How big data fosters a culture of continuous improvement: the case of logistics
Perfection doesn’t exist in the business world. No matter how good you are at what you do, there will always be some room for improvement. This is the idea behind continuous improvement, also referred to as kaizen or lean transformation.
Continuous improvement is a philosophy that leads companies to continually perfect their operations, processes and products. The goal is to never stop improving.
In today’s complex and strongly competitive business environment, embracing this approach has turned vital. Especially in industries like logistics, characterized by high pricing pressures, a tight labor market and constant industry benchmarking.
Therefore, forget cash-cows. If you want to be relevant (and survive) in the next decade, you must embrace continuous improvement.
However, reaping the benefits of this approach can be challenging. Success rate for continuous improvement efforts is less than 60 percent. In this article we look at the logistics industry to discuss the two elements that mostly influence the success of these initiatives: culture and technology. Before we start, let’s quickly revise why continuous improvement in logistics is so important.
The benefits of continuous improvement in logistics
The benefits of continuous improvement in logistics have been the object of a wide array of studies, both from the industry and the academic world. Continuous improvement “is a method for identifying opportunities for streamlining work and reducing waste”.
When applied to logistics, it allows companies to optimize their use of their production capacity and shippers to refine their own operations, as well as their transportation networks and end-to-end supply chains.
For manufacturers, this means being able to manage resource flows and ensure production regardless of market conditions. For instance, they could identify new energy-saving manufacturing processes that help them become more resilient in front of fluctuations of the energy price.
Further, embracing continuous improvement might lead to even more critical competitive advantage for shippers. It allows them to reduce costs, improve employee engagement, decrease delivery times, improve customer service, and operate at a higher level of efficiency
Generally speaking, companies that cultivate a culture of continuous improvement are more efficient and have lower turnover rates. Employees are empowered to take responsibilities and proactively solve the problems they see at work. As a consequence, by giving workers more space to contribute, they feel more fulfilled and organizations improve their processes.
The recipe of continuous improvement: building a positive culture supported by technology
Successfully implementing this philosophy requires companies to change their corporate culture, which is a complex, challenging task. Reforming the corporate culture is actually the end-goal of continuous improvement initiatives, which, in brief, aim at shaping a sustainable change-oriented culture.
Hence, as cultural changes take a lot of time to cement and bring the desired results, continuous improvement is, by definition, a long-term journey. Such journey, as you might expect, is filled with roadblocks: organizations may lack of problem-solving abilities; communication barriers might inhibit collaboration; while a limited budget for improvements might hinder the success of change initiatives. Nonetheless, the success of these projects mostly depends on the level of leadership commitment.
Today, digital technologies offer new opportunities that could help achieve a culture of continuous improvement in a shorter time-frame. However, technology also adds a further layer of complexity, as executives will have to identify the technological solution that best fits their needs. They will have not only to create a culture of continuous improvement, they will also have to make sure their organization understands how to approach big data.
#1: Developing a culture of continuous improvement
Improvement projects are obviously an essential element of the continuous improvement philosophy. However, without a strong culture that is naturally expressed in the mindset of all workers, improvement projects can’t succeed. Focusing on projects, rather than on culture, will sooner or later lead to the failure of this process of change.
So what are the main features of a culture of continuous improvement? First of all, such culture must encourage employees’ contributions, innovation and forward thinking. It must focus on the incremental innovation of processes and promote a long-term view. Therefore, such a culture should be the expression of values such as trust, transparency, cooperation, humility and respect.
Secondly, it should promote a horizontal organizational alignment that balances the relationship between the company and the people who are part of it. While firms get tangible benefits in the form of perfected processes, cutted costs and increased efficiency, workers have the opportunity to thrive in a safe and secure work environment. They should feel valued, free to grow professionally and empowered to carry on more fulfilling tasks. In the end, it is about creating a win-win situation.
