Building a Precision Logistics Process
All roads lead to logistics in the supply chain, so digitalization plans for logistics can significantly impact the entire supply chain, for better or worse. Logistics 4.0 promises high-performance, end-to-end visibility, and if that’s your goal, make precision a top priority.
We’ll explore the idea that a precision logistics process like Logistics 4.0 and the digitalization plans that lead to it share the same operating principles and offer a few practical points for successful planning.
1. Find New Ways to Look at Logistics
Logistics is constantly evolving, and our views must change too, or we will become irrelevant. We learn the most from challenging our ideas with better ones. Finding new ways of looking at and thinking about old problems does that, and it keeps things interesting. More importantly, gaining clarity means your comprehension is growing more accurate.
My view of logistics has evolved over a couple of decades in logistics software development. I’m not sure if it came from my software or logistics background, but I began to notice the commonality between software engineering and logistics. The software development process parallels the delivery plan for a shipment, fulfilling the specific requirements.
Every bit of software code an engineer writes is designed to deliver the right thing to the right place at the right time. Every piece of code, or function, delivers the precise data to another function at the exact moment. The finished software application is just a massive collection of functions doing the same, and the computers and networks it runs on also do the same. Networks are modeled after transportation systems with their traffic, hubs, addresses, gateways, and routing. Was I looking at software or a logistics operation?
This led to a more holistic view of logistics rather than limiting it to shipping and receiving. I encourage you to come up with your way of thinking about logistics. If it helps you produce better solutions, you are on the right track, and if not, perhaps your thinking needs revision. Trying to look at logistics from another perspective will give you greater insight when planning improvements for Logistics 4.0.
2. Have Clear Expectations
We create plans to ensure a desired outcome in the future, so it must begin with a clear description of expectations if it is to succeed. In logistics, the end goal is to deliver the right thing to the right place at the right time. Each party must know Who, What, When, Where, Why, and How the expectation will be delivered. A plan without a clearly defined outcome has a much higher risk of failure, and its critical digitalization plans invest time upfront describing this before shopping for solutions.
Here’s the story of Jack and Jill. Jack and Jill are on the supply chain digitalization team for a medical device manufacturer. Jill is focused on consumer-driven logistics. Jack is a lean logistics guru who has x-ray vision for finding waste. They agree the top priority is transportation optimization, and they’ve selected a dynamic routing solution. There’s no doubt that dynamic routing will reduce delivery costs, make fulfillment more resilient, improve planning, streamline operations, and create a more proactive relationship with their customers. The solution they chose even supports corporate sustainability goals for green logistics. They also agree productivity gains will result in accomplishing more with fewer people. Jill wants to reallocate the employees to address the trend of increasing customer expectations. Jack sees an opportunity to lower fulfillment cost per order with a headcount reduction. Both perspectives are valid. Although they agree on every point, their expectations are incompatible.
3. Clearly Describe Expectations from the Start
Documenting expected outcomes and checking for agreement in the planning stage ensures a project will move forward in the right direction. This is also useful for calculating ROI to justify the project and for KPIs (Key Performance Indicators) to measure the solution’s effectiveness. Here’s a question that can clarify expectations with an example answer:
Q: What will be delivered, and why is it important?
A: ”Reducing freight expense by using ground instead of air freight for overnight deliveries within 100 miles of shipment origin. It’s essential for increasing profitability.”
Expectations should support objectives such as reducing carbon emissions, profitability, or improving customer satisfaction. Add as much detail as needed, so nothing is left to assumption.
4. Have Precise Definitions
There is no official definition for Logistics 4.0. It’s not a solution. It’s not an industry standard, and there are no specifications. I’ll give my description of Logistic 4.0, and let’s see if you agree. Logistics 4.0 is a framework for logistics optimization comprised of:
- A digital supply chain for end-to-end control.
- Business processes are designed for interoperability, granularity, scalability, flexibility, reliability, and transparency.
- Artificial Intelligence to manage the processes.
- Real-time data is available for any purpose, anywhere, anytime.
What is your definition of Logistics 4.0? Do our definitions agree? If they do agree, it’s still possible we’re not in complete agreement on the details. My definition is a high-level summary, and it’s close enough to popular opinion to pass inspection most of the time. Still, chances are we could find some points of disagreement if we were to drill deeper into definitions.
5. Never Assume
We probably all know this one, but I didn’t want to assume, and it’s too important to skip. It’s an insidious offender, and I diligently remind myself of this point after 25 years, and here’s why. It’s easier and more practical to assume everyone understands, that others know what they need to know, that someone else is taking care of the details, etc... A good project management tool can guide this discovery process, but even more important is finding a team member who has previously re-engineered transportation and logistics processes.
Here’s why this one is worth repeating, maybe the most important of the five points. Supply chains and logistics processes require precise definitions to coordinate multiple partners and systems. Poor data quality pollutes the entire chain, and when poorly defined plans are implemented, they become gross polluters. Logistics 4.0 is not immune to this, so forget about Logistics 4.0 curing this problem. Worse, Logistics 4.0 could even amplify the ill effects of malignant software due to tighter integration. Never assume. Question. Question. Question.
Precision is the Goal
The effectiveness of logistics processes and plans increase with precision. Precision is the big idea behind digitalization, and logistics is arguably the biggest benefactor in the supply chain. Every desirable quality listed in my definition of Logistics 4.0 is a product of precision, and the five points given for successful planning demand accuracy.
Tapping the full potential of new technologies depends on our ability to define expectations and provide IT with precise requirements. Logistics technology has never been better, and this is an exciting time in our industry. While capabilities have skyrocketed, clear communication and problem-solving skills must remain sharp.