Late shipments represent massive expense and risk for enterprises around the world. And the problem is widespread. In January of 2021, an average of 37 percent of shipping containers were delayed across regions of Europe, the United States, Asia and Latin America. These delays negatively impact your enterprise in many ways, including:
- Penalties from the Buyer
- Penalties from the Carrier
- Shipment Mode Upgrades
- Expedited Shipping Costs
- Increased Customer Support
- Additional Inventory Days
- Slower Order-to-Cash Cycle
- Brand/Reputation Damage
- Buyer Manufacturing Bottlenecks
- Customer Dissatisfaction
- Potential Customer Turnover
- Lower Customer Lifetime Value
The costs of a late shipment hurt but are generally considered acceptable when accrued individually: having to ship something by air rather than rail because of a supplier delay, or holding a huge order in inventory because a few key components are missing. But when looked at on the aggregate, they’re a major burden, not just on operating expenses but also on future profits and growth.
How a TMS Can Help
Shippers using a Transportation Management System (TMS) can collaborate with carriers to minimize risks to shipment timeliness. They have visibility outside of the ERP and optimize transactions proactively. That’s why the global market for these systems is forecasted to reach $17.8B by 2025.
Among our customers, we see an average of between 5 and 10 percent of savings on freight costs overall, and between $15 and $25 on labor costs per shipment. A significant portion of this savings relates to the avoidance of late shipments. Even just 2 percent is a lot of money. In 2017 the Wall Street Journal reported that companies spent $1.5T on shipping costs that year—rising from between 5 and 15 percent from the year before. And this was pre-pandemic.
So how can a TMS help keep shipments on track?
Mastery of International Shipments
Multiple hand-off points. Customs processes with myriad moving pieces. Numerous risks. Global shipments are complicated, and a comprehensive TMS can transform your ability to manage these inherent risks. For example, if a consignee fails to pick up a specified container and you aren’t aware of this oversight, you could rack up tens of thousands of dollars’ worth of detention fees. A TMS would send a simple alert allowing you to address the issue before these costs accrue.
Upstream Inventory Insights
There are a number of reasons for late shipments, and they can start before actual shipping processes come into play. Among them are not being able to get critical inputs from your suppliers. Some TMS platforms provide proactive notifications when suppliers have inventory issues, allowing you to make arrangements before a disruption.
Automated Negotiation and Transactions
A robust TMS can take care of the back-and-forth negotiation of carrier terms and orders in a way that not only ensures everyone a good deal but also streamlines the process of carrier and shipment management. And it provides real-time rates. So from contract to confirmation, there are minimal hold-ups surrounding administration.
Accurate Shipment Tracking
Is your shipment about to be late? Is it late already? On track? And how do you know? TMS platforms plug you into the visibility you need to know and, critically, give you this information while there’s still time to do something about it.
Automated Route Planning
The latest TMS programs have the ability to automatically find the best combination of routes and carriers that will get your delivery to its destination on time and at the lowest possible cost. They do everything from automate the sourcing of the freight carrier to factoring in real-time variables such as anticipated traffic and weather along the route.
Potential Shipment Consolidation
These systems can also consolidate multiple orders into fewer shipments, streamlining transportation execution for more speed and efficiency. Not only does this help ensure on-time delivery, but it also reduces costs—as well as instances of freight damage.
Terminal & Warehouse Awareness
According to the U.S. Census Bureau, only about 10 percent of a company’s inventory is actually in transit at any given time. The rest of the nation’s $1.9T worth of inventory is sitting in warehouses, storage facilities or retailers. A TMS can let you look into inventory at terminals and warehouses—helping you determine the most optimal way to get shipments where they need to be.
Time Slot Coordination
A TMS can even help move things along as a delivery nears the sender or recipient facility—working out a specific drop-off or pick-up time slot that prevents trucks from having to wait at the facility. It’s a special kind of pain when a delivery is both on site and late at the same time.
Fewer Shipping-Related Errors
What good is an on-time shipment if it goes to Kilgore, Texas when it’s supposed to go to Kuala Lumpur? TMS platforms help reduce the number of shipping-related errors via automated order entry, carrier connectivity and other advantages.
Sometimes you can do everything right, and the shipment is still late. But with the connectivity a TMS offers, you can at least communicate the issue to trading partners quickly so they can plan around the problem. You’ll be in a position to be proactive—informing them of the shortcoming, rather than you finding out when a customer complains.
Better Data Analytics and Decisions Overall
Before you’re able to manage, you have to be able to measure. A comprehensive TMS will let you collect the data you need to run proper analytics you can use to transform your logistics-related KPIs and improve overall decision quality.
So there you have it. If your supply chain is connected by a TMS, be grateful for the many ways these systems help fight late shipments. And if you’re still performing these tasks manually, at least you have an at-a-glance overview of potential improvements. Keeping shipments on time is mission-critical, and it pays to put technology on your side to make it happen.
Brett Renken is Marketing Director at Elemica.