CIO100 2017 #31-100: Neville Richardson, Kotahi Logistics
Neville Richardson says innovations at Kotahi Logistics always come from business calls to action.
“We are a young business with a focus on innovation and the IT team spend some 40 per cent of its time on such demand activities,” says Richardson, who is group IT manager of the Logistics and data management company.
“All ideas start off being associated with a business process and these come through a structured governance process to be discussed, and resources applied to an idea if deemed appropriate. Future state is described, along with how we measure the improvement.
“This has a direct link to LEAN, and we map all activities back to the value streams of the business (the things that customers actually value), and this includes the IT teams themselves, who are aligned according to value stream.”
Kotahi has a very clear business roadmap, to drive logistics innovation and reduce supply chain waste, and our Coda JV, a major business transformation initiative (with Ports of Tauranga), stemmed from this process.
“This involved bringing together two separate (complementary) transport businesses with quite different technologies and cultures, into one business. This was to create efficiencies and to provide customers with a much better value proposition.
“In this program, we had to harmonise core business processes, align technology platforms, bring teams together and deliver some innovation to the market. Success factors ranged from simply keeping the business running to scaling innovation with disruptive technologies (specifically price discovery and optimisation).
“It is early days for this innovation, but we are already seeing business benefits in how we approach our business process,” says Richardson.
He says challenges ranged from aligning business cultures, bringing in governance across a combined business and making major changes to tight timelines.
The challenges were met by bringing in governance and restructuring teams to match the new environment, while keeping the scope of system changes extremely focused to meet cost and time requirements. Early choices had to be made as to what systems would be harmonised and the aligning of the business and vendors to that path also assisted.
“We now have one finance system across the business (highly automated, including BCTI), harmonised warehouse management (previously disparate systems and processes) and a pricing and matching solution in the market, all within 12 months. This has had a significant impact on the bottom line, and in conjunction with tight control in the business, it now delivers to plan, which was not previously always the case.”
“We have implemented lean within our organisation and are able to ‘just get on and do’ small improvements, with larger initiatives being approved on the basis of the spend vs benefit.”
Several innovation projects have been completed in the past year. The stand out was using Azure ML models in the company’s demand forecasting process. This was part of a wider IT initiative to introduce self-service BI in the business he says.
“As well as ‘today and yesterday’ reporting, we also wanted ‘tomorrow’ in the same platform. We worked direct with Microsoft’s data scientists at Redmond to utilise Azure technology for this.
“This improved our financial reporting capability and reduced the time (and skill) needed to set up reports, so analysts were able to spend time on insights and not mechanics.
“We automated the forecasting processes, vastly reducing the time and effort to compile reliable demand forecasts. We increased forecast accuracy, leading to more efficient logistical decisions, like choosing the right sized ships, at the right times, to the right ports.
In addition to measurable savings, the biggest benefit was spending time on analysis rather than mechanics, which has led us to now looking at improving the micro (detailed demand) process, when previously we never got the time to get to that level.
“Within Kotahi Logistics’ IS strategy, we have made a clear distinction between the demand and supply activities of the technology team. Supply activities are those concerned with keeping the lights on, but we want these to be 'seen and not heard'.
“Supply activities are outsourced where appropriate and all are managed to an SLA and a cost. In this way, we are reporting these 'on exception', if KPI's are green it warrants little discussion in the business,” Richardson says.
“We have made some major technology and process changes to increase the reliability of supply, such as ITIL introduction, and a move to cloud and business process as a service. Two years ago, we were spending 75 per cent of our time on supply. Now it is less than 40 per cent.
"Whilst not visible to the business, we will be 100 per cent cloud based by the end of April, and [this] is a key enabler for many areas, be that BI, harnessing Internet of things initiatives, all the way to ISO 27000 security compliance”
This then allows his team to spend most of their engagement time with the business on demand, which are topics where the business wants change, including innovation. “These conversations are value based, not cost,” he says. “Where IT is seen to add value, work is progressed.”
"Whilst completing the plumbing journey, the business has not stopped," says Richardson.
For example, we have implemented Salesforce in both businesses, implemented warehouse management solutions in multiple locations (the 8th will be delivered by May), and systemised the rates management process, he says.
“We are currently implementing a customer centric portal (the previous one being very ‘mechanical’)," he adds.
"Our most exciting times are ahead, however. The ability to solve problems on a massively parallel scale, and the advances in machine learning, means that there are real advances to be made in Multimodal Optimisation, and automation of responses to certain situations, hopefully being able to leverage bot frameworks to enable humans to consider the gnarly problems, and machines doing the mundane stuff.
“This process is supported by our governance and work is done within the framework of IT and business strategy. When initiatives are delivered, they are judged by the business on cost, delivery time and scope. In the past year, we met these 84 per cent of the time,” Richardson says.
The company has a 10-year strategy. This is supported by a 'three-year' rolling IS strategy, that provides the framework (guide rails) for the IT team to work within.
“The board receive a strategy update at least twice a year. At least once a year we have a 'supplier day'. Our strategic partners attend and our strategy and goals for the year ahead are shared with our four major partners, and they provide input.
“The business meets (and brings calls for action) to capability aligned governance meetings once a month. Updates on current work in progress, action item, and new proposals are discussed. The business (not IT) decides what to work on and prioritises those, which avoids an adversarial situation with IT. Where possible, work is then delivered in sprints, deploying value at certain points, until the overall aims are met.”
His department produces a monthly report to the business (and board) on how it is tracking with supply KPI's. He also reports on the governance (that is to say, demand) pipeline, what work is in progress, how many projects have been raised (250 in the past two years), what are not progressed, have been completed and what is still in the requirement backlog.
IT also provides masterclasses on certain topics, from governance, lean and technology.
There have been challenges with engagement in the governance process he says.
“We measure success by time/scope/cost, but also engagement. It has worked well for the past two years, but was in need of refreshing. We have recently begun a lean journey for the business and are aligning governance to that, extending to a six-week cycle, and matching a sprint based development cycle, so we can deploy requirement backlog items on a regular basis
Kotahi Logistics is a diverse organisation, and the IT team is reflective of this, he says.
“We look to employ people with the right business background and train them in the skills they need. In this way, we are not just looking at the 'IT pool' for our resources.
“We have a graduate program in place that has produced excellent results, with one of our business analysts coming from these ranks. Having millennials in the team is energising. We take an active role in the BA masterclass here in Auckland. I mentor key members within the team, and outside of the business.”
There is a clear second in command in the team, who is more than capable to run the business when Richardson takes a two-week break.
This has been part of a succession plan in place for the past 12 months, he says.
“All staff members have training plans and must include soft skills in that programme.”