If you want to achieve mediocre logistics performance do this…

I was on social media the other day and saw a post that talked about the right metrics for leading logistics performance. I wanted to scream. What I saw was the same thinking that has kept many logistics organizations from reaching their true potential. The post said the top metrics were basically logistics costs and on-time-in-full (OTIF). Achieving these metrics is what your CEO and customers expect. Meeting expectations is not the kind of review you want if you aspire to be a true logistics leader. That’s mediocre performance.

True logistics leaders are focused on leveraging their capabilities to change the customer experience to grow revenue and achieve competitive differentiation. For the last 3 years, we have been conducting a benchmark study on transportation management strategies, tactics and technology. The studies’ top performers are much more likely to measure their impact outside of basic logistics operations (see Figure 1).

Figure 1. 2017 – 2019 Transportation Management Benchmark Average for Metrics for Measuring Transportation Value

Source: Descartes

You can see in the chart that those companies who believe transportation management is a competitive weapon go beyond the “4 walls” of logistics measurement, cost and service. The companies that don’t care about transportation management value are 2.5 times less likely to measure the contribution to 2 of the top metrics for the CEO and investors: revenue growth and competitive differentiation.

If your business is struggling to run cost-effective logistics operations and consistently deliver to customers what has been promised, you need to fix it. But don’t stop there or wait until you are done to go after the things that logistics can do to truly transform companies. There are 3 important steps to take to get logistics into a transformational agenda:

1. Track and report the logistics activities that deliver more revenue or cause a win versus the competition. Make sure you capture the commercial metrics after you make changes to your logistics capabilities and systems even if they weren’t part of the planned benefits. You never know what benefits will arise and you don’t get credit if you can’t measure and promote it. For example, I saw one retailer implement a dynamic delivery booking system during the buying process. They saved £3 million in delivery costs (which was their objective), but also generated £10Ms in value-added service revenue as a result of the new capabilities. What do you think got the CEOs attention and where would traditional logistics metrics capture that?
2. Enlist the people who own the customer (e.g. sales) to identify ways that superior logistics capabilities can help them sell more and beat the competition. These are the folks that have the real power and help logistics make a measurable difference beyond the logistics organization. For logistics organizations not used to having influence beyond their own world, understand that there will be a lot of evangelizing until the customer-owners see the value.
3. Get creative. There are lots of ways logistics can add value. Focus on which ones make a difference to your customer. They can be physically- and information-related capabilities. For example, I have seen a building material company drive business by providing real-time delivery information to help improve the productivity of their contractor customers who are trying to optimize their crew utilization based upon the timing of their material deliveries. Another company leveraged their vendor score card on transportation performance to expand the product mix they were selling into a large grocery chain. A third used real time visibility to strengthen customer relationships and protect their margin. The opportunities are endless.

There has never been a time when logistics could play such an important part in the success of a company and there are certainly plenty of examples that prove it. Don’t let your vision for the value logistics can deliver be limited to traditional thinking and metrics. How is your company going beyond logistics metrics to capture the really value logistics can bring to the enterprise? Let me know.