A recent review of two companies with different transportation management strategies reinforced my belief that centralization of transportation management operations will produce better operating results today and in the future. Over the years, I’ve heard a lot of reasons why decentralized transportation management operations are better. Frankly, some of them are outdated because of advances in transportation management, routing and mobile technologies. Let’s go through two examples of companies in the same industry to understand why centralization is the better choice.
A Decentralized Example
Company #1: A large and fast-growing organization with an aggressive agenda to rapidly expand their delivery network. Company #1 books delivery appointments centrally but has chosen a decentralized planning and scheduling strategy. Their belief is that local domain expertise is required to best plan and schedule deliveries. Rather than build a centralized infrastructure, as they open new DCs, they hire local planners who know the geography, road networks, etc.
While this approach gives them flexibility to deploy their network, Company #1 is constantly challenged by several factors:
Treading water. Their business is a dynamic, broad product mix with diverse sizes, and they have short lead-times and tight delivery windows. The level of expertise required goes beyond the basic planner/scheduler who moves orders around a map to create routes, which is where they spend most of their time. Company #1 is in a constant cycle of ensuring basic performance is in place as new sites are brought on-line, and retraining when there is planner/schedule turnover in the existing sites.
Inconsistency and inertia. While some of the local planner/schedulers do a good job, the overall results are varied, and it is difficult to drive consistency and change across the delivery operations. Because Company #1 is moving quickly, they are in a constant learning mode but, with dispersed resources, it is tougher and takes more effort to disseminate process and planning changes and, most importantly, capture the best practices that are being developed at the local level.
Why Centralization is Better
Company #2 is also a large company with many distribution locations, but a more established business. They used to have decentralized planning and scheduling; however, recently moved to centralized transportation operations. Here are their findings: customer satisfaction metrics dramatically improved and delivery costs were reduced. In addition, they improved vehicle utilization and reduced loading times.
Why the phenomenal results? Centralization promotes standardization, leverages the combined knowledge of the team and fosters rapid collaboration.
More consistent operations. With all the planners/schedulers together, there is better management of the process and evaluation of the results. In addition, training is easier to execute and learning from other planner/schedulers can happen organically.
Improvement culture. Best practices and improvement opportunities can be more rapidly identified and executed. Planning and scheduling are learning processes. There is always room for improvement and close collaboration promotes and accelerates it.
Modern systems. Advanced transportation management and routing technologies can capture much of the local domain expertise related to geography, road networks, planning strategies, vehicle and driver requirements, etc., so there is less reliance on locally-based resources.
With customer delivery being one of the most dynamic logistics areas, the ability to continuously adopt new strategies and produce superior and consistent customer service results are two ways companies can differentiate themselves in the market. A decentralized model doesn’t support these important concepts. Going forward, I believe that Company #2 will be able to deliver superior results and be more innovative than Company #1.
There is more. Beyond these two customers, we have seen companies with centralized transportation operations have more efficient and lower-cost planning and scheduling operations. They can manage more vehicles per planner/scheduler and do not have trapped planning/scheduling capacity. In addition, they have more stable workforces. Their workforces are also more immune to the impact of employee turnover as they have greater critical planning/scheduling mass that is concentrated, and they can get new resources productive faster because of the proximity of expertise and support.
This doesn’t mean that the role for local operations as part of the planning/scheduling process should go away entirely. Instead, their role should be to help “close-the-loop” on the quality of the process and results. There will be local conditions—many of them transient—that centralized planners/schedulers won’t know and they need to be captured. The local execution team should be able to view schedules and provide feedback or even make final adjustments. Today’s transportation management and route planning architectures support distribution environments to share information and create roles with different levels of control.
Still running a distributed transportation planning and scheduling operations? It’s time to consider centralizing if you are looking for lower costs, more consistent and higher quality service, operational agility and differentiating performance. What success have you had centralizing transportation management operations? Let me know.
As Executive Vice President, Marketing and Services, Chris Jones is primarily responsible for Descartes’ marketing and professional services organizations. With over 30 years of experience in the supply chain market, Chris has held a variety of senior management positions including Senior Vice President at The Aberdeen Group’s Value Chain Research practice, Executive Vice President of Marketing and Corporate Development for SynQuest, Vice President and Research Director for Enterprise Resource Planning Solutions at The Gartner Group, and Associate Director Operations & Technology at Kraft General Foods.