Business Intelligence for Logistics
Logistics is an important activity for economic development. Organizations offering Logistics services are facing cut throat competition. Increasing competitiveness in the market has led to wafer thin margins affecting the Bottom-line growth of the organization. The increasing number of players is one of the major reasons which can attribute to this situation. These organizations are leaving no stone unturned to cut costs and boost efficiencies. They have bought in huge automation in their operations ranging from ERP systems to TMS systems. These new systems have given breathing time to these organizations for improvement, but provide less scope in exercising perfect monitoring and control. Business Intelligence is proving be an exciting for exercising perfect monitoring and control over the organizations value adding activities. This is a paradigm shift in the way organizations sense and respond to change in the market.
In today’s global scenario supply chain and logistics have proven to more business sense than just being mere buzzwords. In a Supply Chain, Transportation is an important link connecting its various entities. Logistics which is a subset of a Supply Chain depends heavily on Transportation for achieving completeness in its execution. Transportation plays an important in managing inventory levels. Although manufacturers adopt the Total Cost of Ownership model for managing their logistic costs, Transportation still plays an important role in determining the number of facilities and their corresponding inventory levels for the SKUs associated. Transportation has always been a preferred activity to be outsourced for most organizations due to its asset intensiveness and its different nature of operations. Manufacturers are dependent on 3PL in some way or the other for their Transportation needs. Most 3PL have matured from being just basic transportation service providers to providers of other value added services like pickups, storage, packing etc. Therefore there are different types of 3PL depending on the type of services they offer. 3PL (Third Party Logistics) providers are basically Transportation Service Provider (TSP) but have matured to provide other value added services often covering the entire logistic need of an organization. So a 3PL is categorized and differentiated based on its service offering apart from its basic transportation service offering.
Over the last few decades the role of logistics management has undergone a paradigm shift. It is widely recognized as an extremely important aspect of the overall business strategy. At the same time, a number of factors have increased the complexity of logistics management. This has led many companies to outsource their logistics activities to Third Party Logistics (3PL) providers. Today, 3PLs play a critical role in the supply chains of their customers. They are increasingly viewed as strategic partners who can play a pivotal role in optimizing the supply chain and thereby providing sustained competitive advantage.
To effectively manage the supply chains of their customers, 3PLs need to constantly analyze data collected from various sources and convert it into actionable information. Business Intelligence (BI) tools like data warehousing and OLAP can significantly help 3PLs in achieving this objective. By providing a unified view of the entire supply chain, these tools can help improve the functioning of basic 3PL services like transportation management, warehousing, and inventory management. 3PLs can leverage BI tools to provide their clients with information specific to their supply chain, thereby increasing their market responsiveness. BI tools can also help 3PLs improve their own internal organizational functions like human resources and financial management.
Business Intelligence - a must for 3PL
The 3PL industry is in a state of transition. Players are adding more and more services to their portfolio as customers demand more integrated solutions. 3PLs are viewed as strategic partners who can optimize the supply chain, reduce the cycle time, and provide unprecedented customer responsiveness. The key to effectively provide these services is Information Technology. More sophisticated 3PLs have quickly embraced IT to enable better coordination of activities by providing tracing and tracking facility to its customers. But this is hardly enough to ensure sustained competitive advantage. To squeeze out the last drop of inefficiency from the supply chain, eliminate bottlenecks, and continuously seek process improvement, the ability to analyze all the activities in the logistics process is vital.
The fundamental purpose of business intelligence (BI) initiative is to deliver fact-based information to improve the efficiency and effectiveness of the business. It should be the responsibility of the business to define and drive the initiative content and goals because they know the information best; the BI initiative must be based on the business. The BI tools need to be built in support of the business needs, and the tools delivered must be something users can and will use. In today’s competitive global economy, having the right information at the right time is crucial to an organization’s ability to make the strategic, tactical and operational decisions that drive organizational goals forward. To better understand their business, organizations need intuitive query and reporting tools for advanced and consumer-level users to obtain access to critical business information that supports strategic and tactical decision making. Business intelligence (BI) is fast becoming recognized across most industries, among organizations that want to leverage its capabilities, to help them gain a competitive advantage in the market. BI can be categorized into the following categories:
Business operations reporting
The most common form of business intelligence is business operations reporting. This includes the actual and how the actual stack up against the goals. This type of business intelligence often manifests itself in the standard weekly or monthly reports that need to be produced.
Dashboard
The primary purpose of a dashboard is to convey the information at a glance. For this audience, there is little, if any, need for drilling down on the data. At the same time, presentation and ease of use are very important for a dashboard to be useful.
Multidimensional Analysis
Multidimensional analysis is the “slicing and dicing” of the data. It offers good insight into the numbers at a more granular level. This requires a solid data warehousing / data mart backend, as well as business-savvy analysts to get to the necessary data.
Finding correlation among different factors
This is diving very deep into business intelligence. Questions asked are like, “How do different factors correlate to one another?” and “Are there significant time trends that can be leveraged/anticipated?” Data is seen as a wealth of Information by most IT enabled organizations. Organizations are moving towards BI to tap and receive accurate information regarding its various stakeholders. Thus BI can be adopted and applied in the day to activities of the organization, for it to make the most of from the data generated by the organization’s various OLTP (Online Transaction Processing) systems.
