ParceLive & Pareto

on February 13, 2017

Delivering Truth At Scale. The promise of ParceLive to deliver knowledge, insight and solutions across networks on a scale never seen before. Transforming what we know about supply chains from almost nothing to almost everything.

“The majority of results come from a minority of inputs”. This is the basis around which the Pareto principle is built, otherwise known as the 80:20 theory, whereby 80% of your outcomes come from 20% of your inputs. This theory comes from Vilfredo Pareto who made the observation that in many countries 80% of the wealth and land is controlled by 20% of the people.

“THE KEY POINT IS THAT MOST THINGS ARE NOT 1/1, WHERE EACH UNIT OF INPUT (EFFORT, TIME, LABOUR) CONTRIBUTES EXACTLY THE SAME AMOUNT OF OUTPUT”

 

This theory of a minority of things, inputs or people being responsible for the majority of outputs has been related to many areas of life and business. Many have noted that in sales 80% often come from just 20% of customers, similarly that 20% of people are usually responsible for 80% of customer service complaints. Aside from business it is also widely thought that things such as our personal enjoyment, productivity and time management often take hold in the Pareto principle. It doesn’t take long to think of a scenario in our daily lives where we can relate 80%, or similar, of our outputs to just 20% of our inputsThe Pareto principle holds close ties to what many refer to as the law of diminishing returns. The two are directly related in stating that at a point, every additional input after 20% will not yield the same return as the previous inputs. It is important to note that the ratio of 80:20 is representative of the principle itself and not a solid figure. The figure for optimal productivity and efficiency will differ based upon sector, circumstance and volume as well as a whole host of other variables.

In many cases the optimum point of productivity is much below the 20% of inputs mark, for example in the case of a small task 90% of the work could be done by 1 person, with each additional worker providing a diminishing return. It is also important to remember that the numbers in the ratio do not have equate to 100. In some instances we could predict 99% of accuracy by doing 10 or 15% of the inputs or work.

“THE POINT IS TO REALIZE THAT YOU CAN OFTEN FOCUS YOUR EFFORT ON THE 20% THAT MAKES A DIFFERENCE, INSTEAD OF THE 80% THAT DOESN’T ADD MUCH”

 

In the logistics industry there is very little data to present regarding the performance of supply chains. Even the shippers themselves have very little knowledge of what could be happening to their shipments between point A and point B. This is especially true when looking at data other than the location of shipments. As there is currently no information available on the temperature, humidity or the way in which packages are being handled across networks there are few inputs to optimise networks and fix any shortcomings.

While the law of diminishing returns states that additional inputs may not equate to outputs, this may not hold true in supply chains and logistics. In an industry with little knowledge and transparency about exactly what is happening each input of data can greatly increase the output in efficiency.

Currently tracking options don't really let us track anything

ParceLive offers a whole host of never before available data

Current tracking options don’t really let us track anything

With so little knowledge currently available it is clear that using ParceLive for just a small sample of your daily shipments will greatly increase the knowledge on which you are able to base decisions about your supply chain. While factors such as location, shipper and time of year are all relevant variables it is clear that by adding ParceLive trackers to less than 20% of shipments will increase efficiency by more than 90% where the current knowledge is close to 0.

By taking the Pareto principle and applying it to logistics we can surmise that a large number of problems that arise are being caused by a small number of inputs. But how to fix these issues if we cannot identify what they are? By using sampling in order to increase efficiency, identifying and fixing these key network “black holes” could lead to the drastic reduction of the small number of issues that account for most of the problems.

“THE ASSUMPTION IS THAT MOST OF THE RESULTS IN ANY SITUATION ARE DETERMINED BY A SMALL NUMBER OF CAUSES”

 

Taking all of the above into account adding ParceLive to just a sample of your shipments creates the ability to understand almost all of what is happening across your network. The tracking of individual or valuable parcels stands to be effective in the case of ensuring that one parcel arrives in a timely and safe manner. However in an industry focused on volume of speed the safe delivery of all parcels is far more important and, therefore, understanding your network is vital. Ensuring that you understand 100% of what is happening in your supply chain would require adding ParceLive to each and every parcel. While the law of diminishing returns would suggest that by adding ParceLive to under 20% of your shipments you stand to gain knowledge on what is happening across more than 90% of your supply chain. Sampling in this way also ensures that the cost of creating greater network efficiency is spread across your supply chain and reduced to just pennies per shipment. Who doesn’t want to get more than 90% of the results for less than 20% of the work?

ParceLive’s unique use, return and reuse model ensures that the service is primed to work at a volume that allows for full network optimisation. This is the Truth At Scale that is promised.
To learn more about ParceLive and to register your interested head to ParceLive

Stephen HartnettParceLive & Pareto

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