Further, given the rapid changes that characterize the current business environment, a true culture of continuous improvement should foster the ability to quickly adapt to the transformations of its surroundings.
Clearly, this is easier said than done. We prepared a list of tips and recommendations to help you manage this complex change process:
1. Committed leadership: as it was previously mentioned, successfully implementing a culture of continuous improvement requires leaders to be deeply committed, actively and visibly sponsoring every initiative. If executives don’t lead by example, in the long-run, all efforts will be vain.
Executives should therefore abandon the “us and them” mentality and horizontally align with the rest of the organization. As the ultimate goal is to empower employees, the leader's’ role consists in constantly communicating about the importance of continuous and incremental improvement, making sure everyone is rowing in the same direction.
Leaders should help workers share and spread ideas, constantly asking for new ideas for improvements. When evaluating employees’ suggestions, avoid taking decisions only based on criterias such as ROI and the impact on the bottom line, as this will limit the ability to contribute of employees.
Finally, remember to always document and celebrate the results achieved through continuous improvement. Despite being often overlooked, this is one of the most important steps. It will be hard to sustain the continuous improvement mindset in the long-term if workers don’t see the results of their efforts.
2. Effective change management: while everyone talks about change management, few actually understand it. As a result, many change management projects fail because they get implemented too late and with a lax attitude.
However, any company that wants to achieve a culture of continuous improvement must master change management, as it must be ready to embark on a journey of constant evolution. Indeed, continuous improvement must become a routinary way of operating in the company in order to be sustained through time. These three change management tips can apply to any organization:
- tie the company’s goals to everyone’s job: in order to ensure everyone is aligned and understands the business strategy. This will incentivize employees and facilitate managing change processes;
- - constantly communicate: communication is one of the most critical elements of effective change management, so make sure not to overlook this aspect;
- - be patient: continuous improvement takes time to produce tangible results. The same can be said for change management. That’s because humans and organizations are often risk-averse and resistant to change. Be patient and never stop communicating, until every individual in the company has absorbed the values you want to absorb in your corporate culture.
- 3. Manage what you measure (and make sure you know what deserve to be measured): despite focusing on the long-run, continuous improvement is a metrics-driven approach. Understanding what data is worth tracking and which is not is an important element of continuous improvement initiatives. Check this and this to refine your understanding of what kind of data you should focus on.
- 4. Listen to the data: data tells you where you are and how to get where you want to. Clearly, any continuous improvement initiative should be based on the insights coming from the huge amounts of data that companies nowadays collect and analyze. Continuous improvement is not about changing for the sake of changing: it is about constantly getting better, and data is the only compass you can trust. This leads us into our section #2.
#2: Using big data to sustain continuous improvement: the case of logistics
As we just saw, continuous improvement is mostly about culture. However, modern technologies allow us to reach a deeper level of consciousness about what we could improve in the way our business operates.
This is no surprise. Digital technologies are disrupting a wide number of industries, logistics included. Indeed, the logistics industry is becoming increasingly data-driven. Big data is even allowing logistics companies to become more environmentally sustainable.
Interactions between shippers and their stakeholders take place more and more in the digital world. Consequently, logistics players can collect a lot of relevant information which can be used, for instance, to improve the company's accountability, visibility and customer service.
Further, the Internet of Things is generating even more meaningful data through the many sensors installed in most vehicles and factories nowadays. Shippers and manufacturers can use that data to make information available in real-time and refine their forecasting models. This clearly has a large impact on the way companies should manage their continuous improvement efforts.
In particular, big data analytics lets companies identify the root cause of an issue in real-time, or in just a few seconds, thus enabling managers to enact the changes necessary for tackling the problem. As businesses collect information about their internal operations as well, they can track who is taking decisions, thus ensuring a higher level of accountability.
Eventually, all the data collected during this process of change can be used to investigate the repeatability of successful processes. In short, big data enables continuous improvement.
