Ever wonder how good data will actually save you money? Read on…
Like you, I get calls and e mails every day from companies selling another ‘data – predictive analytics – dashboard – AI – profit improvement – gizmo’. It amazes me that we think that more or better data will improve profit. Alone, data – even good data – does nothing. However, combined with the right knowledge, application, recipe, timing and implementation, good data will help empower organizations to make better decisions.
To make the point, we will use a simple analogy – making a plate of spaghetti. You can imagine that a good recipe (good data) might help you make a better plate of spaghetti, but a recipe is not the only requirement.
To make a plate of spaghetti, you need knowledge. You need to know how to cook, boil water, proportion the water & noodles, source the best possible ingredients, etc.
In Supply Chain, to make data valuable, you have to know what you are looking for and why you need that information. For example, if you want to compare freight rates across time, you should consider removing fuel costs because they are so volatile. However, if you are comparing the cost of freight as a ratio (%) of revenue, you should use total freight costs AND freight costs without fuel to get the full picture.
Obtaining data is just like preparing the best ingredients for the spaghetti recipe. Are you able to get good, clean, accurate data from the correct sources? None of us would take the time to make our favorite meat sauce with canned dog food. It might look alright, but it’s just BAD!
This is like the Supply Chain report where all of the calculations are correct, and the report looks good, but the data was bad. So your report might look alright, but it’s just as bad as the meat sauce!
Recipe / SOP
To make spaghetti, the recipe will tell you what ingredients to use and the order in which to add the ingredients. In business, our recipe is the process – AKA the SOP “standard operating procedure“. This is the recipe by which we measure employee’s performance.
The folks selling data packages or analytical software rarely discuss the required changes to the SOP to ensure the information is used correctly. At a minimum, you have to make sure the SOP (the recipe) does not stand in the way. If good, actionable data is provided to an employee who is measured by an SOP, there could be a conflict. Take the steps necessary to train employees on how to use the data, understand the reports and look for conflicting information. Management has an obligation to take the steps necessary to ensure the measures are driving the right behavior and the right outcomes.
The timing of the actions is important. How long do you boil the noodles? Can you cook the noodles today and add the sauce the next day? Yes, you can, but only if you adjust the SOP to include refrigeration and reheating.
In Supply Chain, the amount of time it takes to get good data can be a struggle. If you only get reports monthly, you cannot effectively measure the impact of changes more than 12 times a year. On the other end of the scale, reports that come out every hour are probably equally unhelpful. The timing needs to be matched to the needs of the organization. “More” is not always “better”.
Order of Operations
In cooking, we call it “the steps”, in Supply Chain and operations, we call it the “order of operations”. Ever try to put sauce on the noodles, then boil the noodles then put on a pate? What a mess.
Likewise, in Supply Chain, the order makes a difference. Does it make sense to call the trucking company before you know the final destination or the size of the shipment? Generally, no, it does not make sense. (yes, there are a lot of exceptions).
My clients sometimes tell me that they cannot make the call to the carrier until after they pick and pack the cargo. They have to measure it first – pick, pack, measure, call carrier. Smart order of operations, but it might mean that you are too late to call the carrier for a pick up that day.
An alternative is to change the order of operations – use the parts master that includes weight and dimensions to estimate the weight and cube of a shipment. The new order of operations is: estimate, call carrier, pick, pack, confirm weight and dimensions, validate with carrier if necessary. The net effect is likely to be one-day faster transit to the customer.
Ever see the Nike commercial “Just do it!”? Your spaghetti will never be made if you do not step into the kitchen and begin to try. Your freight will never move if you take no action. “You will continue to get what you always got, if you continue to do the same things in the same way.” “La Nonnina’s Incredible Spaghetti” recipe did not happen without years of trial, tweaking, focus and hard work! Never making improvements to something that is pretty good is no better than doing things the same way and expecting something different to happen.
There are two messages here:
- Try it out. Take different actions. Measure the results. If you want a different result, just having more or different data MEANS ABSOLUTELY NOTHING if you do not CHANGE YOUR ACTIONS.
- One definition of crazy is to do the same things and expect a different outcome!
Data is helpful, but good data, without the other elements – knowledge, SOP, timing, order of operations, AND IMPLEMENTATION – will get you nowhere. In the absence of all of the elements, a new and improved data package is more likely to add cost and confusion rather than support improvement.
The next time you get a solicitation for a new and improved data and analytics service, ask yourself if the provider is giving you a complete solution. Are you getting good data, the type/timing of reports and ongoing support to improve profits or just a bad plate of spaghetti?