Is managing your transportation operations an art form? You may not do your job with a palette and a paintbrush, but it’s safe to say that logistics planners have to be creative when moving freight. Customers have high expectations for quicker deliveries and more visibility into the delivery process, plus you have endless, changing constraints to deal with too. In today’s business environment, no planner is simply loading freight onto a truck and shipping it from Point A to Point B via a common carrier. Creativity is a must.
The key tool for a logistics planner has long been a transportation management system (TMS), but the increased complexity of the market is driving demand for more creative TMS capabilities. Let’s take a look at a new TMS capability that allows for more routing creativity, improvements in operations, more cost savings and better customer service.
A New Approach: Continuous Pool Optimization
Sometimes being creative means waiting to act until you have better insight into your shipping options. That’s what continuous pool optimization (CPO) allows without sacrificing efficiency or service. It enables shippers to be creative in designing a dynamic distribution model that optimizes itself, taking advantage of new realities.
Here’s how it works: CPO allows for a predetermined or dynamic routing of orders through a consolidation network. Shippers can plan shipments to a consolidation point by predetermining a specific location or by allowing an algorithm to dynamically determine the optimal consolidation facility. CPO can identify the best pool point (i.e., a warehouse or cross-dock) in a company’s freight network to route a daily mix of inbound freight on truckload or less-than-truckloads (LTL) to plan loads for delivery. These routes can then be “split,” thus enabling the execution of multiple movements into consolidation while delaying the determination of the outbound routing until more freight accumulates at the pool location (or when time limits require the freight to be released from the pool). Then, outbound routing from the consolidation facility can be executed independently — but with consideration — of the inbound movement while still maintaining a single order that supports each leg of the journey.
By enabling this creativity and flexibility — even when all factors aren’t yet known — CPO lets you maximize freight savings through optimization while adhering to pickup and delivery constraints. Logistics planners can provide complete deliveries in a single shipment, even when product may be sourced from multiple locations. Customers get better service, and you could potentially eliminate the need for warehouses or distribution centers in your supply chain.
Scenarios and Benefits
Continuous pool optimization is distinct from traditional optimization in key ways. First, a traditional TMS typically has to route freight all the way through to the final destination. But with CPO, the TMS is able to route freight in phases; the first optimization routes freight to an intermediate point while factoring in the cost-to-service orders beyond the intermediate point without creating loads. Unlike pool or cross-dock locations, consolidation points allow freight to be held for a period of time at the location for future consolidation with other orders that are either already at the consolidation point or that will arrive in the future. Secondly, a TMS has traditionally only been able to execute orders once all of the key variables are known (the load, its size, where it’s going, the ship dates, etc.). With deep logic that informs CPO, the TMS can deal with many unknowns and very complex freight scenarios.
Let’s say a manufacturer based in Milwaukee needs to ship freight to Tampa. And let’s say it’s Tuesday, and the company doesn’t have enough freight to fill a truckload, but it does have customers in Florida awaiting their deliveries.
The manufacturer could ship the half-empty truck down south or wait until it does have a truckload, or it could utilize continuous pool optimization and plan its shipments to a consolidation point. Then, using its TMS, it can dynamically determine the optimal consolidation facility and get its shipments into its customers’ hands as fast, as cost-effectively, and as efficiently as possible. Some shipments could be delivered direct from the consolidation facility, but some could continue onwards and be routed through a carrier terminal or through another consolidation facility. Because the shipper has time to choose between the varying options, the most cost-efficient decision is always being made using the latest order information available.
Traditional TMS capabilities would only allow this planner to route the freight to its final destination in Tampa. The key breakthrough with CPO is that the TMS is able to route in pieces (while embracing unknown, future options) and allows the planner to execute what must be shipped, delay shipping when possible, change plans and get creative with planning routes.
Your TMS Shouldn’t Be Afraid of Complexity
Look hard at your transportation practices. Are they flexible? Can you be creative with them? Or are you forced to simplify for the sake of your TMS? Continuous pool optimization can help you create a better business model by delivering the power and programming to do the hard work, plus give you the freedom and creativity to work with more options and uncover more savings.
Jayne Marchesan is product manager at 3Gtms and has nearly 15 years of experience in product management, bridging the gap between the technology and business worlds. Experienced in all facets of software development, Jayne works with customers to understand and translate their business problems into actionable business requirements. Her past experiences include project manager at LeanLogistics, business analysis manager at Avendra and product director at JDA. Jayne holds a master’s degree in logistics and supply chain management from Cranfield University.