Tim Fawkes of 3t Logistics (www.3t-europe.com) explains the principles and practices of continuous improvement in transport management.
All companies, irrespective of the industry that they operate in, should be aiming to continuously review and improve their logistics practice. To do this, it’s essential to have a structure in place to measure transport activity – nowhere is the old adage ‘if you can’t measure it you can’t manage it’ more applicable than in logistics.
Most companies can scramble together a basic average cost for their transport activity to price new business – but few have a handle on their true costs. However, these can be affected by many different aspects which have a significant impact on a piece pricing approach.
The most obvious one is geographical location, but order size and service level can be equally important. A demanding customer ordering small quantities in short demand can have the same impact on cost as shipping a product half way around the world. By implementing a mechanism to capture true cost data, you can really understand the impact of any improvements. You can run alternative scenarios to identify opportunities for saving through changing your approach, as well as looking at the impact of suppliers, internal processes and customer actions.
Once you have a process for capturing accurate data, you can identify key performance indicators (KPIs) within your business. We advise customers to start by identifying the right measure: why it’s important and what the target should be. This achieves two things: it will direct business to the important measures and drive a meaningful KPI into your business.
The objective of the indicator should be to enable your business to measure levels of service, inefficiency and cost through aspects such as cost/unit, vehicle utilisation, delivery size and service level. Through measuring these levels and setting targets that are an improvement upon current average levels, businesses can begin to realise improvements almost immediately.
3t client case study
For example, we are working with a client to achieve in excess of 70% vehicle utilisation, resulting in around a 15% transport cost saving. With the current average of 68% delivering a 12% saving, we are identifying projects to improve the KPI. Some of these projects relate to order lead time; others to manufacturing planning and others for despatch. The utilisation KPI is measured and displayed on a monitor every day.
It is also handwritten onto a wipe board during the morning operational review, ensuring that the team acknowledge the achievement and identify with the result. The KPI is discussed between transport planning, despatch, customer service and manufacturing planning. Increases to target measures are made as the KPI is achieved to ensure continuous improvement.
Make it personal
A KPI is individual to each specific operation: for example, for another client who manufactures and delivers blocks of insulation around the country, utilisation of less than 95% would be poor because their customers order in full trailer loads. Therefore, it’s critical that the KPI is individually tailored to the client’s business.
In summary the key steps for continuous improvement are:
1.) Define the KPIs – identify meaningful KPIs and relinquish KPIs that do not drive improvement.
2.) Set the bar – Agree on an achievable target which is higher than the current average.
3.) Measure the actual – Measure the KPI on a daily basis and record.
4.) Be consistent – Ensure that the process continues without fail.
5.) Be more consistent – DO NOT let up. If you are not available, delegate.
6.) Analyse the data – identify ways of improving.
7.) Implement improvements – create internal projects to implement change.
8.) Measure the actual – Measure the KPI, record and capture the improvement.
9.) Raise the bar – Increase the target to higher than current levels.
10.) Start again at step 1.
Having clear, evidence based knowledge of your business is always a powerful tool, enabling you to understand what works and to identify key areas for change. We help our clients to measure their costs and implement the strategies that enable them to reduce waste at the same time as improving processes, services and ultimately, the business itself.