Transportation Management Systems (TMS) bring a lot of value to companies across all industries, but the value proposition is particularly strong in the food industry when you consider the cost of transportation as a percent of revenue and the service challenges involved.
What factors are driving demand today for TMS in the food industry? Are the barriers to implementation coming down? What capabilities are becoming more important for food companies today?
TMS in the Food Industry: Time and Resources Now Available
“In the past, food companies have put so much time and resources into their modernization efforts, modernizing their infrastructure more than anything,” said Wiggins, in explaining the uptick in demand for TMS in the food industry. “We sold to a lot of food companies this past year and those clients have told us that they never had the resources to implement a TMS in the past.” Now that those other modernization efforts are wrapping up, the resources are becoming available to implement a TMS.
“There have also been a lot of mergers and acquisitions in the food industry,” Wiggins added, “so food companies have end up with multiple ERP systems, and many of those companies were hoping to get their TMS needs filled by their ERP provider, [but it never happened].”
Another Driving Force: The Food Safety Modernization Act (FSMA)
“There’s a lot of temperature control requirements and safety aspects to it, which is driving demand for transportation management systems,” said Wiggins. “A TMS is not a ‘silver bullet’ solution to meeting FSMA requirements, but it is a great enabler to help with compliance.”
(For related commentary, see Impact of Food Safety Modernization Act on Transportation.)
“Alexa, order me some tea”
However, Wiggins believes that the biggest driving force is the rapidly-changing buying habits of the end consumer.
“We’ve talked endlessly about all the changes in retail, but if you think about it, a lot of those same same types of changes are now happening in the food industry,” said Wiggins. “Look at Target buying Shipt…you have HelloFresh, you have Blue Apron, and of course, Amazon Prime Pantry.”
Wiggins, in a Talking Logistics first, then called out to Amazon Alexa across the room and said, “Alexa, order me some tea.”
“Based on JP’s order history,” Alexa responded, “I found Twinings tea, 24 count; it is $10.39 total after $2.60 in discounts and credits. Would you like to buy it?”
“Yes,” replied Wiggins.
“Okay, order placed,” confirmed Alexa.
“That’s how people buy now, it’s just so easy,” said Wiggins.
New Fulfillment Models and Structures
“If you’re a shipper or third-party logistics provider (3PL) in the food industry, the whole fulfillment model and structure is being turned upside down.”
“If you’re going to compete in this modern market,” he added, “food companies are realizing they need to have state-of-the-art systems. It used to be fine to manage [your transportation operations] with Excel spreadsheets and your ERP because you were doing simple order patterns [a regularly scheduled full truckload once a week or every other week], but now with these changing fulfillment patterns, all customers are ordering faster, they’re expecting faster delivery times, they’re expecting Amazon-like service, and they’re ordering more frequently and in smaller quantities. So the need for transportation execution excellence is going up exponentially.”
“Instead of delivering full truckloads,” Wiggins continued, “companies are now using a lot more less-than-truckload (LTL), they’re building more multi-stop truckloads, and they’re utilizing pool distribution more,” all things that require a TMS to do them efficiently and effectively.
I encourage you to watch the rest of my conversation with JP for additional insights and advice on this topic, including the TMS capabilities that are becoming more important for food companies today. Then post a question or comment and share your perspective!