A global pandemic. Increased goods consumption. Labor, resources, and inventory shortages. Capacity strains. Increased merger and acquisitions activity.
While the events of the past several years were unpredictable, one thing is for sure – the logistics industry is vital and resilient.
Global logistics companies have faced a slew of challenges, and they continue to deliver. However, as existing and new pressures collide, a focus on productivity and efficiency will become increasingly critical. And measuring it effectively will need to take center stage.
To explore this further, in partnership with Reuters we recently surveyed more than 480 logistics and supply chain professionals from around the world. Our objective was to find out how logistics companies think about productivity across their operations, along with the crucial role that technology plays in maximizing it.
The productivity measurement gap
Understanding what productivity means to business operations is critical. However, according to our research, more than a third (35%) of respondents do not measure productivity or have specific targets to benchmark success.
Despite this, it is interesting to note that 58% of respondents believe they have a good handle on their productivity goals.
According to Martin Lee, Regional Sales Manager at WiseTech Global, this demonstrates a potential disconnect between highlighting the importance of productivity within a business and setting tangible performance metrics to measure it.
“The pandemic has had a profound effect on the business world, and huge changes have occurred across how and when operations and services are delivered. Businesses have had to adapt quickly, and for the logistics industry, the change has been significant,” he says.
“Clearly, it’s important for logistics leaders to understand how they can measure productivity, and then put it into practice to identify and overcome obstacles. In a time, money, and resource constrained environment, those who can maximize the potential of their operations will be the winners.”
Defining productivity metrics
When it comes to the desired outcomes of improved productivity, our research shows increased operational efficiency and improved customer service are top of the list.
Surprisingly, more traditional metrics such as increased profit, increased operational throughput, and increased revenue appeared lower on respondent's priority list.
According to Yves Van Eester, Business Development Analyst at WiseTech Global, whilst still significant, it highlights a potential mindset shift away from historical, financial metrics of success to more customer and employee orientated targets.
“It may be too early to understand the full extent of this shift and of course, this does not imply that revenue and profit are not still high priorities. However, there is no denying the pandemic has driven a transition towards ‘value over cost’ sentiments for some aspects of logistics and supply chain operations,” says Van Eester.
Driving productivity outcomes
Knowing that you need to measure productivity is only part of the success equation. What you measure can make all the difference in understanding your overall productivity levels, while also highlighting weak points and potential roadblocks.
“Much like getting a shipment from origin to destination needs a route planned, ensuring you’re focused on long-term growth requires a map of where of your organization currently is on its productivity journey, where it is going, and how it plans to get there. This is where measuring productivity against a set of key performance indicators becomes essential,” says Van Eester.
Here are just a few examples of the metrics that global logistics companies may choose to track and evaluate, when it comes to maximizing productivity and efficiency across their operations:
- Transportation costs: Measures your transit operations’ end-to-end efficiency, including order processing, administration, inventory carrying costs, warehousing, and costs.
- Average days late: This metric provides insight into the delivery process and directly impacts customer satisfaction and loyalty.
- Freight payment accuracy: Freight bills are error-prone, yet data errors are incredibly costly. Measuring their accuracy can help save hard-earned revenue.
- Truck turning: The shorter the truck turning rates, the longer time the truck is on the road, so measuring how efficiently a truck is loaded and unloaded is critical.
- Warehousing costs: Equipment, energy, labor, delivery, and shipping goods into and out of the warehouse can add up quickly and should all be measured.
Logistics operations – linking technology and productivity
Technology continues to transform traditional logistics practices and operations. The need for increased digital capabilities is now widely accepted, and most logistics businesses have in recent years placed a greater emphasis on strategic, long-term digital transformation initiatives.
“According to our research, when it comes to what logistics providers believe will have the biggest potential impact on their productivity, investment in technology (45%) rates highest, followed by investment in process improvements,” says Lee.
“In fact, if we look in more detail at investment in technology, automation of manual tasks and real-time visibility are two outcomes that respondents believe will have the most significant impact on their organization’s productivity.”
Clearly, logistics is a process-driven industry. Every day, tasks are being repeated over and over – with varying degrees of manual or expert input. Eliminating labor-intensive, repetitive, error-prone activities is the best option, and automating and accelerating such tasks will yield immediate and significant opportunities.
“The benefits of freeing up staff via an automated system with real-time visibility are multifold,” says Lee.
“Not only can it enable staff in all locations to complete more work, in a more efficient and timely manner, but it also provides more time for staff to focus on those parts of their role which simply cannot be automated – like strategic planning, collaboration and innovation,” he concludes.
Want to learn more about the link between technology and productivity? Download the report now
A total of 488 logistics and supply chain professionals from around the world were surveyed between January and February 2022 for this report. Respondents were from North America (48%), followed by Europe (33%) and Asia Pacific (19%). Their responses – analyzed anonymously – represent what these industry representatives consider to be some of the biggest challenges and opportunities facing logistics operations at this time.