5 Steps to Building a 10X ROI Logistics Solution

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5 Steps to Building a 10x ROI Logistics Solution

Sustainable continuous improvement failure is behavior based. “What! That’s an awfully strong statement,” you may be saying to yourself. Indeed, there are many ways for a continuous improvement (CI) program to fail.

Yes, it is true there are many aspects to effective and sustainable CI programs and the number one area of failure is not taking behavior changes seriously. Many executives say that they don’t have time, they must fix the problem, stop the bleeding, or improve quality now, or … (you know what it is.)

The 10X ROI Logistics Solution is not an either/or solution. It is based on tackling the issues that must be resolved now, while at the same time teaching the team to sustain improvements and actually seek out more improvements that yield high results, for example:

  • Boosting revenue growth by 12% while reducing payroll expenses $1.1 million
  • Improving driver labor production by 15%
  • Increasing driver headcount by 45%
  • Increasing asset utilization by 28%

The organizations that created the above results built a sustainable process of continuous improvement in supply chain, logistics and transportation using the following five steps.

  1. Culture of Continuous Improvement

The process begins by creating a culture of continuous improvement at the top, that is supported throughout the entire organization. Everyone must believe that no matter how successful the company is, the results must always get better. Everything must be measured, standardized and improved regardless of how small the ROI. Every day the status quo must be challenged asking: “how can we get better – in everything?”

  1. Identification

Identify all operating procedures, expenses, headcounts, properties, assets, efficiencies, etc. Using data and KPIs determine what a good standard should be, for each measurable item. If you spend $300 for a tire, how can you spend $290? Or, how can you have 8 flats instead of 10? If 20,000 sq ft. of warehouse space is utilized, how can space be reduced to 19,000 sq ft.? If there are five forklifts, can the same work be done with four? If a driver averages 15 minutes at a delivery stop, how can they be lowered to average 14 minutes? It is that level of detail needed to succeed.

  1. Root Cause/Gap Analysis

The next step is to conduct a root cause/gap analysis to determine what is preventing reaching the standard. All causes must be vetted. For example, if drivers are missing the delivery standard by one minute, all the causes of that delay must be found. Is it because the driver is getting delayed at the front gate? Are drivers required to check-in at different locations? Does the driver need to find a forklift operator to unload? Or, maybe it is all of the above? The key is to find out everything that is causing the standard to be missed. You may even learn that the standard should be 10 minutes after conducting a thorough root cause analysis.

  1. Incremental Improvement

Once all root causes are identified, isolate each cause and determine how to improve it. Maybe there are four causes for delaying the driver. Take each cause and find a solution for improvement. If you can improve each cause by 15 seconds, you will achieve your standard of 14 minutes. It becomes much easier to reach a standard when each cause is resolved independently.

  1. Reward

Once a standard has been consistently achieved, it’s a good idea to reward the employees involved and at the same time raise the bar. This process should cycle through every part of the business and should never end. At the same time, do not jeopardize safety, quality or service in the process. Eventually, employee behaviors will change, and then there will be a sustainable process of continuous improvement.

In addition, find out what expenses are included in each line item and create a standard for each expense. For example, there might be 10 separate maintenance expense line items (tires, parts, fuel, vendor repairs, etc.). If this is the case, look at every invoice and set a new standard for each invoice. It might be discovered that some expenses can’t be improved. Some might only be improved by a minimal amount. But some might be improved significantly. Collectively, they can all add up to big savings. For example: If a fleet owner buys one hundred tires a month and saves $10 a tire, that’s a $1000 savings/month or $12,000 savings/yr. If they did that for just 10 separate expenses at the same rate, they now have $120,000/yr. savings. And if they did this for 10 different P&L line items, they just saved $1.2 million. If the company did this for five different departments, the company now enjoys a $6M improvement! The $10 savings is not the most important factor; it’s the cultural mindset that is being instilled that’s important.

These results are typical when your organization follows the operating system of the 10X ROI Logistics program. Even if you are measuring and tracking KPIs, call MetaExperts for a free Executive Chat to identify what may be preventing your organization from reaping outstanding profits and employee retention.


Additional Reading

Turn Logistics from a Cost Burden to Profit

Third Party Logistics (3PL) Selection Process


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