The Harm of the Biased QBR
Welcome back to the 11th edition of The LogTech Letter, a weekly look at a particular aspect of the impact technology is having on the world of global and domestic logistics. Last week, I looked at whether it’s possible to arm shippers with enough data and context for them to use sustainability as a true variable in freight procurement decisions. This week, I’m discussing how shippers can avoid undermining the QBR process.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@ihsmarkit.com or on Twitter at @LogTechEric.
Let’s talk for a second about one of those acronyms that’s become ubiquitous in commercial relationships, including international logistics: the quarterly business review, or QBR. In a vacuum, the QBR is a great idea. It allows parties that are engaged in some sort of service arrangement to measure the efficacy of the work being done. The quarterly nature of the QBR allows for the adjustment of services and expectations depending on performance and external dynamics that neither party controls.
But let’s drill into a specific area where QBRs aren’t as optimal as they could be, and it revolves specifically around data, and who is generating the data. Take, for example, a situation where a shipper has a QBR with its global forwarder. If the shipper is relying on that forwarder to supply analytics around the shipper’s performance, that puts the shipper in a precarious position.
To be blunt, QBRs aren’t terribly effective when the data around the performance of a supplier is being provided by the supplier. It’s like an Uber driver rating him or herself. More than that, shippers expose themselves to service providers dressing up subjective information about their performance in the guise of hard data.
Data-oriented platforms should help shippers better understand the performance of their forwarders, rather than relying on those forwarders to supply data around their own performance.
“If you want to judge somebody on their performance, you collect your own data; you’re not going to ask somebody to provide that data about themselves,” Wiebe Helder, CEO of Singapore-based spot freight procurement platform Cargobase, said at the JOC LogTech conference in 2018. “I’ve worked for a freight forwarder. I’ve made reports on performance, tweaked it here and there to make myself look better.”
How to address this? Shippers need to build capability to measure their service providers effectively, even in situations where they have effectively outsourced 100 percent of the transportation procurement and management functions to a third party. That element needs to be developed or managed in-house or outsourced to a neutral third party that has no stake in the relative performance of the LSP.
Neutral is the operative word here, especially as business models in logistics technology blur. There is absolutely nothing wrong with a shipper using an LSP and relying on that LSP’s technology to manage its shipments. There is a problem with not using a neutral platform or service to gauge the efficacy of that relationship and reliance.
Let’s flip this scenario around to show that neutrality cuts both ways. If a shipper uses a neutral third party software to manage its international freight procurement and management, it similarly should not rely on that software provider to essentially grade itself in a QBR. The shipper must do that independently or find another neutral third party (perhaps a consultant) to measure that.
This is an easy thing to overlook in the process of deciding how much a shipper wants to outsource, and the type of provider to which it wants to outsource. But it’s a critical element. We hear often that you can’t manage what you can’t measure. But not all measurements are created equal. Shippers need to endeavor to create a structure where performance measurement is truly neutral.
Here’s a roundup of pieces on JOC.com the past week from my colleagues and myself (note: there is a paywall):
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Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.