AUTHOR: Narendra Bhende Business Analytics in the Logistics Industry contents Abstract... 2 Current State of Business Analytics... 3 Business Analytics in the Logistics Industry... 5 Conclusion... 6 References... 7 About the Author... 8 About L&T Infotech... 8 Business Analytics in the Logistics Industry Page 1 of 8
Abstract Every business generates huge amount of data in the course of normal operations. This data is often analyzed to gauge current performance and explore possible ways to improve it further. This is done systematically and scientifically using business analytics which involves diagnostic, predictive and prescriptive analysis. However, the amount of data is ever increasing and is further boosted with the availability of digital work place and technology allowing almost paperless offices through digitization. Data generated through social media which is multiple times larger than what used to get generated a few years ago adds to the quantity of data generated. Earlier, organizations relied on standard sets of reports produced by their EDP (Electronic Data Processing) departments. These reports were periodic, static in nature and mostly in printed form. In the phase that followed, organizations set up MIS departments which were responsible for data warehousing and business intelligence. Organizations used standard sets of data values and a few statistical and quantitative techniques for analysis and decision making. The advent of sophisticated, state-of-the-art technologies and superior computing power has changed the scenario. It is now possible to use explanatory and predictive modeling which helps in better decision making. Business analytics has evolved considerably helping businesses worldwide in identifying business opportunities, responding appropriately and thereby benefiting from the results. With ever increasing competition and challenging business conditions, the demand for business analytics is growing exponentially. Most of the literature about business analytics focuses on supply chain and financial services. Even though the travel industry is one of the most customer-centric industries, seldom do travel companies put in efforts in business analytics. Business leaders still struggle to get meaningful insights from available business analytics. Travel companies are yet to begin focusing on identifying the ever changing customer preferences, and accordingly crafting solutions that can make them preferred travel partners. Business analytics can be the most beneficial tool for understanding customer preferences and getting timely answers to many similar questions that require quick and informed decision making. Challenges faced by logistic companies are unique and so are the solutions. Logistics companies serve individuals as well as businesses, and one of their biggest challenges is achieving on-time delivery and fulfilling service level agreements in the most cost-effective manner. Global economic recession and changing patterns of the world economy have also posed a great challenge to the logistics industry. In such turbulent times, business analytics can help logistic companies determine specific drivers for driving performance. It can pinpoint revenue leakage instances and improve decision making capability, thereby allowing logistics companies to take timely corrective actions and achieve SLAs (Service Level Agreements). This paper describes the challenges faced by travel and logistics companies worldwide and how possible business analytics solutions can help address them. It further describes various use cases in the travel and logistics space. Business Analytics in the Logistics Industry Page 2 of 8
Current State of Business Analytics Business analytics adoption level is highest in the securities and investment industry. This is obvious considering the huge amount of financial data that this industry needs to function in almost real time to drive the sensitive decision making process. Transportation finds the 6th slot in business analytics adoption levels. Though this result indicates that business analytics is used in some form by logistics organizations, it doesn t state how widely business analytics is adopted. An IDC survey of over 2,700 IT managers shows that 91% of large enterprises (with over 5,000 employees) have implemented an analytics solution, while 83% of medium-sized enterprises (with 500-5,000 employees) have done so. The same IDC survey of IT managers shows that over half of the respondents have packaged rather than custom analytics solutions. The reasons for this are the ease of use and broad availability of skills to maintain the solution. Gartner's 2013 Magic Quadrant for Business Intelligence and Analytics Platforms Report features the vendors in the BI (Business Intelligence) and analytics space. According to the report, Gartner sees a shift from descriptive reports to building diagnostic analytics with reasoning capabilities. Diagnostic analysis leads to predictive analysis to determine the trend and finally the prescriptive analysis which suggests alternatives and helps in decision making. As per Gartner, move towards "decentralization and user empowerment of BI and analytics" is powering the trend. Business Analytics in the Logistics Industry Page 3 of 8
Gartner describes leaders as "Leaders are vendors that are reasonably strong in the breadth and depth of their BI platform capabilities and can deliver on enterprise-wide implementations that support a broad BI strategy. Leaders articulate a business proposition that resonates with buyers, supported by the viability and operational capability to deliver on a global basis." Vendors are increasingly moving up in the report which indicates the increasing maturity acquired by the platforms. Business Analytics in the Logistics Industry Page 4 of 8
