Why the final one percent counts as cost pressures grow

In elite sports, the pursuit of marginal gains is all about identifying opportunities for small incremental improvements. No activity or area is beyond consideration. By themselves, these changes are small, but in the aggregate, they can make a real difference.

Applying the doctrine of marginal gains quickly became a popular approach beyond the realm of sport. For more than a decade now, companies from logistics to manufacturing and retail have sought to leverage the same kind of meticulous attention to detail and relentless pursuit of incremental excellence to unlock transformative improvements. The challenge, however, lies in the complex, often opaque nature of modern multimodal supply chain organisations.

Granular, data-driven analytics have helped turn the hard-to-perceive risks inherent in high-volume, narrow margin sectors into opportunities for added value in the aggregate.

Marginal gains in an inflationary environment

The pursuit of deep visibility and incremental improvements may be the industry’s best hedge against an economy where inflation and rising fuel costs threaten profitability. Over the past decade, operating costs have risen sharply across logistics functions.

According to the UK Inflation Index, business operating costs have increased by between 41% and 62%, firmly outpacing consumer inflation. Energy costs have surged by an average of 87%, with some sectors experiencing increases above 130%. Insurance and licensing costs have also climbed by around 76%, with materials costs jumping by more than 60% on average. Costs across the warehousing, storage, freight, and logistics sectors have increased by approximately 50%.

Chasing visibility 

It’s a troubling picture even if you’re not pessimistically inclined. In these high-volume, low-margin sectors, inflation doesn’t just erode margins; it threatens business viability.

Many leaders have responded by trying to cut their way to profitability. But with manual processes and leaky spend management making it impossible to see where the money is actually going until the end of the quarter, reducing headcount is just as likely to create problems as solve them. In short, cost-cutting risks being a blunt instrument. Without granular visibility into where costs originate, leaders risk making decisions that deliver short-term relief while undermining long-term performance.

This is where the concept of spend intelligence becomes central. Visibility delivered via an intelligent, unified system of work (like our IQ platform), is the key to unlocking marginal gains across the supply chain. Without a clear, centralised view of cost drivers, inefficiencies stay hidden and opportunities for reducing unnecessary/inflated costs go unrealised. Spend intelligence should involve capturing, connecting, and analysing data across procurement, labour, inventory, transport and finance. Organisations can then move beyond disparate reporting and multiple versions of the truth, and towards granular, real-time insights that expose the areas where marginal gains will make the biggest difference.

In an inflationary environment, real-time visibility is the only real way to stay afloat. When procurement data is linked to labour costs, and warehouse activity is connected directly to financial outcomes, organisations gain the ability to analyse margins at a much more granular level. This includes understanding profitability by customer, by route, by shift, or even by individual stock keeping unit. Instead of relying on periodic reports, leaders can then identify inefficiencies as they emerge and act immediately.

Case in point: Fleet efficiency, manufacturing, and the last mile 

Any operational leader knows that, when it comes to managing a logistics fleet, fuel efficiency and driver behaviour have a huge effect on cost. Putting telematics devices in fleet vehicles has been standard practice for years, but manually analysing telematics data at scale is complex and time-consuming. Manufacturers, retailers and virtually any other field with complex supply chains generating large amounts of unstructured data via IoT sensors face the same challenge.

A typical logistics fleet can comprise hundreds of drivers and vehicles, each generating continuous streams of data: distance travelled, fuel consumption, idle time, and safety-related events such as harsh braking or acceleration. Virtually every logistics company in the world has access to this kind of data, but relatively few are leveraging it for marginal gains.

By applying advanced analytics and AI within a secure and compliant environment, fleet managers can convert this data into actionable insight almost immediately. Spend intelligence connects telematics directly to the P&L - for instance, tying route idling data directly to fluctuating fuel surcharges or missed delivery window SLA penalties. A dataset containing trip summaries for multiple drivers can be analysed to identify those with the lowest safety and fuel efficiency scores. These drivers can then be compared against fleet-wide averages across metrics such as eco-friendly driving, safety, frequency of harsh events, and proportion of driver downtime. Once an operator understands the pain points that are leaving drivers idle, they have actionable information. Automated scheduling or smoother warehouse gate check-ins further reduces driver frustration and increases time spent on the road.

For retailers, ‘last mile’ logistics and returns processing are massive P&L pain points. Using business intelligence to coordinate inbound returns logistics with outbound deliveries, or orchestrating automated returns sorting or predictive restocking (even if the resulting efficiencies are as small as 1%) can save millions across a national retailer’s operations.

The value of insights from an intelligent platform like OneAdvanced IQ lies in the ability to both diagnose issues and recommend actions that lead to marginal gains. Instead of simply highlighting underperformance, the system can identify behavioural patterns that explain it. Looking at a logistics fleet, the platform can identify and connect the fact that frequent harsh braking points to poor anticipation on the road. Excessive idling could indicate inefficient route planning or bad driver habits. Based on these nuggets of information, targeted coaching recommendations can be generated for each driver. Over time, small behavioural adjustments contribute to measurable reductions in fuel consumption, maintenance costs, and safety incidents.

The same data-driven approach also extends to asset performance and maintenance, both in terms of logistics fleets and the manufacturing floor. By analysing trends like mechanical faults over time, it becomes possible to predict which machinery or vehicles are most likely to experience declining efficiency or need maintenance in the near future. Picking up on these risks early means operators can intervene before breakdowns occur, reducing downtime and avoiding more expensive repairs. Again, just a 1% reduction in unplanned factory floor downtime can translate into massive cost savings, as can reducing the amount spent on roadside assistance for a logistics fleet.

For wholesalers, a major hidden cost is failing to claim vendor rebates or accidentally selling at outdated bulk contract prices during inflationary spikes. If an intelligent system can leverage real-time data to catch small leakages in contract pricing, the aggregated benefits will once again be highly impactful. When it comes to physically fulfilling orders, speed is everything for wholesalers. By doing something as simple as optimising pallet slotting or warehouse layout, AI-enabled insights can keep goods moving through fulfilment warehouses faster, with fewer disruptions, and even reduce the cost of picking labour.

The gains from any of these interventions might look modest in isolation. But, across an entire organisation, they really start to add up.

Conclusion

In a market where inflation continues to escalate, there’s no simple answer to the question of how to offset costs without potentially ripping something critical out of your business.

Our IQ platform is about making the transition from fragmented analysis of a cost base to a system of work which automates many elements of cost control and operational efficiency, providing a single source of truth for every penny spent.

Adopting the philosophy of marginal gains, enabled by interconnected workflows and comprehensive intelligence, is a practical step businesses can take right now. By focusing on visibility, integration, and continuous improvement, supply chain leaders can transform cost pressures into opportunities for incremental value creation.

Over time, those little wins translate into something much, much bigger.