Do you need a transportation optimization solution?
A surprising number of transportation and logistics executives would reply “No” to that question. “Our operations are not that complex,” they would say, or, “We ship mostly full truckload, so there is nothing to optimize.”
However, if you ask these same executives, “Do you want to operate your transportation and logistics operations as efficiently and cost-effectively as possible while meeting customer requirements?” they would all reply “Yes” (at least you hope they would!).
According to Merriam-Webster, to optimize is “to make as perfect, effective or functional as possible.” Isn’t that what transportation professionals get paid to do? From this perspective, optimization is not optional; it’s woven into the DNA of transportation management.
Then why the two different responses?
A Continuous Improvement Mindset
I believe it is because many transportation and logistics professionals look at optimization the wrong way.
They view it primarily as a software application instead of a continuous improvement mindset.
Yes, technology facilitates optimization, but the process of making transportation “as perfect, effective or functional as possible” doesn’t begin with algorithms and mathematical formulas — it begins by asking probing questions, such as:
- Are we shipping orders from the best locations (DC vs. store vs. drop ship)?
- What would be the impact on cost and service if we had an extra day of lead time?
- Is less-than-truckload (LTL) still the right mode for our shipments? What about continuous multi-stop truckload?
- Should we use cross-docks or pool points in our network?
- Why is there always a line of trucks at our dock waiting to load or unload?
- Does it make sense to implement a dedicated fleet on some of our lanes?
- Are we leveraging our transportation spend as effectively as possible?
- Why are we paying so much in accessorial fees?
Regardless of how simple or complex your transportation operations are, you should always ask questions that challenge the status quo and seek opportunities to reduce costs, improve service, reduce risks and enhance customer experience.
How do you answer these questions?
Trends in Transportation Optimization Solutions
Well, that is where technology comes in, specifically transportation management systems (TMS) with optimization capabilities.
Companies can use optimization solutions to answer execution, tactical and strategic questions. “Can we combine multiple LTL shipments into a single truckload shipment?” is a classic example of an execution-focused question. “How should we route our trucks for tomorrow’s deliveries?” is another example, particularly for companies with private fleets that want to minimize miles driven while meeting customer delivery windows.
Examples of more tactical and strategic questions are: “What would be the cost and service impact if we converted 20 percent of our volume to intermodal?” and “Should we convert from prepaid to collect on our inbound freight?”
Discussing the different types of transportation optimization solutions available and how they work is beyond the scope this post, but a few trends are worth noting:
- You don’t need a Ph.D. to use a transportation optimization solution. Today’s solutions are much more user friendly, configurable and intuitive than those in the past.
- Leading solutions use dynamic optimization engines for execution. Unlike static optimization engines that determine the best solution based on a snapshot in time (but that can become outdated very quickly), dynamic optimization engines continuously analyze and come up with the best solution as new orders or exceptions come in.
- The scope of TMS optimization is expanding beyond execution into the tactical and strategic realms too. Execution-focused optimization has always been a part of leading TMS solutions, while tactical and strategic optimization were typically separate, standalone applications. However, since all three types of optimization depend on TMS data, TMS vendors are adding tactical and strategic capabilities to their platforms.
At the recent Manhattan Momentum 2019 conference, for example, Dr. Kimberly Ross, VP, Science at Manhattan, provided an overview of the company’s transportation modeling capabilities and various use cases, including network design, determining fleet vs. common carrier policies and fleet sizing. “Transportation modeling is designed and built to help you evaluate the impact of a policy decision on your transportation network,” Dr. Ross commented in her presentation. “It does this through a combination of optimization, simulation and analytics.”
Ask Good Questions
A few years ago, I came across the following story, which was published in The New York Times on January 19, 1988:
Isidor I. Rabi, a Nobel Laureate in physics, was once asked, ”Why did you become a scientist, rather than a doctor or lawyer or businessman, like the other immigrant kids in your neighborhood?”
”My mother made me a scientist without ever intending it. Every other Jewish mother in Brooklyn would ask her child after school: ‘So? Did you learn anything today?’ But not my mother. She always asked me a different question. ‘Izzy,’ she would say, ‘did you ask a good question today?’ That difference – asking good questions – made me become a scientist!”
That difference is also what makes transportation professionals successful in their roles.
Transportation optimization — that is, the journey to make transportation “as perfect, effective or functional as possible” — begins with asking good questions. The process of developing questions, and refining and prioritizing them, will lead you to new ideas and insights about how to improve your transportation operations. However, you can’t answer those questions effectively, even those that seem simple on the surface, with spreadsheets or back-of-the-envelope calculations.
So, the answer is yes: you need a transportation optimization solution.