Business Analytics in the Logistics Industry Business analytics helps logistics and distribution companies improve the speed, accuracy and reliability of goods movement. Business analytics can immensely benefit most players in the logistics ecosystem such as shippers, 3PLs, 4PLs, freight forwarders, ocean shipping, trucking, rail, air cargo, airports, sea ports, rail terminals and regulatory authorities too. A logistics service provider organization generates huge amount of data at different data capture points. It includes ordering data, cargo-tariff data, scheduling data, charging & billing data, asset management, fleet mapping, maintenance, storage area and allocation data and RF integration data. Though most of the logistics organizations already have this data in their data stores, they use it only for operational purpose and do not know what to do with the archived data. Business analytics can bring out the real value of this data which can lead to improved supply chain efficiencies and customer satisfaction at reduced costs. Cost Savings Analytics The biggest scope for cost reduction in logistics is in the area of fleet maintenance. Logistics organizations have always struggled to reduce fleet maintenance costs. Traditionally, organizations maintained preventive maintenance schedules which helped them achieve reliability. However, business analytics can go miles ahead in determining optimal schedules for preventive maintenance. This approach helps organizations avoid unnecessary maintenance while ensuring necessary maintenance right on time. This helps maximize asset life at a much lower cost. In case of break-downs, business analytics can quickly perform repair/replace comparison and suggest the best cost-effective way. It can also perform root-cause analysis and help reduce repetitive failures. The biggest advantage of business analytics is in the field of predictive maintenance. Real-time big data analysis and rule-based artificial intelligence algorithms help suggest maintenance, thus avoiding field failures. Labor Planning Analytics Business analytics can effectively facilitate resource allocation. It can enable scheduling with correct matching of routes to fleet to driver. It allows optimization of resources by reducing idle time between trips. It can also suggest overtime/outsourcing possibilities to improve efficiency at reduced costs. Business analytics can be further leveraged by organizations to understand driver sentiments based on analysis of their conversations and organizational behavior patterns. This analysis can be effectively used by HR departments to improve productivity and efficiency, and retain staff. Warranty Analytics Business Analytics can also help transportation companies maximize benefits from warranty. Manufacturers are expected to service equipment free of cost during warranty periods. However, non-availability or poor quality of data become major bottlenecks in warranty claims process. In such a scenario, predictive analytics can provide early warning signals which help transportation companies to service assets even before they fail. This saves cost as well as ensures timely service under warranty. One challenging example of warranty analytics is in the rail industry where warranty of moving stocks is involved. There is a very limited time window to inspect, identify defects and service. Predictive analytics saves time and provides timely maintenance information so that moving stocks can be serviced just in time. Business Analytics in the Logistics Industry Page 5 of 8
Embedded Analytics Transportation management systems (TMS) require a lot of inputs along with fine tuning of configuration parameters for effective functioning. With business analytics of relevant data, the performance of TMS can be continuously monitored and results can be fed directly into TMS resulting in automatic fine tuning of TMS. As this happens in almost real time, optimal performance can be obtained. Other Applications There are numerous other possibilities of using business analytics in logistics, including: Selection of a profitable mode Selection of a profitable route Load building and consolidation Freight charging and billing Conclusion With technology advances and increasing digitization, organizations today generate more and more data, but struggle to gain maximum benefits from it. Business analytics is a scientific and systematic way to apply sophisticated quantitative and statistical analysis and predictive modeling to obtain tangible business results. Business analytics can be immensely beneficial to the travel and logistics industry. More and more businesses prefer packaged rather than custom analytics solutions. Gartner s 2013 Magic Quadrant for Business Intelligence and Analytics Platforms Report features SAP, Oracle, Microsoft and TIBCO Spotfire as some of the leaders in this area. In the travel industry, business analytics can be used to obtain meaningful predictive insights through data collection from a number of data sources such as Travel Management Companies (TMCs), Global Distribution System (GDS) providers, call centers, user interfaces, travel agencies and individual carriers. Sales and marketing analytics can help organizations in the travel industry understand behavior patterns of their customers. This information helps organizations analyze trends and customer preferences their likes & dislikes and sentiments. This can then