their spend. The data IT provides is typically stale and no longer relevant (months behind), or it has to be cleansed because a large portion of the data is not accurate, so it is removed. This always leaves the shipper with a partial view of their current reality which often mutes the extent of any opportunity to actually solve the problem.
If you find yourself working with data that is stale or incomplete, you can neither accurately diagnose or solve the problem. It’s time to find a consultant.
Consequences of Not Solving Problems
While there is a cost of bringing outside resources on board, the cost of not solving these problems or of solving the wrong problem can be significantly higher.
For example, a routing guide compliance problem could present itself as a carrier billing issue. Say a particular lane should have its freight hauled by carrier A, but instead, carrier B is used. When the freight invoice from carrier B is received, the shipper may have an exception in their payment process because they don’t have a rate for carrier B. Instead of solving the real problem—wrong carrier used to haul the freight—the shipper gets approval on the freight invoice to pay the carrier. This problem can cost a shipper an additional 5% to 10% in freight, which can equate to a few hundred thousand dollars, or even a few million dollars depending on the volume of freight moving down a particular lane.
Three Questions to Evaluate Logistics Software
This type of problem, and the inability to accurately diagnose or solve the real underlying problem, is typically caused by not having three things: 1) standardized data, 2) relevant data, and 3) insight. These are three things that a consultant should be able to provide.
Of course, a consultant is only as successful as the logistics software that is used. The most important questions to ask when evaluating a consultant’s software is how will their software provide these three things:
- Standardized data—how is the data going to be standardized and cleansed? The answer should be no data will be removed and any non-standard data will be fixed so as to ensure a complete picture.
- Relevant data—how close to real-time is the data going to be? The answer should be near real-time with data being presented within 24 hours. The sooner you see a problem, the easier it is to fix, and the greater the value.
- Insight—how actionable will the data be? The answer should be there will be alerts telling you in real-time when something is happening right now that needs attention, and analytics should tell you why it happened.
There is a fourth question that should be asked of the consultant. Are you going to talk the shipper out of doing anything? To this the answer should be, “No, the data will drive all the decisions.” There should be no need for a consultant to have to convince a shipper to do anything, because the data will reveal the solution. A consultant’s job is to help the shipper obtain standardized, relevant data and provide insight to interpret the data. As I wrote in my last blog, the consultant should be enhancing your ideas to take them from good to great, and the software should allow you to do this quickly and easily. This type of collaboration will allow you to improve outcomes and leverage your logistics as a competitive advantage.