CONTRIBUTION BY TOM CRAIG – SUPPLY CHAIN AND LOGISTICS CONSULTANT AND PROFESSIONAL AT LTD MANAGEMENT
Concept of Granularity A company is not homogeneous. It has different granularity. Granularity reflects the size of the units being assessed, whether large or small. Think of the United States as a country, then each state and then counties within a state; each level reflects a degree of granularity.
For businesses, product categories may be considered coarse-grained and individual products can be fine-grained. Fine-grained, smaller units are the surprises of the analysis. Note, granularity is a term often used with information technology related applications. That is not the will be discussed.
The firm’s granular content is defined by and within its different divisions or business units, if it has them; or by different department or product categories. It means looking deeper into a company to gain insights, especially with regards to smaller, less recognized areas or products of the company. It means looking for the gold nugget among the rocks and gravel.
With granular analysis, the company can identify key performance areas to compete in. Profit contribution, return on investment or revenue growth of divisions or product categories is a good way to assess the granularity of a company. The revenue, profit or return metric should be compared to overall GDP (gross domestic product) or some similar measure. Results that exceed the comparative measure are what need to be identified and exploited.
A granular review may find opportunities that traditional analysis could miss. Conventional analysis often stays within the context of the present organization or within terms such as strategic or tactical. To some extent, such rigidity in approach can predetermine the results of the analysis and overlook hidden drivers within the business.
With the granular analysis, the firm looks at customers, customer types, market segments, geographic regions, individual SKUs and other sub-levels. As a result, the company can find performance areas that they compete in and in which they outperform. As such, it may identify areas within business units or product categories that are less emphasized by the overall company organization or portfolio and that may be otherwise overlooked. The company should then work to understand the opportunities and focus on the identified and prior unrecognized areas or products.
Application in Supply Chain Management
Granularity has value for supply chain practitioners and for 3PLs and other logistics service providers. For supply chain management, it presents two options. One is how to support and to effectively handle these fine-grained opportunities. Two is the use granular analysis within the supply chain process where there are likely granular opportunities.
There can be a challenge in the supply chain support for fine-grained company opportunities. This would involve costs to support smaller customers or markets. Operations effectiveness often includes volume as a driver of velocity. This can be seen, for example, in the transit time of a truckload of products versus a less-than-truckload shipment or a parcel size shipment. This method also stays within traditional accounting practices where cost spread over more units means lower costs per unit. Similar implications are with warehousing large volumes or picking large orders. Such issues need to be recognized before the specific supply chain support for the company’s granular growth or related opportunities are developed and implemented.
For the second option is reviewing the company supply chain for granularity. For example, the analysis may proceed with the firm’s assessing the first level, the inbound supply chain. Then it looks at the next level, imported products and orders. Then to imports from a certain geographical region.
The supply chain practitioner then looks at the container movements. Then at the ocean carrier and/or freight forwarder who handled the container. Nothing is outstanding there. There are nominal differences among the logistics providers. He then looks at it be inventory priority-A, B and C. That review may be masked by the performance of the logistics service providers.
So another cut is done by supplier instead. This part of the analysis shows a supplier that ships its orders at 100% on-time. That is good for the company. Overall suppliers have been shipping about 50% of the orders on-time, with some having a supplier performance as low as 30% on-time. Here is that gold-nugget among the gravel.
Now learn more about that supplier and why his performance is so good as compared to others. This result can be important to the supply chain and to the company. Not shipping orders on time to the firm affect its customer service by not having needed products available for sale, by having too much overall inventory on-hand at the same time there is a certain product(s) not in stock and by impacting warehouse picking and costs with the extra travel time to move around slow-moving inventories.
A review of the outbound supply chain may show a carrier that is outstanding overall or in certain routes. A certain warehouse or labor shift may perform at near mistake-free levels of operation. Process transitions within distinct organization segments may be quick and flawless. Such operations opportunities present benefits have discernible and may be applied and the potential for adapting and expanding them.
For Logistics Service Providers
There are also two values of granular analysis for 3PLs and other logistics service providers. One is the benefit of doing it and finding opportunities in its own organization as to market or logistics segments or other sub-levels. A global 3P: may disaggregate his scope and find unrealized opportunities in a geographic region or in a select market. A freight forwarder may find them in certain trade lanes.
Two is for the provider to understand what it can mean to a customer in developing and delivering services that more closely match their real requirements. Logistics service providers, or with the assistance of a consulting firm, can offer to do a granular assessment for customers. The end result would be to create a value proposition with a customer that goes beyond standard definitions as to freight costs or other criteria, a proposition that is stronger than such criteria and makes the provider an integral part of that customer’s logistics needs and operations.
Granular analysis can yield benefits to all companies, regardless of their industry or service. It is good to do for wholesalers, manufacturers and retailers and for their company’s supply chain. It is likewise good for 3PLs and other logistics service providers. Granularity does not follow the usual ways of looking at a company or its operation based on its organizational structure and sales. These approaches can miss the smaller opportunities that can be developed into a larger impact.