Two major shifts are changing the face of global transportation management as we know it:
- Supply chains are becoming increasingly complex, relying on partners and data beyond the four walls of the enterprise;
- The very definition of global transportation management is broadening and expanding well beyond the traditional TMS scope.
As a result, several areas of focus will move to the forefront of logistics strategy. Here are five to look for in 2015.
Breaking Down Silos to Capture Greater Cost Benefits
Traditional TMS delivered cost reductions within specific pockets of business. Return and savings have been well proven. But the next level of cost reduction requires a move across silo walls to bring it all together. This will be possible through a platform approach to transportation management that delivers a unified control structure, and drives savings by aggregating sourcing volumes and optimizing end-to-end transportation. Ensuring compliance is another benefit and a key driver for cost reduction across the entire business.
On a more granular level, automating the planning and execution functions removes manual disjointed processes and enables business rules to ensure compliance. Automation removes errors and time. It enables optimization within and across silos. Transport optimization typically reduces spend by 5-15%. A platform approach delivers ROI at the high end of that range.
Connecting Suppliers for Agility and Responsiveness
A strategic approach to transportation management, or a control layer strategy, delivers both planning and execution data across the supply chain, together in one platform. Unlike an isolated transportation management approach, orders and supplier ready-to-ship details are used in planning and executing transportation moves, creating a unique linkage of transportation data with what is generally considered non-transportation data. Multi-strategy transportation plans become possible with interconnected multi-stop routes and multi-leg international moves being executed with efficiency and agility. Domestically, companies can handle extensive networks of cross docks.
A strategic TMS approach connects the network nodes and enables transport plans to be layered on top of that network for seamless execution of robust strategies without losing item-level detail. End-to-end supply chain visibility at the item level leads to a better picture of where inventory is. In a situation where a manufacturer is attempting to figure out a disruption response, it can take a microscopic view of the state of business and identify the most critical product and the best option to deliver it from. This makes for a more responsive and agile supply network, while minimizing the costs of expediting.
Having suppliers connected on the platform has further benefits: when suppliers are already linked and plugged into the network, there are no data translation issues or disconnects. This ensures goods are shipped right the first time.
Prioritizing Partner friendliness
Traditional TMS takes a shipper-centric approach even though transportation management is fundamentally a multi-enterprise process. TMS applications have to make it easier to do business with all trading partners. A community approach can bring “partner friendliness” that benefits shippers, carriers, 3PLs, and suppliers. Suppliers should be able to interact and collaborate. Carriers should have a robust platform to optimize business across shippers and loads. Shippers should be able to leverage multiple relationships with 3PLs. In 2015, if a shipper has 16 business units integrating with the same carrier, they should no longer operate as separate units but as one pooled resource to improve overall buying power and leverage. Each business unit controls its own procurement and defines its constraints, but they are all centralized when interacting with the carrier. For carriers, there should be one standardized way to interact with that entire company and its 16 business units.
Assuring Data Quality
A key segment of the partner friendliness dialog centers on data quality. Companies tend to have better visibility into goods sitting somewhere within four walls – theirs or their partners, but not when goods are moving. Visibility into moving goods relies on static messages gathered inside of four walls – noting when the goods enter and leave. A broader strategic approach says, “Why limit visibility to goods inside a building?” The next phase of transportation management delivers visibility into goods even as they move from point A to point B. This opens the door to broader, more strategic programs coupling inventory management and in-transit inventory with on-hand inventory. The connecting element is the availability of transport details and accurate data. A control layer approach interlocks plans and execution to know what the status is and how it impacts overall supply chain performance, driving reaction times lower.
A manufacturer needs plan data linked across its supply chain and with actual execution information to measure its performance and the performance of its partners. In the absence of this context, organizations set up detailed evaluation programs, invest a ton of time and money measuring partners, and see very little or no improvement in their supply chain performance.
Capturing Freight Spend Visibility
Freight spend does not have to be a surprise that we learn about once a freight invoice is received and gets processed. Visibility into freight spend and its timing can start with transportation planning. Linking the visibility information keeps the projections updated as goods move through the shipment lifecycle.
Freight pay and audit function for most organizations is primarily structured as a match and pay model, triggered by receipt of an invoice. It can take anywhere from 7 to 45 days (or more) for the entire process of a shipper creating a plan, to when goods are received, followed by the carrier providing proof of delivery, and then the invoice. A very small number of shippers project freight spend based on the plan and even these organizations are blind to any changes in transport spend during that entire time period. If we consider variability in the amount of time it takes to process an invoice, the blind spots become even larger. A more strategic TMS approach starts earlier and integrates supply chain visibility into the workflow. This allows accruals to be more predictable, takes cost and conflict out of the process, and can lead to a much more partner-friendly environment.
Ajesh Kapoor is Senior Director of Transportation Management Solutions at GT Nexus, the world’s largest cloud-based b-to-b network and execution platform for global trade and supply chain management. Kapoor has 20 years of experience developing industry-leading supply chain and logistics solutions and building lean market-driven organizations.