Here Steve Reis, a partner at McKinsey & Company, talks about how logistics firms can overcome their ‘digital dilemma’, investing to set themselves apart from the competition.
The logistics sector may work to move some of the hottest products between manufacturers, retailers and customers, but it is burdened by the weight of its own technology. Legacy systems are costly, and when they are mission critical, the thought of upgrading or replacing them with new solutions, can be the stuff of nightmares. However, overcoming this dilemma has become one of the most critical tasks for logistics companies that want to grow and stay profitable.
Many companies across sectors served by logistics providers have already embraced the latest technologies, whether it be cloud services, IoT, or real-time data. That has put many logistics providers in the unenviable position of being a bottleneck in the digital supply chain. In many cases, that hampers the ability of manufacturers and customer-facing organisations to meet the demands of their customers for flexible delivery mechanisms and real-time updates.
Ultimately, logistics operators need IT systems that live and function at the same speed as every other entity that interacts with their business.
Analytics is a key component in addressing this shortfall, and can accelerate growth beyond the typical 1% seen in the logistics sector.
Used in other industries, analytics is doubling growth and increasing profitability by 3-5%. B2B logistics companies, in general, fall far short of achieving that kind of performance. Comparing themselves to the in-sector competition and thinking “we’re OK” is simply the equivalent of sticking your head in the sand.
Analytics has been shown to directly impact lead generation processes, productivity, and sales growth as well as enable disruptive features such as dynamic pricing, which can make the difference between winning or losing new contracts. But it is important to remember that analytics alone is not enough. Achieving these kinds of benefits requires operators to embed advanced analytics tools in the business and drive broader behavioural change in the organisation. Part of achieving that requires analytics to prove its abilities, gaining the trust and confidence of users.
One of the key ways to do this is to build digital transformation teams that include champions from across the business, who will not only contribute to the project’s technical success but also its adoption by other users.
To begin your journey towards adopting advanced analytics to grow your business, there are four key areas to consider:
• Find the right use cases – Start by discovering in which part of the business analytics can have the most impact. Remember, you don’t need to do everything at once. Look at business goals and functions through four lenses: profit & loss, use case inventory, customer journeys, and value/process chains.
• Prioritise and validate projects – Validate and rank identified use cases based on their impact and potential to disrupt competitors or the market. This, combined with initial feasibility studies should allow you to identify 3-5 ‘lighthouse’ projects with significant potential to positively impact operations.
• Build a roadmap – Once your key use cases are identified you need to build out the requirements to deliver them. This should include not only looking at the data and analytics capabilities needed, but also how they will impact processes and whether staff training will be required or new talent recruited. You may also need to consider partnerships with systems integrators or other parts of your supply chain to exchange the data needed to create your new capabilities.
• Implementation – See the implementation of your analytics projects as iterative. You don’t need to deliver every capability or feature in one go. Trial applications with small groups, and run them in parallel with existing processes to assess how they perform. An iterative approach gets applications and value into users’ hands more quickly, and allows you to adapt with business needs as part of your ongoing digital transformation.
In an increasingly competitive marketplace, advanced analytics is the key to gaining access to hidden insights about your business that can drive growth and improve performance. Your direct competitors are no longer the benchmark of success.