Four Steps to Establish KPIs for Your Supply Chain

Introduction: KPIs, metrics, goals, deliverables – no matter what you call them we are all given some version of them for our jobs. We set KPIs as a way to monitor and measure performance. It’s a practice with an almost 100% adoption rate and has proven a successful way to ensure goals are set and achieved. If the deliverables are not met then it can be an indicator that changes may need to be made. 

Establishing KPIs and creating action plans to achieve the KPI targets is a no-brainer for transportation management and the same should be applied to one’s life. What are your “life KPIs” and how are you measuring your own personal performance? “Where do you see yourself in five years?” is a common interview question, but if you don’t have KPIs in place how do you really know if you’ve achieved what you set out to achieve year-over-year? To truly measure performance in life or transportation management you first need to establish KPIs. For today though, let’s tackle the latter and the importance of setting KPIs to manage your supply chain. 

I. The Right KPIs 

If the first step is understanding that KPIs are needed to help an organization monitor and measure their supply chain performance, then the next step is to identify  the right KPIs for your business. To assist in doing this there are many resources out there from advisory and consulting firms like Gartner , but the organization themselves should know their own business the best and must determine what the right KPIs are for them.  

Ideally, they will start by collecting feedback and data from key stakeholders of each department in the company, not just logistics. The departmental silos must be removed within an organization as transportation effects every part of the business and insight from the different groups can be invaluable to ensure the right KPIs are set. If the wrong KPIs are used to monitor and measure the performance of a business the effects could be as detrimental or worse than not having any KPIs at all. 

II. The Right Data Source 

Once the right KPIs have been established then it must be decided what data source will be used to calculate each KPIs performance. Many company’s try to use an ERP or WMS or even *gasp* Excel as the data source, but the most efficient way to collect and collate data for true transportation management is by leveraging a transportation management system (TMS). The best TMS’ will provide business intelligence that includes dashboards and scorecards that allow a shipper to make quick and confident decisions as they aim to manage a data-driven and connected supply chain. 

III. The Right Targets & Prioritization 

Once the right KPIs have been established and the data source determined then targets for each KPI must be set and the KPIs prioritized. Historical performance or industry benchmarks are common ways an organization can set their KPI targets, but that should not be the end-all-be-all. Every company, every business is different, which means their KPIs and those targets may need to be different as well.  

Again, key stakeholders from different departments should be part of this discussion in not only identifying what the right KPIs are, but also in setting the targets. Prioritization of the KPIs is essential as well as it is expected that there will be conflicting interests between the stakeholders. For example, for on-time delivery, customer service may require that the target be 95%, but to achieve this it will increase the transportation costs by 8%. An organization must understand their business and prioritize their KPIs to find the right balance. 

IV. The Right Review 

Whether it be in life or transportation management, having the right KPIs will help to ensure success, although that alone will not guarantee it. Every task, project, etc. a person does in life or a company does in managing their supply chain must be aligned with and have an impact on the KPIs that have been identified as the best way to monitor and measure performance. If they do not, then questions must be asked such as why are we working on this project? Or if truly the right actions are being taken, but they don’t have an impact on the established KPIs then the question must be asked, do we have the right KPIs? This continual review will help keep all of the stakeholders aligned and moving in-sync toward achieving the KPI targets. 

Conclusion: KPIs, in life & transportation management, are a part of what my own father always tells me, “Plan your work, work your plan.” If you can’t measure it, you can’t improve it; using these four steps as a guide to help in identifying, defining, and setting targets for your KPIs in your life or managing your supply chain will allow for continuous improvement, but now the real work begins – working your plan. 

Author

Adam Davis：VP of Managed Services in oTMS, responsible for SaaS TMS, transportation process control and consulting services, with 16 years senior management experience. General Manager of TMC Asia Pacific in C.H. Robinson since 2010.

oTMS AS THE ONLY CHINESE VENDOR COVERED IN MAGIC QUADRANT REPORT

SHANGHAI, CHINA – MAY 2, 2017: oTMS, a leader in clouding and connected SaaS transport management system in China, today announced that Gartner, Inc., the world’s leading information technology research and advisory company, has listed oTMS as a “notable vendors” in its 2017 Magic Quadrant for Transportation Management Systems* report. oTMS is the first and the only China-based company covered in this Gartner research.