OVERVIEW OF 1KEY BI
1KEY Business intelligence (BI) provides tools that enable the delivery of information to decision makers. The information delivered comes from relational data sources or enterprise applications (e.g., enterprise resource planning, customer relationship management, supply chain). 1KEY BI includes:
Query Tools
Standard query tools allow the users to view information by answering a series of predefined questions. The business problem that query tools resolve is the need for users to combine, analyze and export information from several sources using a static format. The standard query tool is an excellent mechanism for segmenting the user population into groups: users who need ad hoc query capabilities, those who need prompted query capabilities and those who need static query capabilities.
Reporting Tools
Reporting tools provide the capability for presenting information in a visually appealing format. The business problem that reporting tools address is the need for organizations to create permanent records representing the business at a specific point in time that can be easily disseminated to others. Because of the formal nature of the information that reporting tools represent, it is important to develop procedures for maintaining and updating the data that they present.
OLAP Tools
Online Analytical Processing (OLAP) tools are for users who require intensive data analysis capabilities. The business problem that OLAP tools solve is the need for users to “drill” seamlessly into information when additional details are required. OLAP tools provide users with ad hoc access to data on an as-needed basis. These tools insulate users from the details surrounding the retrieval of information from the data warehouse.
Data Visualization Tools
Data Visualization tools help in the visual interpretation of complex relationships in multidimensional data. Graphics tools are used to illustrate data relationships. Dashboards and scorecards have emerged as a means of helping organizations do just that by providing an instrument for making decisions, delivering on long-term plans, responding quickly to market changes, providing greater control over the execution of strategy and promoting accountability. Both are dynamic tools that make it possible for organizations to respond to short-term market changes, support tactical decisions and keep strategy on track.
KPI is important to any BI implementation so the KPI defined for the various processes would enable the data to be analyzed and presented to the user. BI uses KPI to present in a Dashboard. Further the 3PL can use OLAP Tools for generating MIS reports for evaluating the operations performed in the organization. Reporting Tools would be of a significant use for making daily operational decisions for managing 3PL’s daily operations. The 3PL can also use Data Mining Tools to evaluate strategic factors both internal and external to the organization and identify patterns of business and operation behavior. The 3PL can be then able to take decisions which are of Strategic or sometimes of Tactical in nature using data mining tools.
The direct benefits of the usage of a BI solution are reduction in the Turnaround Time for preparation of reports, Direct and Faster access to data needed to support decision making, analyze the ebb and flow of businesses across services, regions, clients, pricing, currencies, and market factors in time etc. The indirect benefits are improved sales performance, Improved Data Quality, Improved Productivity etc. The KPI discussed in this paper is just a drop in an ocean and there can be various KPI which can be defined by the organization in conjunction with its BI consultants to capitalize on and make the best of BI technologies available in the market.
Key Performance Indicators for 3PL
3PL Process Key Performance Indicators
Order Receipt Total Order Receipt Time, Order Information Accuracy, Revenue per Order
Vehicle Load Planning Planning Accuracy, Capacity Utilization, Resource Utilization, Load Balancing
Vehicle Routing & Scheduling Route Utilization, Scheduling Accuracy, Rate of Route Addition / Removal, Vehicle Availability
Dispatch Operations Vehicle Loading Time, On Time Vehicle Dispatch, Order Dispatch Accuracy
Goods In Transit Rate of update of Location Information, Average Transit Time, Cost of Transportation per Ton
Receiving Operations On Time Vehicle Arrival, Vehicle Unloading Time, Order Receipt Accuracy, Percentage of Goods Damage
Order Delivery Total Order Delivery Time, On Time Deliveries, Goods Delivery Error Rate
BI solution is becoming seen as more of a need than a luxury. 3PLs can implement BI solutions covering either key operations or the operations covering their entire organization. Whatever would be the acceptance level and the kind of implementation but the benefits realized should be in totality. BI is here to stay as the rate of adoption is increasing as organizations are looking towards data as one of the key assets of the organization. Leveraging Data needs it to be harvested it in beneficial manner. Harvesting Data to gain an edge over the competition can be done with ease by using a well qualified BI Solution with a unique BI Strategy for the organization. 3PL who adopt BI solutions which would exhibit only behavior would be moving to solutions in BI Analytics space. Such solutions would not only show present behavior or market and other related activities but also predict future behavior and suggestion actions. And the later is the future of BI in Transportation. Thus 3PL should embrace BI in its nascent stages to stay competitive and also move the organization towards using high end BI solutions, to be successful in the race for market leadership and customer satisfaction.
The 3PL industry is in a state of flux. Internet, supply chain management and globalization have made sweeping changes in the existing business models of the 3PLs. To compete in this market, a 3PL has to continuously improve the existing services, add new services based on technology and make its internal organizational functions more effective. BI tools like data warehousing can significantly help a 3PL achieve these objectives.
Recognizing the need for an effective business intelligence solution is just the first step. The real challenge is to make it an integral part of the decision making process. It is vitally important to set clear business objectives for the business intelligence solution with total top management support.
Posted on August 12th, 2008 by Vikram Kole
Filed under: Business Intelligence
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