Executive Briefings

In Uncertain Times, Get Back to Basics

Today's economic uncertainty has brought transportation and distribution operations back to the board room. The fluidity of the supply chain is critical to the long-term success of the organization and should be on everyone's mind.

There is no question that understanding the ebb and flow of transportation and distribution is key for any executive in today's restless economic climate. The increased variability in supply and demand, along with the rising costs of maintaining business performance, have put a great deal of pressure on the people responsible for reporting corporate performance to the board. While over 90 percent of Aberdeen Group survey respondents in July and September 2008 indicated plans to improve operations within the coming 12 to 24 months, the question on whether or not they'll follow through lingers. Not only has the uncertainty in supply and demand affected operations but customers continue to put more pressure on companies to deliver more value within tighter windows, often using that measurement for pricing and negotiation. Without question, the topic of transportation and distribution should be at the forefront of every executive's agenda in the coming year. There are very few areas of our world today that are not affected in some way or another by the complexity and the cost of transportation and distribution. From the rising costs of shipping food around the world and its impact on the average cost of a meal for the average person, to the need to re-evaluate supply chain layouts based on the "total" cost of doing business, transportation and distribution are in the mix and critical for success.

Before big changes can take place, many executives agree that there needs to be a better baseline to operate from and better visibility into key performance indicators of today's business. Almost 50 percent of survey respondents indicated that gaining better visibility into transportation and distribution activities was a key strategic action going forward. In addition, creating more flexibility in warehouse operations, reducing freight costs, and collaborating more with internal and external partners were some of the key actions identified to help offset today's pressures. Over 50 percent of survey respondents still rely on performance measurements that are at least a month old in order to provide visibility across operations. In many cases, less than 20 percent of respondents indicated the ability to utilize daily performance measurements.

Without insight into more real-time performance, it's difficult to truly understand where the company stands today in response to current pressures, and even more difficult to make strategic decisions for tomorrow. Because of the rapid change in today's supply and demand climate, trends can emerge more rapidly and time is of the essence when it comes to improving tomorrow's operations. If today's executives are not putting together strategic teams to evaluate existing performance and plan for improving operations around transportation and distribution going forward, there is a great deal of risk for the company and its ability to sustain a high-degree of profitability for tomorrow.

The Outlook

With the increased level of awareness around the true cost of transporting and distributing products, many organizations will place an emphasis on ensuring that operations are more efficient and can be flexible enough to handle the changes coming from the market uncertainty. For the 90 percent that are going to be improving operations in the coming two years, aligning business goals with operational capabilities is one of the most important activities companies will take on in the coming months.

There is no question that understanding the ebb and flow of transportation and distribution is key for any executive in today's restless economic climate. The increased variability in supply and demand, along with the rising costs of maintaining business performance, have put a great deal of pressure on the people responsible for reporting corporate performance to the board. While over 90 percent of Aberdeen Group survey respondents in July and September 2008 indicated plans to improve operations within the coming 12 to 24 months, the question on whether or not they'll follow through lingers. Not only has the uncertainty in supply and demand affected operations but customers continue to put more pressure on companies to deliver more value within tighter windows, often using that measurement for pricing and negotiation. Without question, the topic of transportation and distribution should be at the forefront of every executive's agenda in the coming year. There are very few areas of our world today that are not affected in some way or another by the complexity and the cost of transportation and distribution. From the rising costs of shipping food around the world and its impact on the average cost of a meal for the average person, to the need to re-evaluate supply chain layouts based on the "total" cost of doing business, transportation and distribution are in the mix and critical for success.

Before big changes can take place, many executives agree that there needs to be a better baseline to operate from and better visibility into key performance indicators of today's business. Almost 50 percent of survey respondents indicated that gaining better visibility into transportation and distribution activities was a key strategic action going forward. In addition, creating more flexibility in warehouse operations, reducing freight costs, and collaborating more with internal and external partners were some of the key actions identified to help offset today's pressures. Over 50 percent of survey respondents still rely on performance measurements that are at least a month old in order to provide visibility across operations. In many cases, less than 20 percent of respondents indicated the ability to utilize daily performance measurements.

Without insight into more real-time performance, it's difficult to truly understand where the company stands today in response to current pressures, and even more difficult to make strategic decisions for tomorrow. Because of the rapid change in today's supply and demand climate, trends can emerge more rapidly and time is of the essence when it comes to improving tomorrow's operations. If today's executives are not putting together strategic teams to evaluate existing performance and plan for improving operations around transportation and distribution going forward, there is a great deal of risk for the company and its ability to sustain a high-degree of profitability for tomorrow.

The Outlook

With the increased level of awareness around the true cost of transporting and distributing products, many organizations will place an emphasis on ensuring that operations are more efficient and can be flexible enough to handle the changes coming from the market uncertainty. For the 90 percent that are going to be improving operations in the coming two years, aligning business goals with operational capabilities is one of the most important activities companies will take on in the coming months.