Copyright Business News Publishing Company Nov
|DRIVING OUT COSTS AND INCREASING CUSTOMER SERVICE
THROUGH ADVANCED TMS BY DAN GILMORE |
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
How can TMS solutions deliver these savings? Several
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
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
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
|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
|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.) |
|Dan Gilmore is with RedPraire Corp., in Waukesha, Wis.
(www.RedPrairie.com). Red Prairie offers DigitaLogistix TMS solutions.