Business benefit: Five tips for transportation management excellence

The challenges facing companies today in a plummeting economy are obvious: rising costs, pressure to deploy environmentally sound practices, and shifting consumer demand. So what are best-in-class companies doing to combat the issues while keeping a tight budget in mind?

By David Johnston, senior VP of manufacturing and wholesale distribution, JDA Software January 6, 2009

The challenges facing companies today in a plummeting economy are obvious: rising costs, pressure to deploy environmentally sound practices, and shifting consumer demand. So what are best-in-class companies doing to combat the issues while keeping a tight budget in mind?

A recent report out of Stamford, Conn.-based Gartner ( October 2008, Market Trends: Transportation Management Systems, Worldwide, 2007-2012 ) says demand for transportation management systems (TMS) is driven by two primary needs: controlling costs and improving operational/logistics performance. Although performance and efficiency remain important business drivers, cost reduction—derived primarily through better planning of shipments—has become the principal motivation for evaluating and acquiring a TMS.

Maybe it’s time to consider walking your company through these five steps:

Rethink your globalization strategy .

For years outsourcing to China and India has been the most economic option for many companies. Rising fuel costs, longer lead times, and eroding margins due to duties, taxes, and unexpected transportation expenses are causing this trend to shift and forcing companies to look more closely at their sourcing and transportation plans.

Strategic network design tools that can analyze the time, cost, and risks involved in sourcing and transporting goods from various locations are allowing companies to more accurately evaluate their manufacturing and production plans. In many cases, fuel and other costs related to importing and exporting product have climbed so high that despite higher labor costs, manufacturing goods in the U.S. or Mexico is more cost-effective. For this reason, many are turning to “right-shoring” models that include a combination of on-, near- or off-shore options for manufacturing and assembly of products.

Put fleet management into practice.

Breaking down the silos that traditionally exist across fleet and third-party carrier operations is critical to delivering a synchronized, enterprisewide workflow for transportation management.

By using a single platform to manage fleet along with multi-carrier and multi-modal transportation, there is a better balance of cost-reduction, asset utilization, and customer service. A single monitoring and alerting environment across the entire enterprise enables full visibility and enhanced control so adjustments can be made as economic conditions and fuel prices fluctuate.

Deploy collaborative transportation management .

Getting carriers more actively involved earlier on in the transaction process can ensure that front-end agreements, transportation forecasts, operational planning, and transportation execution—including continuous moves—are all in line with consumer demand. This collaboration requires little in terms of capital investment—especially where a technology foundation already is in place. The primary investments are people and time. Companies must have the resources and the commitment to create a collaborative culture between parties. The results can mean better rates, greater carrier stability, and relationships and optimized asset utilization.

Drive cost savings, green operations with optimization strategies .

Today’s customers are no longer satisfied with simply having the goods they want in their hands—they also want to know they got there in the most environmentally friendly way possible.

Consolidation and continuous-movement tools that combine loads and schedule routes in sequential order ensure maximum use of each truckload. Not only does this save time and money by getting goods through the supply chain quickly, but it also creates a leaner and greener operation by reducing the number of trucks on our roads.

By using route optimization solutions, companies can determine the most direct route and prevent idling and wasted fuel by taking into account construction obstacles and even difficult turns. Often it is the “last mile” of getting goods to a destination that causes companies the most pain—navigating through city roads, for example, can be more efficient with a smaller truck. Tools that anticipate this pain point and allocate the right vehicle to be ready at the right time—so the larger vehicle is not left idling—can speed the movement of goods through the supply chain while reducing carbon footprints.

Opportunities to reduce costs don’t end when a delivery is made. Backhaul strategies while products are in transit can further maximize dollars while allowing companies to be more environmentally friendly. Additionally, since trucks don’t always represent the most optimal mode of transport, multi-modal support is needed to allow companies to evaluate all possible modes and determine the most effective option.

Create true visibility via trading partner management .

The key to managing a global supply chain is end-to-end visibility. Close communication and collaboration with factories, forwarders, logistics providers, brokers, and other partners across multiple geographies and process touch points enables issues to be resolved with greater speed and agility. This visibility allows transportation and logistics managers to monitor shipments, make more informed decisions, resolve issues in-transit, and identify opportunities for modal shifts, inventory diversion, direct-drop shipping, and other cost-saving tactics.

Advanced transportation planning and execution solutions deliver the visibility and the agility necessary to survive in a down economy. By driving efficiency throughout transportation and logistics processes, TMS solutions create a lean supply chain that can adapt quickly to factors such as rising fuel costs and turbulent economic conditions. In addition, TMS solutions pave the way toward overall cost control by streamlining freight management, shipment planning, and route selection—making them an essential solution in any company’s arsenal.

About the author:
David Johnston is senior VP of manufacturing and wholesale distribution for JDA Software , a provider of advanced transportation planning and execution solutions, including JDA Transportation 7.5 release.