Data-driven logistics: more data than you can stomach?

Logistics is one of the engines of the Dutch economy. Whether it's large-scale handling and storage in the Port of Rotterdam, or the super-fast delivery of a package from your favorite webshop: without logistics processes, the enormous flow of goods moving through our country would be impossible to control. Alongside that flow of goods, however, there's also an (even much larger) flow of data coming from those logistics processes. But how do you use that data to improve your logistics process? In this blog, Data Strategy Leader Louis de Roo explains it to you.

Logistics isn't difficult: you get a product from A to B with as few intermediate steps as possible. Simple — or is it? Doing logistics well, and being successful at it, is a lot harder. Data comes out of every logistics process, and all that data gives us information we can use to optimize our processes. Every bottleneck in the process produces measurements, which we use to facilitate decisions: our KPIs. But with even a modest logistics process, you're quickly looking at dozens, if not hundreds, of KPIs.

Anyone who has to focus on that many figures at once isn't really focusing at all, of course. You can try to keep track of all those numbers, but how do you decide which figures to steer by?

Customer promise

First of all, it's important to know where you as a company want to stand out: are you the fastest? The cheapest? The most reliable? That customer promise is the basis of your data strategy. In your data strategy, you establish which data is important to know whether you're still delivering on your customer promise, and which data you need to be successful at it. By having the right data available, your company can make better decisions about the steps you need to take to reach your goal.

Other data

But what about all that other data? Because standing out is wonderful, but ultimately there are endless numbers of processes that can disrupt things if we ignore them. They may relate a bit less to what makes your company special to the customer, but they do genuinely contribute to good business operations — and enable us to keep delivering for the customer. This is exactly where that enormous amount of data is an advantage: most of those processes produce good, usable data, and in many cases the decision in your process is a simple choice from a handful of options that you can easily turn into a logical — data-driven — decision. Reorder points, batch sizes, delivery quantities, lead times: the logistics puzzle is made up of a great many pieces. The trick is mainly to know how those pieces fit together. Once you know that, with a small technical step you automate many of the decisions in your process so you no longer have to worry about them.

KPIs

Once all those — relatively simple — logical decisions no longer demand your attention, you have time to look at the matters where more complex decisions are needed. Here, your data helps you make the right choice, but that choice can't be made based on predefined parameters. It's therefore important to steer by the right KPIs. By looking at KPIs that tell you where the exceptions in your process occur, rather than reporting your achieved results, you can improve and optimize your process every time. And by knowing how your KPIs contribute to fulfilling the customer promise, you also make sure your company stays relevant to your customers.

Which KPIs those are depends on your business processes and how they're set up. And on what you as a logistics organization specialize in. If you're "the fastest," your attention should be on the KPIs that help you prevent delays, and the fill rate of your transport might be slightly less important. If you're "the cheapest," you make sure the factors that influence price get plenty of attention.

The right KPIs help you focus on the data you need to make the difference for your customer. And focus also means choosing what to pay less attention to. By keeping your KPIs clearly in view and letting the other decisions happen automatically — data-driven — you avoid neglecting the other matters. And you get from A to B with as few intermediate steps as possible. Simple!

Written by Louis de Roo
Data Strategy Leader
E-mergo