What company doesn’t want to be world class? What head of logistics doesn’t want to be world class? What warehouse manager doesn’t want to be world class? They all do, and they are all under constant pressure to be the best.
The ongoing challenge for logistics and warehousing leaders is to figure out what it means to be world class. What should they measure? Why should they measure? How should they measure? Who should they measure?
While the goal to be world class is laudable, too many logistics organizations suffer the “decathlon paradox.” What does that mean? To be world class at an individual thing, say the 100-meter dash, causes an inverse decline in performance for another thing, say the 1,500-meter run. So, can someone be world class at both? No.
Table 1 highlights the decathlon paradox. It shows the differences between the times for each of the 10 individual events for the decathlon world record compared to the world record times for each of the individual events. Averaged across all of the events, there is an 18.57% difference between the decathlon world record event scores and the world records for each event, with as much as a 30% difference for events like the shot put and discus. Furthermore, when you look at the minimum qualifying times for the 2020 Olympics, the world’s best ever decathlete would not qualify for a single one of the individual events.
While this seems reasonable for Olympic track and field events, the same phenomenon is prevalent in logistics. Regrettably, however, this is not merely about gold or silver medals — it can be life or death.
Accidents and injuries leading to lost productive time, if not loss of life, are a growing problem in logistics. In 2018, the U.S. Bureau of Labor Statistics reported 5,250 total workplace fatalities, about 3.5 per 100,000 workers. Looking closer, 1,443 of these were in logistics, or about 15 deaths per 100,000 workers or over four times higher than the industrywide average. Furthermore, the Bureau reported non-fatal incidents of about 4.5 per 100 workers in the same year, which is 4,500 incidents per 100,000 workers. This costs companies billions of dollars in downtime and settlements. A large part of what causes this is the relentless push to continuously drive higher levels of performance. Safety suffers.
One well-known online retailer has gotten bad press recently for what critics call the harsh working conditions in its warehouses. Workers are given very aggressive performance metrics that are monitored continuously, and any deviation results in harsh penalties. It is not alone. Most logistics operations are under pressure to relentlessly increase performance, often at the expense of employee well-being.
Warehouses are ripe for measurement. The Warehousing Education and Research Council (WERC) conducts an annual benchmarking study evaluating a variety of warehouse performance metrics. Its most recent study surveyed nearly 500 companies evaluating “34 operational metrics, grouped into five categories: customer, operational, financial, capacity/quality and employee (plus perfect order and cash-to-cash cycles).” It ranks performance levels on a five-point scale from low to best-in-class. To be best-in-class, a company has to be in the top 20% of all respondents.
Could this personify the decathlon paradox any better? Best-in-class across 34 metrics. Impossible.
Using the decathlon as a metaphor, think about what it takes to train to do well in the 100-meter dash versus the 1,500 meters. Physically and mentally, these have inverse relationships, where the 100 meters is power and anaerobic and the 1,500 meters is grace and aerobic. Great decathletes recognize the significance of balance — they know they cannot be world class in both.
Figure 1 highlights the same basic challenge with warehouse metrics. At left is a list of common throughput metrics like cycle time and task completion metrics. At right are quality metrics like accidents and events and the effect of these on things like turnover. Turn up the volume on one and there is likely an opposite and negative reaction to the other. With a Slinky, if you spread the spring across both hands it forms a nice, clean arch, but raise either hand and all of the spring flows to the other hand. Same thing for warehouse metrics. Companies either need to accept this and decide to put all their “eggs in one basket,” suffering the consequences of the inverse reaction, or they must seek balance, accepting slightly less performance for one metric to keep others in check.
Companies also need to dig below the surface to understand what causes the inverse correlation. For example, a drive to increase order cycle times might force workers to cut corners by driving lift trucks more aggressively. The result can be they achieve the throughput goal, but quality and safety suffer. Exacerbating this further can be that one employee could have a stellar safety record, for example, but their cycle time might be a bit off, while another has great cycle times but their safety metrics sink. Who is the better employee?
So, what should logistics leaders do? First, as the decathlon shows, balancing performance across a lot of different and conflicting events (e.g., metrics) is very hard. It is nearly impossible in this environment to be world class in any, let alone all events. Next, focusing exclusively on one metric while simplifying oversight can result in unintended and negative behaviors in other areas of the business like safety. So start by focusing on finding the balance point where performance in one area can be pushed while performance in another area doesn’t suffer. This will likely mean a company can’t be world class in all the areas it measures. It might accept being slightly below par in one area to be better than average in several areas.
Research VP and Gartner Fellow,
Gartner Supply Chain