Sept. 16 2013 09:55 AM

Your operational, administrative, and technical requirements should be driven by, and a reflection of, the identified mission and KPIs of the transportation function. The importance of considering these requirements cannot be overstated. This is where many shippers drop the ball. Cost reduction/containment can become such an overwhelming consideration that other requirements are overlooked. Transit times are the classic example. Stakeholders may love the prospect of a 20% reduction in transportation cost that stems from a service level optimization (SLO) project. But how pleased do you think they will be if the resulting increased transit times result in lost sales, increased customer service calls, increased returns, and lower overall customer satisfaction. This is not to say that cost reduction projects in general, or SLO projects in particular are not valuable. I have seen SLO projects result in savings in the mid-to-high 20% range with little appreciable impact on customer satisfaction. The key is to understand the variables, and build your requirements around them. If you are in an industry where transit times are not highly valued, your sensitivity is lower. In these cases your requirements should be structured such that cost is weighted higher than transit time in the decision making process. Conversely, in the e-commerce world transit times are a key factor in customer satisfaction. In these cases SLO projects can still add value, but typically they must be structured in such a way that service levels are optimized with no negative impact on transit times.

Service level optimization projects are only one example of where requirements are overlooked. When considering any initiative, start at the start; define the requirements. The question shouldn’t be who can move these packages/shipments at the lowest cost, but rather who can meet or exceed my requirements consistently at the lowest cost. Don’t follow the example of many and become so myopic that you consider only the cost side of the equation. It’s the value, the bottom line if you will, that must be considered.

To hear more on this and other topics, visit us at the Parcel Forum presentation, “Building a Best-in-Class B2C Transportation Program”.

Joe Wilkinson is Director of Transportation at enVista, a leading supply chain consulting and IT services firm, delivering innovative solutions that improve profitability, enhance customer service and reduce waste from source to consumption. For more information, visit www.envistacorp.com, or contact Joe directly at jwilkinson@envistacorp.com or 724-457-1869.
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