For many years, analysts and consultants have talked about the importance of taking a holistic approach to transportation management to successfully weather the ups and downs of the market. But what does that mean exactly? Why haven’t more companies adopted this approach? What are the benefits and how do you get started? Those are some of the main questions I discussed with Joe Wilkinson, Vice President of Transportation Consulting at enVista, during a recent episode of Talking Logistics.
Although there have been many changes in transportation over the past 20 years, such as the impact of ecommerce and new technologies, in many ways the more things change, the more they stay the same. So I began my discussion with Joe by asking him what has stayed the same.
Joe notes that in many ways it is what it’s always been, with everyone operating in their independent silos. He says partially it’s a function of the marketplace with every company trying to slim down their staff. “You have small transportation departments trying to manage very complex networks for disparate stakeholders, all of whom have their own goals and objectives,” says Joe. “People tend to get tunnel vision as they focus on their piece of the puzzle and what is missed are the bigger opportunities that don’t fit nicely into those individual buckets. It will take a mindshift to change that.”
Joe also notes that even though technology has come a long way and can process multiple functions, it still does those functions discretely. It generally doesn’t, for example, use audit data to help understand how to improve freight tendering or mode optimization.
Holistic transportation management
To get the benefits of a holistic approach to transportation management, Joe says that you need several things. “First, a process and system that allows you to apply business intelligence to historical data to give you clarity and actionable insights. You need to leverage the results of that analysis to predict likely outcomes of whatever actions you are taking. You need to satisfy the goals of the disparate stakeholders and you need a central hub that enables you to tie the input of various functions into an integrated transportation strategy. The crux of it is you have to have a function that looks at the analytics to identify opportunities and threats.”
Benefits of a holistic approach
Joe claims there are many benefits to taking a holistic approach to transportation management, but it all comes down to taking the time to analyze the data to look for opportunities. For example, Joe notes that one customer who is spending about $40 million on ecommerce parcel shipments found that $1.5 million of that spend was for next-day and 2-day air shipments that could have been done with the same or better transit time using ground. The savings associated with that was almost $400,000 per year. “No transportation management system that hasn’t been properly tuned is going to tell you that you’re picking your service levels incorrectly,” says Joe. “But you won’t know that the TMS isn’t properly tuned until someone looks at it and analyzes your key performance indicators.”
Joe also states that best-of-breed business intelligence tools can pull together data from many different sources, not just the TMS, to provide the holistic view of what’s happening and where the opportunities lie. This can produce many benefits.
“The benefits can vary widely from shipper to shipper depending on their situation and capabilities, but I’ve never seen one that didn’t have at least a double-digit ROI because of the opportunities involved,” says Joe. “Sometimes when you find systemic situations that have better alternatives the ROI can be triple-digit.”
Our discussion next turned to ways companies can implement a holistic approach for transportation management. Joe mentions three approaches: internal implementation using existing personnel and systems; use of external consultants and expertise, along with their advanced software; and a hybrid approach combining both options depending on where your capabilities lie. “Generally, it comes down to expertise and cost,” Joe summarizes.
With each approach there are advantages and disadvantages which Joe described in some detail. Joe also shared some critical success factors such as regular stakeholder meetings and road-mapping sessions, among many other factors, that are valid regardless of which implementation approach taken.
Joe also shared a number of hurdles companies must address to implement the types of holistic approaches we discussed. Therefore, I encourage you to watch the full episode for all of Joe’s insights and advice on this topic. Then keep the conversation going by posting your own experiences and success stories.