More specifically, companies need to invest in big data performance measurement tools if they want to succeed in their continuous improvement efforts. Obviously, they will also need to make sure their employees have the necessary skills and knowledge to understand and be able to use big data technologies.
However, given all the complex tools, methods and concepts necessary for successfully implementing a big data strategy, it can be a real challenge for executives to figure out the best way to approach data in their organization. One of the first things to do is to make sure the company's leaders understand which are the benefits of using data for continuous improvement.
So let’s take a look at how the logistics industry is using big data for their continuous improvement initiatives:1. Performance management:
performance management consists in solving inefficiencies and ensuring operational standards are respected by tracking any metric along the supply chain. In other worlds, performance managers transform big data insights into actionable results, such as the optimization of resource consumption or delivery routes.
Indeed, big data can help workers gain a better understanding of what they are doing right and what, instead, could be improved. As a consequence, employees know how to improve their performance and managers can spend less time supervising them.
For instance, shippers expect your drivers to arrive on time, maintain docking schedules, and avoid dead time. Big data can automatically indicate in which cases the company should take disciplinary action or require additional requirements for a specific group of employees. It can also highlight when and which machines are performing poorly, allowing managers to quickly intervene.
Finally, when data is shared among partners, it can be used to improve the efficiency and transparency of the whole supply chain or network of partners. Nonetheless, carefully select the data you can afford to share.
2. Improving visibility and order-to-cycle process:
logistics players are using data to boost their speed of delivery and provide customers with real-time visibility over orders. This is critical in today’s logistics industry, which has been heavily impacted by the so-called “Amazon effect” and the rise in customer’s expectations. Consumers expect deliveries to be fast and easily trackable. Analyzing big data to continuously improve these operational aspects will lead to better quality partnerships and increased customer loyalty.
3. Metrics, KPIs and Forecasting:
metrics and KPIs are undoubtedly a central aspect of any continuous improvement initiative in logistics. They allow to monitor performance on an ongoing base and identify inefficiencies based on real-time information.
As soon as data indicates errors in picking rates, delays in picking procedures or that a shipping is lacking some items, managers have the information they need to immediately intervene. However, to ensure consistency among the metrics used at every level of management, make sure you choose a technology that allows you to smoothly tackle data silos.
Finally, historical data can be used to improve forecasting, which is critical in today’s business environment. As consumers expectations rise and competition intensifies, predictive big data analytics has become essential for business survival.
During the holiday season, for instance, enhanced forecasting can be used to predict potential shortages of workers in certain areas of the business, thus enabling to take action quickly and avoid costly peak-season congestions. Predictive analytics can also be used to anticipate demand peaks for any product, at any time, at the right the place and the right price.
Conclusion: big data as a tool to promote continuous improvement
The aforementioned examples and considerations were meant to underline the importance of big data technologies in supporting the shift towards a corporate culture of continuous improvement. Technology is a critical foundational element of any continuous improvement initiative, as it provides companies with a better understanding of their activities and a roadmap to eliminate inefficiencies.
Nonetheless, identifying the right technological solution remains a challenge. Each company has different needs and requires a tailored approach. To sort this issue out, independently from what their organization looks like, executives should start by identifying which data sources to tap.
Data can be collected from an infinite list of sources and at any stage of a company’s activities. In logistics, for example, every transaction, scan, arrival, departure, and order processing method generates data. However, not all data is meaningful and actionable the same way. Make sure you understand what data is most important for you.
Also, choose a big data solution flexible enough to be adapted to the needs of each manager. As you foster a culture of continuous improvement and identify the technological solution that most fits your needs, you should be able to develop a consistent and repeatable approach to process improvement.
Finally, don’t overfocus on technology. Continuous improvement is mainly about culture, while big data is just a tool. If your organization doesn’t have the right mindset, it won’t be able to eliminate its inefficiencies even when provided with the most powerful technological wonder. In the end, your role as an executive consists in managing complex cultural changes and the best technology is the one that helps you achieve such cultural shift.