Imagine you’re tasked with overhauling your supply chain based on internal procurement data. It costs millions of dollars, has a significant potential impact on the business, and may help or hurt the direction of your career. The integrity of the data you use is vital to the outcome. Many supply chain decisions are made based on shipment trends, cost, and KPIs that are generated from TMS, WMS, ERP systems, and other procurement platforms. These systems are only as good as the data that flows into them as incomplete data fields create limitations. These constraints can force a company to make a decision based on partial data. Validating your systems and confirming the data flow between them is key to ensuring data accuracy and justifying your logistics solutions and decisions.
Let’s use a real life example to measure the impact. ABC Company sells widgets and measures its transportation costs at the case level. The organization tenders its shipments through an ERP system that creates orders for vendors using a purchase order (PO) number and measures cost using an invoice ID. When ABC Company attempts to measure cost per case this common mistake occurs:
Carrier A invoiced ABC Company for delivering 1,000 cases of widgets from Philadelphia, PA to Dallas, TX for $2,500.00. Carrier A forgets to bill for detention and cuts a second invoice for $150.00. Both invoices are captured separately in the ERP system inflating the delivered statistics, which understates cost per case.
Cost per case can be drastically understated when multiple invoices are issued for the same load. When multiple invoices are issued, most organizations export data from their ERP system at the shipment level, which can understate cost metrics. If an organization were to multiply this scenario by tens and thousands of shipments, transportation costs would be vastly understated. It’s important to be familiar with your data sets to recognize these issues. A consistent reporting format will allow for a higher level of data integrity leading to better supply chain decisions.
Inaccurate data can also create disconnects between vendors and customers. Data is used to track inventory as well as the performance of vendors. On-time pickup and delivery metrics are KPIs that impact inventory levels, sales, and potentially vendor relationships. It’s difficult to track on-time performance without electronic status notifications and at times cost an organization non-compliance fees. Many customers have implemented a program to recoup costs incurred by late deliveries. These costs can be as high as 25% of the landed cost of the delayed goods if on-time percentages reduce to a non-compliant level. Creating vendor and carrier scorecards to track these metrics will not only improve the performance of your supply chain, but save money by tracking and validating your networks performance.
One key mistake made in supply chain is providing a customer, vendor, or internal leadership with inaccurate reports. It’s important to remember that there’s a human component with supply chain activity such as cutting purchase orders, scheduling, executing route guides, and managing distribution logic. A 40,000 pound shipment can be incorrectly entered as 400,000 pounds if an operator accidentally makes a key error with an extra zero during order entry. An additional 360,000 pounds in a small data set can completely skew reporting metrics.
Sorting data by key fields to capture exceptions is vital to the end result. You must have the ability to capture the minimum amount of data to create analyses, pivot tables, or dashboards to effectively measure components of a supply chain. Another important aspect is to identify what is necessary to complete an adequate analysis. Larger subsets of data lead to more optimal results.
Several adjustments can improve a network’s data accuracy. One of the fundamental aspects of data is that a large part of it comes to the organization from another source. If that information is not correct, or is not present, it leaves you with gaps. One proven initiative that can be incorporated into your operation is to create a vendor scorecard to measure performance and PO accuracy. Customers continue to implement fines at the PO level for non-compliance associated with PO ship windows and accuracy of data. The same methodology exists for carrier EDI compliance. Some have set up EDI 214 status notification expectations and measure their carriers based on the timeliness of updates. If you aren’t receiving EDI notifications then this may be a way to improve your communication and get real time information while improving visibility. Requiring stores to also update their dock and yard management systems allows you to capture actual delivery information. You can use this data to conduct a store and carrier scorecard to validate performance — giving leadership the tools they need to promote positive behavior and compliance.
Data integrity may be a component of your supply chain that is overlooked but can be a huge advantage. Being confident in your data can lead to the success in landing new business or re-negotiating contract terms with an existing customer or vendor. Finding possible trends and opportunities wouldn’t be possible without accurate data. The right KPIs, systems, processes, and partners will allow you to create value, produce accurate analyses, and assist in delivering outstanding customer and vendor experiences.