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Using Analytics to Drive Costs Out of the Supply Chain

by | IntelliTrans | Jul 9, 2020 | Services

Here are five ways analytics are being leveraged to help companies do more with less.

In a business environment where taking actions based on gut instinct has been replaced by good decision-making supported by advanced technology, analytics has become a core necessity for companies.

Especially critical for companies that want to operate efficiently, productively, and profitably, analytics leverages current figures, historical data, dashboards, charts, and other tools to help companies make sense of their information.

In supply chain, analytics also uncovers patterns, generates new insights, and jumps in to substantiate (or refute) the many “seat-of-the-pant” decisions that supply chain and logistics managers must make on a daily basis.

“The relationship between advanced analytics and supply chain excellence is undeniable,” Gartner points out. “Leaders in supply chain have consistently credited analytics as a key differentiator to cope with complexity and capitalize on market opportunity. To follow suit, supply chain organizations are focusing on building strong analytics competencies.”

Data is the New Oil

Supply chains generate tons of data. So much so that many companies don’t even know what to do with all of the information that their operations are generating. Supply chain analytics helps those organizations make sense of all of that data, use it for good decision-making, and save some money along the way.

Recognizing that many companies are still on the early road to both harvesting data and successfully using analytics, Gartner says most have set their sights on fully leveraging the latter. According to a recent survey, 85% of organizations are either already using or planning to invest in advanced analytics/big data. “Supply chain organizations identified advanced analytics as the top emerging technology they currently have,” Gartner adds, “or will be investing in.”

5 Ways Analytics Drives Costs Down

The benefits of supply chain analytics are too great to be ignored, and include:

• Better outcomes based on accurate benchmarking.
• Improved organizational results that are both accountable and visible.
• Better visibility over global data (whether it’s for a single operation, a domestic company with multiple locations, or a global enterprise).
• Improved inventory management.
• Lower supply chain risk.
• Ability to respond quickly to both challenges and opportunities.

The benefits don’t end there. Analytics also helps to drive costs out of the supply chain. Here’s how:

1) Highlight the impact of data quality. Let’s say a company has a long list of rail car maintenance expenses that typically run $200-$500 per line item. Then one day a $10,000 charge shows up on a list of over 1,000 different line items. This would be difficult to pick out of a tabular data set, but to a supervisor viewing a chart that tracks the maintenance expenses over time by line item, that $10,000 data point would stick out like a sore thumb. These anomalies are much more obvious when presented in the right visual fashion than, say, if someone is just reviewing invoices or a table of data.

2) Make better decisions. Companies that have accurate reliable data to work with can make better decisions across their organizations. Using the same $10,000 example from the last point, let’s say the 5-digit charge wasn’t an error, but it was a very expensive repair that could have been avoided. What caused it? What can we do to prevent it from happening again? Is it an erroneous point that needs to be corrected or is there something genuinely wrong that we need to address? By combining those answers with analytics, companies can effectively drive these and other costs out of their supply chains.

3) Drive continuous improvement. Analytics not only helps you identify the “bad” data points, but it also looks for numbers that don’t align with the rest of the information around them. For example, one IntelliTrans dashboard tracks dwell time at shipment origin or destination. Using number of shipments and total/average dwell time, the platform shows shippers what’s been waiting around where, and how much that dwell time is costing them. A red circle indicates an immediate problem that needs to be solve, while a greenish-blue one indicates that things are doing according to plan. By addressing the red flags first, users can enact changes that can have a notable impact on performance and customer service—both of which can help drive costs out of the supply chain.

4) Identify points that aren’t visible to the naked eye. IntelliTrans recently worked with a company that sizing its rail car fleet. Historically, this process is done by:

• Assessing yearly demand
• Looking at average transit times for the year
• Determining how many rail cars are in bad shape and/or out of service
• Based on an average transit time of 8-12 days and demand of 1,000 rail cars per month, the company would plan for about 12,000 cars.

Using analytics, the company we were working with noticed that its transit times were shorter when it had a higher number of shipments. That could have been because carriers were performing better in answer to a higher volume of work, but whatever the impetus the end result was a company that could remove about 400 rail cars from its fleet. Based on an average cost of about $10,000 per car per year, that equated to a $4 million cost savings thanks to analytics.

5) Establish control mechanisms. To extract the biggest value from an investment in analytics, companies must use it on an ongoing basis—not just when times are tough or when they want to implement a specific improvement. For example, one company may want to know how many tons of product it can put in a rail car. This is an important metric for a firm working with per-car-shipped freight rates. That means the shipment costs $5,000 to move whether the rail car is carrying one pound of product or 200,000 pounds of product. The ultimate goal would be to maximize that weight on every shipment, but that’s difficult to attain without good analytics. Using IntelliTrans’ dashboard, for instance, companies can set their goals and then quickly glance at the screen to see what is and isn’t performing properly. This control mechanism can translate into significant supply chain savings over time.

Drive the Costs Out of Doing Business

In the current economic environment, all companies are looking for new ways to drive down operational costs. The supply chain is often a focal point during these exercises, and is often looked upon as more of a “cost center” than a hub for potential operational efficiencies and money savings. Using analytics, companies can flip that conversation, get better control over their supply chain processes, and drive the costs out of doing business.

Putting the Data to Work

IntelliTrans’ Global Control Tower provides high levels of supply chain transparency; aggregates, completes, and enhances data from a variety of sources; offers visibility into and execution of different aspects of the supply chain; and generates data-driven alerts and analytics that ask deeper questions and deliver meaningful insights.

By leveraging tracking information, the Global Control Tower provides analytics that measures key performance indicators (KPIs) like fleet cycle time, origin/destination dwell time, lane and hauler performance, back orders, freight spend, load optimization, and more. With their rate, equipment, lease, tracking, and invoice data in a central repository that’s accessible 24/7, companies can position themselves for success in any market conditions.