It’s rare that a shipper or third party logistics (3PL) provider has the luxury to sit back and roll out perfect operations and systems strategies, perfect improvement programs or perfect projects. Yet, many improvement approaches focus on that green field. Ideal transportation operations are difficult to achieve, but an ideal approach to improving transportation in the real world — finding real savings and adding value to other functional areas in the supply chain, or business more broadly — is achievable.
Work and life do not occur in a vacuum; organizations’ politics, systems, customers, suppliers/vendors and people push and pull in different directions, making it difficult to achieve an ideal approach. Still, walking through this process helps shippers and 3PLs answer the questions, “Where do I start?” and “How do I get to a better future state?”
These six steps allow shippers and 3PLs to improve transportation operations and increase supply chain value in the most ideal way possible.
Data is always an issue. Shippers and 3PLs often struggle to build a single data set of their transportation costs. Implementing a comprehensive audit, across all modes, geographies, currencies and languages, can achieve this data set. Audit is no longer just about rate or discount verification, credit recovery and timely payables; it is about carrier and regulatory compliance and identifying savings opportunities upstream in the sourcing, planning, and execution areas.
With clean, useable data (from audit or otherwise compiled), companies can assess opportunities with the knowledge of where the money really is. This assessment focuses on value created by and for stakeholders, process and integration strengths and weaknesses, as well as relevant application use and configuration. The assess step allows a company to understand where it should be investing time and money on solutions.
Solution design moves beyond assessment’s identification of opportunities and benefits into detailed future state processes, relevant service providers (carriers and systems), integration requirements and a documented return on investment (ROI) that even a CFO could love. This often involves modeling, a proof of concept, or other detail supporting ROI estimation.
With a solution designed and determined, it’s time to source it. This often involves a strategic carrier sourcing effort with carriers or 3PLs but could also mean sourcing a transportation management system (TMS) or at least better using the one you already have. For example, if the solution design determined that better inbound purchase order (PO) management had a higher ROI than renegotiating outbound truckload pricing, then TMS improvement likely makes sense.
Once provider(s) are selected, it is time to implement. Implementation is where the payoff is created in the real world. Success requires experience with the solution, a well-defined methodology and project plan, and a problem-solving and stick-to-it attitude. Implementing a new system versus upgrading a current one has very different risk vs. reward equations, depending on the situation. This might sound obvious, but balancing ROI with implementation resistance is critical as people can be very proud of the bad processes they created and own.
During implementation, companies should lay the groundwork to operate a Lean and successful transportation operation, including working with external providers to the extent that there is some process outsourcing, which is increasingly typical. Regardless of what entity operates which process, robust and frequent reporting to measure success is crucial. Ongoing updates to standard operation procedures (SOPs) help keep process owners critiquing what they do, while training them on skills to advance within the organization. Keep challenging the organization on what functions should be housed centrally, in a control tower or center of excellence, versus pushed out to the physical location or closer to the customer. As companies evolve, so do operations. As a result, a nimble operation is a long-lasting one.
These six steps offer a successful path to follow in the real world. While some companies may be able to skip one or two steps because of their strength in that area, the steps work. So, for example, a company with clean transportation spend data from an enterprise resource planning (ERP) system or TMS may be able to skip audit. Or a company that knows its top initiatives from clients and the value of them may be able to jump right into solution design. Other times executives or managers take on a new role where a system or carrier strategy has already been put in place, and they must quickly assess how to move forward given those existing system or carrier strategies.
During each of these steps, the leadership and project teams should ask, “What can we insource or outsource?” “What can we centralize or decentralize?” Plummeting software and integration costs, converging business models, e-commerce and speed-to-market all influence the right transportation strategy and operating model differently for each company — so challenge your current state! Transportation improvement is achievable in the real world of budgets and cost/service pressures.
Geoff Milsom is a director in the transportation practice at enVista, a leading global supply chain consulting and IT services firm. enVista delivers innovative solutions that improve profitability, enhance customer service and reduce waste from source to consumption. enVista’s unrivaled consulting experience, deep vertical industry expertise and comprehensive solutions portfolio enable clients to leverage one strategic partner that consults, implements and operates across supply chain, transportation, retail, IT and ERP.