“How’m I doing?”
Ed Koch, the mayor of New York when I was a kid, would walk around the city asking that question to people on the street. It was his way of getting a pulse from voters on how good a job he was doing as mayor.
Supply chain and logistics executives ask this same question too, but instead of walking the halls and asking everyone in their cubicles, most of them turn to business intelligence (BI) dashboards for the answer.
This is particularly true in transportation management. According to an annual survey of leading TMS vendors conducted by ARC, Business Intelligence/Analytics is the highest ranked functionality customers are requesting.
There are various factors driving this demand for BI, including:
- Companies want more granular visibility to their transportation spend so that they can manage and control it more effectively.
- Companies want to identify negative trends in costs and performance—and identify root causes—as early as possible to take corrective action.
- Companies want to conduct “what if” analyses to evaluate the service and cost trade-offs of different transportation strategies and tactics, such as using different modes or utilizing pool points and cross-docks.
Simply put, the trend is to embed business intelligence within transportation management systems and other execution applications—to bring BI to the frontlines!
TMS vendors have made great strides over the past few years in enhancing their solutions with BI capabilities. Performance dashboards are fairly standard in most leading TMS solutions today. Compared to table format reports, these dashboards make it easier for users to identify trends and exceptions, and to analyze specific components of their transportation operations in a more intuitive manner.
However, there is a missing link to these BI dashboards. While they allow companies to compare their current performance against what they accomplished last year, as well as what they planned/budgeted to achieve this year, they generally don’t provide companies with any insight on how their performance compares against industry peers or the broader market.
There are various ways companies can obtain transportation benchmark information, such as participating in benchmarking services, accessing index data from third parties, or conducting their own market research. While all of these approaches provide valuable insights, they fall short because the data typically only represents a snapshot in time (often a quarter or more in the past) and it is standalone—i.e., not embedded within the TMS, which limits the ability for users to leverage it in a streamlined and ongoing fashion.
However, I believe 3PLs and software-as-a-service TMS providers are in the best position to provide this missing link. Over the past few months, I’ve had the opportunity to discuss this topic with several clients that are active in this area, including CH Robinson, LeanLogistics, and Transplace, as well as some transportation executives. Here are some of my key takeaways:
- 3PLs and SaaS TMS providers have a built-in network of shippers, carriers, and other trading partners that execute millions of transportation transactions annually through their operating platforms. Therefore, they can use all of this network data—such as rates, carrier performance, and transit times—to develop a “transportation index” that gives companies visibility to market-level trends. And more importantly, they can embed this index information within their TMS application and BI dashboard. For example, this is what LeanLogistics has done with its “LeanDex Transportation Index,” and CH Robinson and Transplace are exploring ways to leverage their network data and TMS business intelligence dashboards in a similar way.
- Coupling quantitative benchmark data with qualitative, process-oriented benchmarking is important. Transplace, for example, has made enhancements to its BI capabilities in recent years, as we highlighted in “A New Business Intelligence Solution…from a 3PL!”. Last year, the company also introduced a very structured and detailed benchmarking methodology facilitated by a third-party firm. The process includes forming a steering committee of executives from client companies; having clients answer a comprehensive set of questions to evaluate and compare performance metrics, best practices, processes, technologies, training and organizational structures; and after the analysis is complete, providing each customer with a custom “gap” report and tailored interactive on-site workshop that include peer comparisons, metrics benchmarking, and best practice comparisons. CH Robinson also works with third party firms to augment its BI capabilities with quantitative and qualitative benchmarking information.
- No benchmark data is 100 percent accurate or a perfect representation of the market. And understanding how an index is calculated—the algorithms used, the scope and quality of the input data, the assumptions made, and so on—is also important.
- Companies definitely want to know how their performance compares against peers and the broader market. But there are also concerns and challenges associated with how to collect the information and make it relevant to everybody, as well as how to use it effectively, both internally and with carriers.
We are still in the early stages of this trend, and a lot more learning and experimentation by all parties needs to occur. But if you want a more complete and insightful answer to “How’m I doing?” in managing transportation, you’re soon going to get it. And this reminds me of that famous exchange between Tom Cruise and Jack Nicholson in the movie “A Few Good Men”:
JN: You want answers?
TC: I think I’m entitled to them!
JN: You want answers?!
TC: I want the truth!
JN: You can’t handle the truth!
As Ed Koch learned on many street corners in the city, if you ask the question, you’d better be ready for the answer.