For many companies, the impact of the COVID-19 pandemic on their transportation operations has been one of two extremes: a large (unexpected) surge in shipments and capacity demand or a huge (unexpected) decrease in both.
The current situation underscores two important questions transportation and logistics executives have to address, today more than ever:
How do you effectively scale your logistics resources, technology, and processes in a rapidly changing environment?
Do you build your organization and capabilities to address all possible scenarios and situations or do you build a core set of resources and capabilities and leverage external partners to scale and stretch your capabilities as needed?
There is no right or wrong answer to the latter question, but once you choose a path, you have to make sure you’re committed to making the necessary investments — in time, resources, process changes, technology, etc. — to succeed.
For example, if you choose to build up your internal organization and capabilities, having a modern transportation management system (TMS) that can scale with your needs is critical. If you’re implementing a TMS for the first time, or replacing an outdated one, it’s important to understand and follow some key factors for success, as I highlighted in “TMS Implementation: 5 Critical Success Factors.”
But while having a TMS is a must, it is not enough. You also have to ask yourself:
Do you have the resources internally to effectively use and manage a TMS? One of the main reasons why TMS solutions sometimes fail to provide sustained value is when a power user leaves the company and there isn’t someone (or ideally, a team) with the requisite skills and experience to fill the void.
Do you have the skills and discipline to keep the TMS tuned? Since your operations change over time, you need to continuously fine tune the TMS, otherwise the quality of the output will degrade.
Simply put, you also have to invest in people and training. And you have to invest in driving continuous improvement in your operations, which leads to other questions:
- How effective are you at analyzing your transportation data to identify continuous improvement (CI) opportunities?
- Do you have the time and resources to plan and execute CI initiatives?
- How many CI initiatives do you execute per year? Do you measure and quantify results?
When viewed from this more holistic perspective, some companies decide to take the other path: to build a core set of resources and capabilities in-house, but leverage external partners to scale and stretch their capabilities as needed.
This path is what continues to fuel demand for transportation managed services — the logistics equivalent of cloud computing — that enables companies to tap resources and technology as required to address their evolving needs.
Managed services can include a lot of different things: supply chain modelling and network design, transportation procurement engagements (both strategic and tactical), day-to-day planning and execution of shipments, business intelligence and analytics services, execution of continuous improvement projects, and so on. And these services can be ramped up or down as required, lasting a year or more in some cases, or just a few weeks or months in others.
Although managed services differ from traditional third-party logistics (3PL) engagements, the same critical factors in selecting a partner apply (see “4 Important Factors To Consider When Evaluating 3PL Partners”).
What new requirements and challenges will transportation executives face tomorrow? The honest answer is that nobody really knows. You have to expect (and prepare for) the unexpected.
Which path are you taking and why? Post a comment and share your perspective.