Aug. 28 2007 04:38 PM

What do FedEx, UPS, Netflix, Amazon, Google, Harrahs and the Oakland As have in common? According to Professor Tom Davenport, These companies have only two things in common: they compete on the basis of their analytical capabilities, and they are highly successful in their industries. I recently heard the professor and author of Competing on Analytics: The New Science of Winning speak at a conference for CFOs. The professor has found that analytics is a major reason that high performing organizations succeed. What are analytics, and how do they relate to your job in logistics? We will explore that in this column.


In a nutshell, analytics is information: Analytics is the extensive use of data, statistical and quantitative analysis, explanatory and predictive models and fact-based management to drive decisions and actions (Davenport 2007). Logistics has been defined as the art and science of managing and controlling the flow of goods and information. And in our small parcel industry, Fred Smith, the founder of FedEx, said in 1978, Information about the package is as important as the package itself. Really, it is our job, as professional logistics and shipping managers, to effectively manage information.


Unfortunately, overall, this is a problem. According to Adrian Gonzalez, director of the Logistics Executive Council at ARC Advisory Group, poor data quality [late, incomplete or inaccurate] is the Achilles heel of supply chain management. The path to improvement in managing your shipping operation is better use of your data. In many shipping organizations, the carrier knows more about the volume, services utilized, trends, accessorial charges and package characteristics than the client. Parcel contract consultants say that knowledge is power when it comes to negotiating. How does your knowledge measure up? What should you evaluate?


Analytics is really a subset of what we call business intelligence: technologies and processes that use data to understand your performance. This generally means being able to answer the five Ws: who, what, why, when and where. No matter what size your operation may be, you can use analytics to improve your parcel intelligence.


The easiest place to begin is your shipping system. Most shipping systems have standard reports that can tell you what happened. An example is a list of the total number of packages shipped by date as well as the total cost. One thing to be aware of is that the cost in the shipping system may not be what you actually pay the carrier because sometimes the carrier discounts are based on 52-week, rolling averages and vary from week to week. So it is important to reconcile the information from your shipping system with your carrier invoices. CFOs are becoming more interested in these numbers and the impact they have on financial performance, driven in part by the need to comply with the Sarbanes-Oxley Act. They want accuracy and visibility to transportation costs as theyre accrued.


Another source of information is your carriers. They can provide electronic invoices with package data that you can import to spreadsheets or databases so that you can perform analysis and ad hoc reports. These reports can tell you how often, how much and where something happened. An example of this type of report is a list of packages that were sent by air to Zone 2. This could be useful for assessing the savings that can be generated from shipping the same packages by ground (which could even get there faster). Other important data from these electronic invoices can tell you what you paid for address corrections, dimensional charges, residential surcharges and other accessorial charges, which could be useful in designing strategies to reduce these fees.


If you put your data into a database, you can perform queries and drill down the data to determine the specifics of a problem. You could get a report of the number of packages shipped by a
specific job number, carrier, packer, shipper, salesperson, account, customer, department or whatever else you need to isolate specific circumstances.


Once you have figured out the basics of data management, you can move to the next stage of utilizing that data on a proactive basis. For instance, you can easily set up alerts that send you an email when something happens or doesnt happen the way you expect. If, for example, an important package scheduled for next-day delivery is delayed, you can know before the customer does and manage the situation proactively. You can set up alerts to inform you if your operational standards are violated, so you can see that an individual has shipped with Early AM service and know before you receive the monthly report two or three weeks later. Alerts can help you take corrective action faster.


In this second stage of analytic development, you can also conduct exception reporting and know when carriers have not delivered packages at their guaranteed time. You can begin to see trends where they have problems delivering to certain routes. Another important activity is auditing your invoices to make sure that you are being billed correctly, your discounts are what you negotiated and you are not paying for packages that were shipped but not delivered or not shipped with one of your account numbers. Auditing can save anywhere from two to five percent of your total bill by catching inaccurate charges or duplicate payments.


If all of this seems too difficult or time-consuming, there are a number of consulting companies where you can outsource this function. Some of them offer web-based dashboards that can be customized to provide you with the information you need to manage your operation.


Remember, the ultimate objective of business intelligence and analytics is to accurately forecast and model your parcel operation. The capacity to know what will happen next and to optimize your operations for the best results can significantly lower your costs and increase your profitability. The manager that can effectively utilize analytics can make better, faster decisions. This will ultimately help you succeed and outperform your competition. And, after all, isnt that the ultimate goal of any logistics professional?


Mark Taylor, MBA, DLP, is the President of TAYLOR Systems Engineering Corporation and the Chief Logistics Officer of RedRoller, Inc. He has been featured as an industry expert on ABC News and in the New York Times and is the author of Computerized Shipping Systems: Increasing Profit & Productivity Through Technology. Taylor has been named a Distinguished Logistics Professional (DLP) by the American Society of Transportation & Logistics in recognition of the contributions he has made to the field of logistics during his 30 year career. Mark is also a frequent speaker at the annual PARCEL Forum. He can be reached via email at