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Achieving transportation excellence
Dan Gilmore. World Trade. Troy: Nov 2002. Vol. 15, Iss. 11; pg. 36, 3 pgs
Abstract (Summary)

Companies across every industry segment are striving to become supply chain management (SCM) leaders. SCM leaders achieve this status by reducing cycle times and operating costs, increasing supply chain velocity, and enhancing top line revenue growth through improved customer satisfaction. There is a growing recognition of the role that transportation and logistics excellence plays in achieving a world-class supply chain. Transportation costs represent a substantial component of overall supply chain and corporate spend for many companies. Transportation management solutions (TMS) can enable companies to take back control of their transportation processes and drive out transportation related costs. TMS can deliver these savings through: 1. process improvement, 2. shipment optimization, 3. continuous moves, and 4. carrier management.

Full Text (1147  words)
Copyright Business News Publishing Company Nov 2002

[Headnote]
DRIVING OUT COSTS AND INCREASING CUSTOMER SERVICE THROUGH ADVANCED TMS BY DAN GILMORE

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Improvements in transporta tion process and technologyenablement provide the lowest hanging fruit available to most companies today to drive out supply chain costs and improve quality, consistency and customer satisfaction.

Even mid-sized companies can often drive millions of dollars to the bottom line through improved shipment optimization and execution effectiveness, while simultaneously improving customer service. The opportunity for larger companies, with annual freight budgets that may exceed $100 million dollars per year, is substantial.

Companies across virtually every industry segment are striving to become supply chain management leaders. SCM leaders achieve this status in their markets by significantly reducing cycle times and operating costs, increasing supply chain velocity, and enhancing top line revenue growth through improved customer satisfaction.

Across many companies, there is a growing recognition of the role that transportation and logistics excellence plays in achieving a world-class supply chain. The result is a growing focus and investment in transportation related process and technology improvements that can deliver high ROI and rapid payback on their own, and also provide an indispensable foundation for other integrated supply chain management initiatives.

The opportunities are great. For many companies, transportation costs can range between 3 percent and 7 percent of total sales, which even for mid-sized firms adds up to millions of dollars in annual expense, hundreds of millions for the largest firms. Transportation provides the richest, lowest hanging fruit of any potential area of supply chain improvement to quickly drive out costs and achieve improved operational performance.

Market data shows increasing numbers of companies are coming to a similar realization. Recent studies by several leading analyst firms forecast substantial growth for transportation management systems, an essential tool for achieving logistics cost savings and supply chain performance improvements. For example, data from AMR Research, one of the supply chain industry's leading observers, shows global TMS-related spending will grow at a compound rate of 26 percent over the next five years.

Transportation costs represent a substantial component of overall supply chain and corporate spend for many companies. These costs have been rising in recent years due to changing order profiles and higher velocity supply chains, which require more expensive modes of transportation (e.g. LTL rather than full truckload shipments).

The good news is that TMS solutions can enable companies to take back control of their transportation processes and drive out transportation related costs. This is accomplished through a set of capabilities that enable companies to optimally plan and more effectively execute their transportation processes.

How can TMS solutions deliver these savings? Several ways:

Process Improvement. By automating key transportation and logistics processes through advanced TMS, most companies are able to substantially reduce or redeploy current transportation staff and overhead. This is accomplished, in part, by automating manual tasks (e.g. shipment planning, carrier selection, tendering and acceptance). This leads to greatly enhanced productivity gains for transportation staff. Many companies are also able to reduce overhead by centralizing transportation functions at a network level, rather than maintaining transportation staff at each ship point. Companies implementing these network "load control centers" realize substantial savings in overhead and total freight bills.

Shipment Optimization. An advanced TMS will provide the ability to automatically process inbound and outbound orders and optimally select the least cost transportation mode. Orders (inbound and outbound) are also optimized to create least cost, consolidated plans that drive substantial savings on net freight bills while meeting customer service requirements and other network constraints. Common optimization opportunities include consolidation of LTL shipments into multi-stop truckloads, use of inbound or outbound carrier pool point distribution, and multi-origin to multi-destination plans that utilize cross-dock and related best practices. Continuous Moves. Transportation costs can be further reduced by TMS capabilities that support "continuous moves," or the ability to link full truckload movements together (such as a pick-up and delivery) that will generate a lower per mile rate than treating each shipment as an individual move.

Carrier Management. TMS provides the opportunity to reduce rates and improve quality and service through support for core carrier programs.

Rules for carrier assignment by lane can be easily configured into advanced TMS software. Robust TMS reporting and analytic capabilities enable transportation managers to spot quality and service problems with ease and take appropriate actions. Improved service execution, monitoring and compliance can be achieved through electronic load tendering and shipment tracking, using traditional EDI or new webbased technologies.

TMS ROI is substantial, with payback periods of typically 12 months or less, sometimes in as little as a few months. All of these bottom line benefits can be achieved while simultaneously improving quality, customer service and supply chain information flow.

Transportation is the physical process that links the flow of goods through every stage of the supply chain, from inbound supply to the ultimate consumer. As such, overall supply chain excellence is inextricably linked to transportation excellence.

Supply chains today are increasingly complex, with multiple parties inside and outside the company playing critical roles in executing specific logistics flows (inbound flows, intra-company flows, outbound flows, reverse logistics, etc.). These activities must be synchronized to enable the right product or material to be in the right place at the right time, at the least possible cost.

Today's advanced transportation management solutions enable companies to manage complex scenarios in two important ways. First, considering transportation moves across the entire network and generating optimal plans produces lowest total cost while meeting customer service requirements and other constraints. Second, providing web-based, roles-- oriented connectivity enables multiple parties engaged in each logistics flow (suppliers, carriers, 3PLs, customers, etc.) access to real-time information and gives them the ability to update transportation-related information as they execute their part of the process.

The result? Synchronized supply chain processes that enable companies to take costs out of transportation and reduce cycle times, while improving information flow that drives better decision-making and improved customer service.

The top solutions currently being offered feature integrated components for warehouse, transportation, and logistics productivity management, supply chain visibility and event management, supplier collaboration and logistics scorecarding and performance management.

Despite the tremendous opportunities offered by advanced transportation management systems to reduce costs and improve supply chains, the penetration rate for TMS is relatively low compared with other supply chain applications, such as warehouse management. But the market is clearly starting to recognize this opportunity, as the high growth rate for TMS solutions indicates. WT

[Sidebar]
Common optimization opportunities include consolidation of LTL shipments into multi-stop truckloads, use of inbound or outbound carrier
pool point distribution, and multi-origin to multi-destination plans that utilize cross-dock and related best practices.

[Sidebar]
Supply chains today are increasingly complex, with multiple parties inside and outside the company playing critical roles in executing specific logistics flows (inbound flows, intra-company flows, outbound flows, reverse logistics, etc.)

[Author Affiliation]
Dan Gilmore is with RedPraire Corp., in Waukesha, Wis. (www.RedPrairie.com). Red Prairie offers DigitaLogistix TMS solutions.

Indexing (document details)
Subjects: Excellence,  Total quality,  Logistics,  Customer services,  Shipping,  Supply chains
Classification Codes 9190 United States,  5160 Transportation management,  5320 Quality control
Locations: United States,  US
Author(s): Dan Gilmore
Document types: Feature
Publication title: World Trade. Troy: Nov 2002. Vol. 15, Iss. 11;  pg. 36, 3 pgs
Source type: Periodical
ISSN: 10548637
ProQuest document ID: 209744331
Text Word Count 1147
Document URL:

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