For a logistics business organization; it is all about value addition & doing business which is sustainable and profitable either by improvement at the top or the bottom line (i.e. increasing revenue or reducing cost). Performance management addresses it very clearly. It works as a tool which helps freight logistics organization to understand the current scenario clearly by having key performance indicators (KPIs). It is used to measure the gap between the desired performance vis-à-vis the actual performance and key areas can be found on which development is needed. The system is so powerful that it can drive the strategy of the organization. For implementing the performance management the following steps can be followed:

The key areas need to be defined taking the balanced score card into consideration such as customers perspective, financial perspective, internal business process (operational) perspective and internal business (people) perspective.  Then exhaustive list of parameters under these heads are defined and they should be SMART (Specific, Measurable, Achievable, Realistic, Timed)

• The need is to boil down to some 3-5 KPIs under each head which explains most of the business desirables
  
• It is more important to know the business relevance behind any KPI before selecting it
  

After implementation, these KPIs work wonder. They measure the current supply chain business processes and track them. The areas for improvement can easily be identified and the gap can be reduced by taking corrective measures

From the first joint study conducted by MIT Sloan Management Review and IBM Institute for Business Value, it has been found that companies who are in the aspirational stage have little or no competitive advantage. However, those in the transformed stage are best positioned to gain long term advantage by taking better decisions leveraging on their analytics capabilities.

The insights given by business analytics can be implemented in the organization by having proper systems in place as formulated under Simon’s Levers of Control. These systems are explained as follows:

Belief system: For the organization to buy in the system and adopt the system from top to bottom level (i.e. managerial to employee level). It goes with the learning curve. As initially the performance may go down due to adoption but ultimately it will pay off. The initial glitches need to be diagnosed and catered. It is necessary to get the job done

Diagnostic Control System: This system measures critical performance variables which can be compared to standard benchmarks  and can be improved if there exists any gap

Interactive Control System: The implementation of this system needs to be interactive throughout the organization from the top to the bottom. It adds to learning and growth of the organization

Boundary System: The system controls the employee behaviour and keeps check on malpractices which definitely reduces leakage and wastage

Business Analytics can be used to create a dynamic, interactive interface which can be used not only to know the present status of the business but also to do a predictive analysis, thereby leading to a better decision making process for freight logistics companies. It enables an organization to remove guess work from its decision making exercise and gain competitive advantage through analytical sophistication.

Contributed by Amber Yadev and Abhinav Sinha, (PGP15 IIM Kozhikode / summer Interns @ SA-FMS)