Logistics operations are complex and the parameters are difficult to measure. Challenges include collecting error-free information from routine processes and reconciling financial entries related to logistics. The choices an organization makes in reporting logistics costs under various overheads only add to the difficulty. Tracking and measuring costs allocated between the company and its suppliers when it comes to inbound and outbound logistics is another gray area.
Complexity also lies in the design and layout of the logistics operation. One Fortune 500 healthcare services company manufactures a variety of medical products and provides them to more than 40,000 locations each day; nearly a third of all products used in hospitals and surgery centers flow through its logistics facilities. The company manages one of the largest private fleets in the world to deliver it all. Yet despite its reach and experience, it found itself struggling with low shipment consolidation and high transportation costs. It lacked an effective means to maximize loads going to all those locations, wasting truck capacity and driving up fuel and other costs.
Fortunately, none of these challenges and uncertainties negates the maxim: "Whatever is monitored can be measured and whatever is measured can be improved." Any method a company engages to track and measure the logistics function can reveal areas for improvement, but in order to really tame the supply chain, businesses must focus on reducing these and other complexities arising within the network. Some are turning to detailed analytics frameworks, hiring consultants, or attempting technology solutions, but these alone cannot manage the problem. It takes a more holistic approach to understand and manage logistics and associated costs. A combination of analytics that extract data from deep in the network to determine where gaps and complexities lie; better technologies that provide real-time, actionable insight; and smarter processes that manage end-to-end workflow and governance—all at lower cost—would be the magic formula.
While metrics are instrumental to performance monitoring, too much data—or the wrong kind—might only get in the way. Logistics managers therefore need to determine what, specifically, to monitor and how to improve it.