The interesting science behind effective decision making by fleet operators

Peter Drucker, one of the foremost management thinkers has aptly said, “If you can’t measure it, you can’t improve it”.

In this ever-changing world, organizations across industries don’t just have to adapt to the change, but also face an uphill task of continuous improvement. One industry that needs to measure and manage the change on a daily basis, in-fact sometimes on a minute-by-minute basis is the logistics industry, which acts as a conveyor-belt for our modern world. The art of timely delivery of the right product, in the right quantity, condition and price to the right customer at the right place, depends on the science of inclusive and accurate planning & decision making.

The science of inclusive decision making for Logistics / fleet operators is guided by the identification of the right set of KPIs to be measured, carved out of a business goal. Example – To increase the fleet utilization by 25% and to reduce fuel consumption by 10%. Whatever the goal, the process of identification and measurement of KPIs is considered incomplete without a detailed understanding into actions and behaviours that need to be performed to achieve the required goal. KPIs must be identified, developed & selected entirely based on facts and deep analysis rather than emotions and perceptions.

Following are the ingredients for inclusive and accurate decision making by a fleet operator:

  1. Key themes and drivers for business goals
    • Enhanced fleet operational visibility
      It is said that seeing is believing. Hence visibility into the current status of the fleet operations is vital to ensure adherence and making necessary corrections to achieve the designated KPIs and the business goal.
    • Improved Operational Efficiency of the fleet
      Having achieved operational visibility, the next step is to further improve and optimize it. Some of the areas that can be considered for optimization are:

      1. Balance between maintenance, availability and utilization of fleet
      2. Completion of trips with reduced operational cost
      3. Completion of trips with the least or no degree of violation of rules and set KPIs
      4. Completion of trips with on-time deliveries
    • Predictive fleet operations
      Trends from the current set of data is great but it only facilitates a reactive or to an extent preventive mode of operations. The long-term theme must be to understand the patterns and anomalies from the data collected over a period of time and transition to predictive trends. The activity of creating predictive algorithms is known to unearth the complex correlations between functional, cross-functional & technical parameters that are otherwise unknown to the organizations. The predictive algorithms are primarily being developed for either continuous improvement and optimization of fleet operations, or for avoidance of vehicle failure.
  2. Measurement and analysis of the right set of KPIs
    1. KPI development process
      The need for selecting the right set of KPIs is an understated and less understood activity. This is by far one of the most critical steps required to achieve the set business goal. All efforts must be made to ensure that KPIs selected have a compounding and a direct relationship to the identified business goal, and corresponding parameters chosen provide the necessary accuracy to the KPIs. Without this the measurements will not lead to the desired improvements. The first step must be to create a KPI methodology. The methodology must go through the iterative process of definition, collection, set composition, implementation and assessment. KPI development methodology must be comprehensive and must aim to identify all parameters and KPIs leading to successful fleet operations.

      • KPI Definition
        There is no dearth of KPIs in logistics, but companies should also define their own KPIs specific to their business operations. While the KPIs like fuel efficiency, fleet utilization, availability, on-time delivery and others are here to stay, but definition of KPIs influenced by organization specific strategies & business goals are not uncommon. Also with the change in the business goal and objectives either new KPIs will have to be defined or the existing KPIs have to be appropriately tweaked.
      • KPI Collection
        The next step is to arrive at the required KPIs in relationship to the business goal and eliminate the outlier, low or no impact KPIs. Dealing with far too many KPIs will not only complicate systems but also takes focus away from monitoring the critical ones. E.g. OBD II provides huge volume of data and hence associated KPIs. But based on whether the goal is to monitor (fuel efficiency, combustion efficiency, emission rate) vs (trouble-codes, fault rate, % persisting fault), the KPI list would vary accordingly.
      • KPI Set Composition
        KPI set composition is a complex activity of arriving at the right composition of KPI sets with crisp criteria (performance, availability or quality), right number of KPIs and right balance of focus KPIs vs aggregate KPIs. If the business goal is to achieve 10% planned increase in fleet utilization, then it requires consideration on:

