A good deal of our work is focused on the core of Enterprise Performance Management (EPM), and the relationships among budgeting, forecasting and strategy.
However, in the case of a major strategic turnaround at Tollpost*, as we will see below, it was in a way simpler. There were numerous things that were “broken” at Tollpost, and a simpler approach, focused on operational excellence, was deployed. You don’t always need strategy management to drive a return to profitability. But let us start at the beginning.
Tollpost Globe is a mid-sized Norwegian transportation company engaged in providing shipping services for its customers. Tollpost ships full and partial pallet loads, as well as parcels. The almost century-old company moves approximately 12,000 pallets and 60,000 parcels per day. Back in the early 2000s, the company was facing an annual loss of $13 million on revenues of USD 200 million.
New Executive Team – New Software for Problem Solving
In 2002, a new CEO was brought in. He deployed the early version of the UNIT4 Business Analytic Apps product to help visualize the problems, and return to profitability. First off, he and his team had a look at the metrics that drive the business, and the current values that needed to be improved.
Metrics for Success (showing starting points in 2004)
Stops per day: 20
Container Utilization: 5.5 Tons/Year
Items Handled in Depots: 40 – 45/Man-Hour
These numbers needed to improve. In the planning world, the above business drivers were the keys to success and the improvement in business drivers can translate right to the bottom line.
Using the UNIT4 Business Analytical Apps, Tollpost was able to model the situation by business driver, as well as begin to simulate how much the results could improve.
The Devil is in the Details
Tollpost has 60 managers who control more than 800 vehicles. Using UNIT4 Business Analytic Apps, management decided to benchmark and analyze every driver on every route. Now, we don’t recommend this as a general practice, but it is certainly a way to get to the heart of the problem. It was obvious, of course, that drivers had differing skills, that certain routes were more complex, and that not all drivers could achieve the same results. Nonetheless, it provided a first step in aggregating the results, and management could begin to set achievable targets. And, to Tollpost’s advantage, the creation of individual scorecards and aggregate results could be achieved using the UNIT4 Business Analytic Apps.
Taking a Page from Strategy Management
Although the Tollpost initiative is about improving operational performance, the approach they took adopted the best methods of strategy management. Have a look:
You see, it is really all about working on initiatives to achieve objectives. Consider the following example, which could apply to Tollpost:
Objective: Improve container utilization
Measure: The number of containers utilized by driver/week
Target: 30% improvement over current utilization
- Reallocate customers to truckers, by proximity to each other
- Create incentive programs for customers to accept more items, less often
- Develop a pallet purchase program
At the end of the day, this is what the Tollpost management team did on an operational level. They created objectives for pallet utilization, trucker efficiency, etc., and defined targets and measures to get there. And, just as trucker activity was monitored, the Tollpost team, using UNIT4 Business Analytic Apps, could measure the work of the team that was charged with improving overall efficiency.
So, what happened?
Metrics for Success (showing starting points in 2004 and improvements)
Stops per day: Originally at 20 now 30 – 40
Container Utilization: 5.5 Tons/Year now 8.5 Tons/Year
Items Handled in Depots: 30 – 35/Man-Hour now more than 50/Man-Hour
Tollpost went from a $13M anual loss to a $30M gain. Revenues increased by 33%, and there was no increase in staff. Quite the accomplishment!
Bottom Line: It is all about great management strategy execution with appropriate software. Utilizing UNIT4 software, Tollpost could visualize the problem, set targets for improvement, empower teams to effect change, and measure the teams along the way.
*With appreciation to Robert Francis Group, for providing details and analysis on Tollpost in an upcoming blog