“We are excited to be the first China-based TMS vendor included in Gartner report and have them recognize that highest growth will come from Asia. This is what we experience, as Chinese market and customers are maturing and no longer accept manual processes” said Mirek Dabrowski, oTMS, CEO and co-founder.

According to Gartner, “The overall market size for supply chain execution (SCE) applications is estimated to have grown at an annual rate of 13% to $3.9 billion during 2016. Within SCE, transportation management systems is estimated to have generated 30% of the market spend.

Factors such as the need to reduce costs, and improve productivity, efficiency and customer service are driving the growth of the market through 2021. The Americas region is expected to continue to lead the global TMS market, followed by EMEA, with the APAC region expected to have the largest growth.”

“Traditionally, the implementation of a TMS solution was a long and complex project. Shippers’ and 3PL providers’ expectations around the implementation have changed dramatically, especially with the advent of multitenant cloud TMS options. Customers now require these solutions to be implemented in a much shorter time frame (weeks instead of months), at a much lower cost and provide a much faster ROI. Over the past year, Gartner has witnessed more and more implementations that were accomplished in six to eight weeks. Traditionally, these would have taken six months or more.”

*Gartner “Magic Quadrant for Transportation Management Systems” by Bart De Muynck. March 9, 2017.

About the Magic Quadrant

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

About oTMS

oTMS is committed to creating a new Transport Ecosystem and Making Transport Easy. In 2013, oTMS launched the first ever SaaS TMS + market place model in the domestic market. Today, oTMS not only operates a omni-channel SaaS TMS (One-TMS) with the largest market share in China, we have also, through the consolidation of five other products including oSuper, E-RFQ, One-Insurance, EasyLoan, and Transport Control Tower, achieved the establishment of a connected, digitalized and data-driven Transport Ecosystem. oTMS believes that, in the process of promoting industry development and transformation, every link and company along its industry chain can be further integrated for the creation of a better world that is more convenient, efficient, and green. For more information: www.otms.com

With the rise of unicorn companies in the 2C logistics industry, logistics and supply chains are now buzzwords. The trillion-dollar transport market is very attractive. In particular, the 2B industries account for the bulk of the total, therefore a massive amount of capital and internet/logistics talent are pouring into the business. It makes us wonder: what kind of upheaval is being caused by the incoming wave of hot money? Who will be the next B2B logistics unicorn? How are the experienced logistics IT professionals who have been silently working behind the scenes for years responding to the gold rush?

Our guest today, Elton Chen, is the quintessential experienced logistics IT professional. Chen started learning about supply chain operations when he started working for one of the world’s 500 largest suppliers after graduation. He came into contact with leading global ERP software such as SAP and SSA. For more than a decade after that, he focused on supply chain software and IT consulting, and worked in well-known companies, including SAP, T-Systems, INFOR, and Hitachi Consulting. The rise of internet logistics prompted him to leave the traditional software industry to join the army of startups. Before joining oTMS, he was the Vice Chairman and Founder of CargoCN.

Being a part of one of the Top 500 suppliers, established software/IT consulting firms, and an internet entrepreneur, Chen has gone through an impressive list of career changes. There may be inspiration to be found in his words.

From traditional logistics IT to internet startup

 Some say 2015 was the year SaaS took off. There are all kinds of reasons behind this statement. It comes down to people. There is perhaps a youthful heart in every experienced logistics IT professional. A person will experience a variety of challenges when immersed in the industry over the years. One always feels, one way or another, a little urge and determination to make things better.

Having worked with UNIX, AS/400, Linux, and Windows as well as today’s Cloud through his years in the traditional logistics IT industry, Elton, too, reached his turning point in 2015 and decided to leave the traditional software company to start working with the internet. He founded CargoCN, a SaaS platform designed for bulk cargo, with a few like-minded friends in the same year.

Speaking of the reason why he joined the army of startups, Elton commented, “In my years of working in foreign companies, I observed a lack of adequate localization in many products. A lot of R&D for international products are not carried out in China. The China market is not seen as sufficiently important, and therefore Chinese customers do not receive quick feedback. We knew what systems and solutions were needed in China’s logistics industry, but were unable to bring about changes.”