        • Desirable number of KPIs to ensure that only the decision deriving ones are chosen (though psychologist George Miller’s rule says “Seven plus or minus two” – lesser is always better).
        • Right balance between focus KPIs and aggregate KPIs for an objective and accurate view of fleet
      • KPI Implementation
        KPIs are rolled out onto the field for the live fleet. It needs be ensured that the KPIs implemented are accurate, actionable, independent, predictive, quantifiable, traceable, verifiable, cost-effective and have buy-in from stakeholders. The involved stakeholders need to be trained for proper implementation of KPIs.
      • KPI Assessment
        Once implemented, the KPIs must be assessed for the relevance and accuracy. Assessment must
        determine the following 2 elements,

        • accuracy of KPI alignment with the target business goals
        • accuracy of KPIs w.r.t to criteria (performance, availability, quality).
          The results need to recorded and should be used to generate a prioritized list of action items by
          {KPI, criteria} and {KPI, business goal} pairs formed by measuring the importance of the KPI to trips.
    2. List of KPIs for consideration
      The KPIs below can provide a fleet operator a holistic and accurate picture of their operations, and
      facilitate effective decision making:

      • Fleet KPIs:
        Fleet operator’s aim is to have their entire fleet available and utilized for revenue generating trips at minimum possible costs. Hence operators should monitor the overall health of their operations by looking at KPIs at a fleet level. Example – average distance travelled per day.
      • Vehicle KPIs:
        Vehicles are the most important asset for any fleet operator and they are also their biggest investment. It is vital for the logistics player to understand both the current and the past trends of a vehicle’s condition. Fleet operator needs to know how the engine is operating, how are the emission levels, faults that are persistent and needs immediate attention, fuel efficiency, etc at each vehicle level.

        • OBD KPIs
          On-board diagnostics systems provide the vehicle technicians and owners access to various vehicle subsystems. Latest OBDs provide detailed information on engine, fuel, DTCs (diagnostic trouble codes) and the corresponding freeze frame data. DTCs help rapid identification and remediation of malfunctions within the vehicle. Information from OBD can not only facilitate maintenance of vehicles in best possible running condition but also in reducing unexpected breakdowns
        • Location Related KPIs
          Knowing the location of the vehicle at any given point of time is of paramount importance. It not only helps get operational visibility, but also facilitates tracking performance viz-a-viz defined SLAs and provides an input for effective planning of fleet operations.
      • Driver KPIs
        It is the drivers who in principle owns the vehicle during the trip. The health of vehicle has a huge
        dependence on their driving style. If a driver’s style involves idling for long durations, over-speeding
        or patterns of harsh braking/acceleration, it will have a significant impact on the health of the
        vehicle and also fuel consumption. So, even if a driver is delivering the shipment on-time, fleet
        operation become unviable and unprofitable in the long run due to increased operational and
        servicing costs.
      • Product KPIs
        Purpose of fleet is to carry products from point of origin/source to point of
        distribution/consumption. Transportation of temperature sensitive goods or hazardous materials,
        requires continuous monitoring of product condition during the journey to ensure product quality
        and safety. It is therefore logical to identify and track KPIs not only to measure on-time delivery but
        also the ones that ensures product quality & integrity.
      • Route KPIs
        Fleet operators go through an elaborate process of identifying routes, testing the routes followed
        by profiling the routes on various parameters (e.g. No. of tolls, traffic congestions, average time to
        reach, stopover locations, fuelling stops, fast /slow zones, terrains, etc.). Since SLAs committed to
        customer are based on route profiling, it is logical to expect operators to continuously measure
        actual vs assumed performance at route level.
      • Cross-functional KPIs
        While the KPIs at fleet, vehicle, driver, product and route are seen and analysed individually, the
        holistic intelligence on fleet operations is infused by the cross-functional KPIs. As in, a driver A with
        the vehicle B on route C gives the highest fuel economy and on-time delivery.

More and more logistics operators are realizing the importance of KPIs in helping them track the rhythm and health of their business operations. They are also becoming aware of the role these KPIs can play in driving effective decision making. There are however two aspects that needs their focus in the days ahead. Firstly, the process of identifying, evaluating, implementing and improving the KPIs has to be structured and holistic. Secondly, appropriate technology investments have to be put in place to drive this change.

At SensiWise, we are committed to helping commercial fleet owners and operators reduce their operational cost and improve their profitability. We do this by leveraging technologies like IoT, Analytics, and Blockchain. Our ready-to-deploy solutions allows them to get started quickly.

If you are a player in this segment and would like to understand more on how technology can help your business, do contact us.

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