It’s well documented that a lot of the potential savings a transportation management system (TMS) can provide is derived from optimization. Yet many companies still don’t leverage the optimization capabilities of their TMS. Why not?
That was my opening question to Vikram Balasubramanian, Sr. VP Strategic Product Development at MercuryGate, in a recent episode of Talking Logistics. Vikram highlighted several barriers to implementation:
Companies focus first on automating their execution processes, leaving optimization as a Phase 2 implementation, but they never get to it.
Many shippers have been discouraged by the cost (particularly for traditional, on-premise solutions) and believe they can do it themselves manually.
The challenge of getting quality data that reflects operating reality. As Vikram pointed out, “the quality of the solution is largely dependent on the quality of the input.”
Some companies believe they are not big enough, or their transportation operations are not complex enough, to require optimization. Vikram does not agree with this point, however, because “once you expand your analysis to [both inbound and outbound, as well as private fleet], and in the case of retailers, you add in returns, things do become complicated.”
Another barrier, particularly for small and mid-sized companies, is having the resources to effectively leverage optimization technology — that is, having knowledgeable and experienced analysts on staff to develop, run, analyze, and maintain optimization models. But as Vikram pointed out, many solution providers — including software vendors, 3PLs, and boutique consulting firms — are providing optimization as a managed service, which companies can leverage as they develop their own internal resources and expertise.
All that said, it seems like the tide is starting to turn, with more companies looking to implement TMS optimization technology. Vikram highlighted some of the factors, including companies finally moving on to Phase 2 after achieving the savings from their execution capabilities, and the rise of cloud solutions, which provide cost, trading partner connectivity, and other benefits.
Vikram also described how companies can leverage optimization in a wide range of scenarios. For example, “3PLs can leverage optimization as part of the sales process…On the execution side, companies can use it to create or consolidate loads from shipments ready to be fulfilled…and on the planning side, companies can use it when they’re identifying capacity requirements, and they can also use it during the procurement process to make sourcing decisions, and in strategic network design.”
I encourage you to watch the rest of my conversation with Vikram for additional insights and advice on this topic. Then post a question or comment and keep the conversation going!
Note: MercuryGate is a Talking Logistics sponsor.