act as a powerful tool for devising strategies, uncovering hidden sales opportunities with the right decisionmaking strategies, and also, in identifying unknown risks in market segments. Social media analytics can help organizations explore meaningful information from a huge amount of irrelevant data. It can provide information in the form of level of satisfaction, factors responsible for the level of satisfaction on-time arrivals, involuntary denied boarding, mishandled baggage, quality of food, etc. This information can help the carrier work on a corrective action plan and improve the rate of satisfaction. Customer buying patterns analytics helps in creating differentiation, targeted products, campaigns, promotions and discount offers. Predictive product pricing helps in dynamically and intelligently changing pricing, and thereby maximizing revenues, reducing losses by optimizing capacity utilization. Some other possible use cases of business analytics are demand/sales forecasting, inventory management, revenue leakage, cancelations, Customer Life Time Value (CLTV) and loyalty, and multi-channel campaign optimization. Business analytics in the logistics industry can help save costs by way of predictive maintenance. It suggests optimal schedules for preventive maintenance and can quickly Business Analytics in the Logistics Industry Page 6 of 8
suggest repair/replace options in case of break-downs. Labor planning analytics help in maximizing resource utilization with improved productivity and efficiency. Warranty analytics helps organizations in take maximum benefits out of warranty conditions including timely replacements. Embedded analytics turbo charges transportation management systems by feeding back the output data, thereby automatically fine-tuning the system for maximizing performance. Business analytics can also be deployed for selection of a profitable mode, selection of a profitable route, load building and consolidation, freight charging and billing, etc. Abbreviations and Acronyms CLTV TMC GDS TMS SLA EDP Customer Life Time Value Travel Management Companies Global Distribution System Transportation management systems Service Level Agreement Electronic Data Processing References 2012 IDC Manufacturing Insights Gartner's 2013 Magic Quadrant for Business Intelligence and Analytics Platforms Business Analytics in the Logistics Industry Page 7 of 8
About the Author Narendra Bhende is a BE (Bachelor of Engineering), MBA (Master of Business Administration) and a PMP (Project Management Professional) with 18+ years of rich IT experience. As a Delivery Head with a Fortune 100 company, Narendra has managed the organization s regional development center and has provided IT services for regional IT across platforms like Mainframe and mid-range systems - Sun Solaris. He has also offered support for various applications like ERP, E-commerce and EDI across various geographies ANZ, Southeast Asia, India and China. Narendra has a decade of experience in the supply chain domain which includes areas of Distribution, Logistics, Inventory (MM), OTC(Order to Cash), P2P (Procure to Pay), Credit and E-commerce. He was part of a number of transition and transformation initiatives and is a recipient of a Global Award of Excellence for his contribution. About L&T Infotech L&T Infotech is a wholly-owned subsidiary of the USD 14 billion Larsen & Toubro (ranked 9 th by Forbes among World s Most Innovative Companies in a 2012 study of global corporations) which has a presence in construction, engineering, manufacturing and financial services. One of the fastest growing IT Services companies, L&T Infotech is ranked by NASSCOM as the 9th largest software & services exporter from India and among the top 20 IT BPO employers. L&T Infotech provides end-to-end solutions and services in the following verticals: Banking & Financial Services; Insurance; Travel & Logistics, Media & Entertainment, Healthcare, Manufacturing, Energy & Process, Utilities, E&C, Hi-tech & Consumer Electronics, Product Engineering Services (PES), Consumer Packaged Goods, Retail & Pharmaceuticals, Auto & Aerospace, and Industrial Products. L&T Infotech also delivers business solutions to its clients in the following horizontals/service lines: Testing, Mobility, Infrastructure Management System; Business Intelligence/Data Warehousing, SAP, Oracle and Microsoft, Enterprise Integration and Manufacturing Execution Systems, in addition to an innovative CIO-thought partnership program that provides a valuedriven edge to clients. L&T Infotech s horizon is filled with the promise of new and cutting edge offerings in the technology space including an end-to-end cloud computing adoption toolkit and cloud advisory consulting services; enterprise mobility solutions covering a smart access platform; big data advisory services; and in-memory computing. L&T Infotech has developed intellectual properties (IPs) in all the vertical and horizontal service lines and leverages them to provide IP-led solutions. L&T Infotech, headquartered in Mumbai, India, has a global presence across continents. The Company prides itself on a culture of training and mentoring. Coupled with a work ethos that encourages innovation, the Company lists high among the best companies to work for. L&T Infotech is differentiated by its unique Business-to-IT Connect which emerges out of its rich corporate heritage. For more information, visit us at www.lntinfotech.com or email us at info@lntinfotech.com Follow L&T Infotech on: *All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from L&T Infotech. Business Analytics in the Logistics Industry Page 8 of 8