How do companies make sense of all the data that's available to them today? And how does that translate into the creation of appropriate metrics and key performance indicators in distribution? Tim Judge, president and CEO of Agilitics, offers some guidance.
SCB: What do you see as the big challenge today when it comes to defining and managing metrics in distribution?
Judge: Metrics have been important for a lot of organizations for a long time. What we’re trying to do now is make sure that the metrics we're tracking throughout the organization align with our strategies.
SCB: What's the difference between the companies that are doing that right, and the ones that are still struggling?
Judge: It starts with leadership. Where companies struggle is, they'll come up with a vision statement of what they should be doing, but it's very nebulous. It's not tangible from a mission perspective. If you're, say, Toyota, and quality is your guiding principle, you need to make sure your metrics align with that. If you’re Amazon and your focus is on service, then all of your metrics up and down the organization should align with that strategy.
SCB: What are the most important metrics today?
Judge: It differs by company and industry. Overall, companies do a pretty decent job of understanding what their best practices are, and which metrics they should be tracking. Over the last several years, with shortages in labor, talent and training, we've seen a transition from people-type metrics to an emphasis on managing complexity, in response to mergers and acquisitions. A lot of companies are running into capacity issues in distribution centers, so they’re looking to metrics that can help balance peak holiday seasons with times of average capacity.
SCB: Do you find differing metrics within organizational siloes, and do they need to be aligned in many companies?
Judge: Absolutely. A lot of companies struggle with having siloes across functions. Whether it's in supply chain, purchasing, transportation, warehousing, or the store, you need to make sure that all of those metrics are normalized across the organization.
SCB: What’s role is technology and software playing in the world of metrics today?
Judge: Technology is always going to be an enabler. Often, though, companies chase the latest and greatest technology, and get into trouble. They get dazzled by it. A good example is about five years ago, when companies were making a lot of progress in getting data into consolidated data warehouses, in order to have one version of the truth across the organization. They moved toward data lakes and capturing everything they could possibly capture. They abandoned the traditional structured approach to doing stuff.
Now they're finding it was a lot harder than they thought to get all that data together to make better decisions and insights. It's not great just to jump at the latest technology. But if it ties to your strategic goals from an IT perspective, you can get value and visibility out of it.
SCB: What role are the internet of things, artificial intelligence and machine learning playing now, and what role might they play in the future?
Judge: Machine learning has been around for a while, but it at the same time, it's being enabled by a massive amount of data. There are more bits of data now than there are stars in the universe, and that's not going to slow down. When you start adding in a lot of sensor and real-time data, and everything is being tracked, that enables these programs to learn quickly and make better decisions.
SCB: How can companies avoid being overwhelmed by all this data and accompanying technology?
Judge: Companies shouldn’t feel that they need to capture all of it on Day One. They need to figure out the smart questions that tie to their strategy. Once they have that, then they should focus on achieving a better and more granular level of data on what they’re trying to track. There are some risks, but it could make all the difference in the world.