Furthermore, Elton sensed a clear decline in traditional IT project orders around 2015, which sent chills down his spine. Meanwhile, internet software was showing skyrocketing growth. “We came to realize the inevitability of a switch to the internet and the cloud. In addition, technologies such as the mobile internet, cloud computing and big data were becoming more mature and able to fuel the moving block that was TMS. The growing dominance of SaaS led to a product cost sharing model that gave us an idea. Rather than wait for internal changes in large companies, why not start to make a difference now? So we decide to start our own business.”

It is understood that CargoCN initially targeted bulk cargo because there was less competition in SaaS TMS systems. The team also started paying attention to this area at an earlier stage. It was an advantage, but turned into a development bottleneck after a while. Unlike other industries, bulk commodities enterprises (e.g. coal and steel) are often managed by truckloads, and therefore have relatively little need for enroute management and visualized management. Private bulk companies, such as many coal companies in Shanxi, are unwilling to invest in software. Such enterprises focus more on finding sufficiently low-cost transport resources and proceeding with freight matching.

The freight business in China started undergoing a transformation in September 2016. The industry moved from SaaS platforms to truckless transport management platforms with trials of shipping and logistics. Elton was involved with the restructuring of products and operation systems, and the building of teams.

However, deep down, he always believed that SaaS could be used to change the logistics industry, and while the time had not come for bulk commodities, it was possible that the time for SaaS TMS systems for other businesses had.

Faith in SaaS+ services

Speaking of his reason for joining oTMS, Elton said, “This is a place where I have the chance to finish what I wanted to do but have not done yet. ”

“oTMS entered the market in 2013 – it is a pioneer and leader. This place allows me to apply my experience in traditional software and my approach to starting a business. Compared to traditional software, oTMS’s SaaS TMS is more open, and connects multiple limitless strategic development spaces. We are a local company and are able to respond quickly to changes in market conditions and demands. At present, oTMS customers are customers with strong demands for TMS systems, which give oTMS an edge in building ecosystems.”

“What is more important is that oTMS is not confined to SaaS TMS systems. SaaS is only the foundation. A solid foundation makes it possible to construct skyscraper combinations of SaaS+ services, and subsequently a transport ecosystem encompassing oSuper, transport bidding services, and financial and insurance services. SaaS is subject to a ceiling, but the combination of data+ services can result in a much longer future.”

His entrepreneurial experience gives Elton a different mindset. He is now more willing to step out of his comfort zone and be a pioneer. Joining oTMS, to Elton, was an extension of his beliefs, and the rebirth of a supply chain veteran.

Vacancy awaited for SaaS unicorn company

 Having started the SaaS business and now running the oTMS’s SaaS service team, Elton has his own opinion on B2B logistics: “In terms of the industry as a whole, there has not been a true SaaS unicorncompany in China, but there will be. There have been a huge number of logistics platform companies over the last 3 years. Although many have failed and disappeared, competition remains fierce. There will be some mergers and acquisitions in the next 2 to 5 years.”

It is inevitable that the internet will migrate to mobile devices. Mergers and acquisitions are already taking place in the global market. It will not be long before the China market catches up. When asked about the reasons, Elton said, “Many traditional software companies are undergoing transformations, but the progress is hampered by strong roots in the past. It is also impossible to change some of the older product structures. These are the companies that may adopt the SaaS model to help them complete their transformations.”

Elton has experienced first-hand the rise of SaaS and witnessed the process oTMS underwent as a pioneer, going from a struggling startup to a blooming success. “It is not easy to become a unicorn, nor is it easy to revolutionize the supply chain, but I choose to travel down the path with oTMS.” He said, “As the team leader, I will take the lead in developing better product UIs and user experiences for SaaS TMS systems. Our goal is to make the process friendlier and improve the quality of data used by our clients. It is quite a different approach to services from the SOW delivery for traditional software. oTMS is dedicated to building a data-driven ecosystem. It will not happen without proper data management. We will also optimize project implementation. The implementation cycle will be shortened significantly by installing standard online implementation tools. The service experience will be enhanced by putting customers first.”

While the interview may have drawn to a close at this point, the logistics revolution continues. Elton used his own experience to demonstrate that capital injection would not only stir up the market, but also encourage experienced logistics IT professionals to embrace technologies and follow their hearts to achieve the extraordinary.

Together We Make A Difference！