Preventing shrinkage and reducing logistics risk with telematics

Package smashed in transit risk assessmentThis time of the year, thoughts turn to gifts and gift giving. Usually it involves something expensive – and often it involves shipping to someone far away. That’s where it gets tricky. Remember the viral video of the Fedex guy tossing the computer monitor. That guy may have been the exception, but do we really know what happens behind the scenes? And that’s why we did this experiment. To capture, publicize the data that are available on products in transit, and use this to assess the risk of the shipping channel. Read on how Big data can help the Big Guy in the red suit.

The Blackbox tag came about as a follow-through in an investigation of a repair depot’s claims practices. Our client was concerned about physically abused parts replaced as in-warranty claims. The tag sensor was developed to shine a light on what happens to products after it leaves the warehouse.
As part of a test we shipped a package by Fedex to Fountain Valley CA from Toronto ON. The blackbox sensor is triggered at a fixed time and captures impact events on three axes through the transit. We also monitored the official report from Fedex to overlay the location of the package on the recorded events. See the chart below.

Fedex shipment data overlay on Blackbox event detection on same time scale

Each blue dot corresponds to a “bump” in excess of 3G’s. The activity of the event is shown in the inset graphs on the top right. We were frankly surprised by the continuous stream of events at every transit point. Then we came across this video from the Fedex hub in Memphis. All the little bumps and nudges from one conveyor belt to the next over what seems like a couple of kilometers of movement show up as the individual events in the event data recorder.

Rest assured – Most packages go through without any untoward incidents. I looked at the operating expenses reported by UPS, Fedex and DHL to estimate the damage claims. The numbers are likely in the $40MM-$100MM range which is not very big for operations of this size. So the losses are either underreported or marginal. The design proposed above is useful for assessing the damage risk of specific routes or channels. eg. when shipping from Dallas to Calgary, is it best to use the train or the truck network?
As a shipper, if you are handling critical goods, your assessment of your logistics service provider should include shrinkage risk in addition to timeliness and reliability. In this respect the new generation of technologies such as Big Data analytics services and BlackBox can be invaluable.
The purpose of this show-and-tell was to demonstrate the art of the possible in risk measurement and mitigation – especially now that the technology is so accessible. Most companies are now capturing and compiling data across various product and channels. The challenge is in leveraging these insights into day to day business activities. Contact us via the link below for a free no-obligations consultation on how to extract and then embed the insights into your processes.
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