Four Ways to Get More from TMS.
Softer freight rate increases and added capacity in the trucking and ocean sectors have not reduced the pressure CEOs and CFOs put on logistics managers to control transportation costs. If anything, the C-suite is clamoring for cost information.
The result has been a measurable uptick in companies re-evaluating their existing transportation management systems and buying new software.
Recent research suggests that companies acquiring a TMS must pay more attention to the system as an enabler of business process improvement. New TMS alone won't result in better control of transportation activities and costs. An Aberdeen Group study shows that companies that made an investment in a modern TMS and aligned their processes to take maximum advantage of the technology are not experiencing the increases in transportation costs that the rest of the market is seeing.
Mainly larger companies are early adopters for new technology and thus the major beneficiaries. Midsize firms could achieve the same benefits, if pursued correctly, but few have made the attempt, according to a Georgia Southern University study.
The few medium-sized firms controlling costs and activity with a TMS and considerably changing their transportation business processes are gaining the expected efficiencies. When considering the investment:
1. Decide which transportation functions need the most attention. A transportation assessment is an appropriate starting point, and it is often better to use an outside consulting firm to gain perspective. You must calculate the time needed to achieve benefits from the TMS. Careful companies examine TMS capability vs. their own specific needs, then build a business case that is dependent on achieving the benefits of process improvement, rather than the technology investment. The most successful implementations involve considerable business process improvement, some of which may result in major cultural shifts within the transportation function or the entire company.
Achieving benefits over a five-year time frame accounts for the notions that:* Operational practices should be reviewed every five years to ensure they are aligned with corporate strategy.* Technology improvements will likely be made in that time, rendering today's solution unacceptable to suppliers and customers, both internal and external.
2. Make "optimization & planning" a focus for improvement. Few large or medium-sized businesses pay sufficient attention to powerful modern optimization tools. Most require employees to compile orders into shipments and to pick the best mode and carrier. The powerful mathematics underlying optimization tools produce results unmatched by human staff. There is a role for human approval, and occasional intervention, in reviewing optimization results, but overall demands for cost control and productivity improvement make limiting human intervention a worthwhile business process improvement. A very proficient load planner can handle the equivalent of 30-50 truckload shipments per day. Using modern optimization tools, productivity in the range of 650 shipments per planner per day is achieved, greatly lowering transportation costs.
3. Make the TMS the sole repository of rates, routes and charges. Many TMS implementations stall when pockets within the organization do not become part of the solution. The local traffic manager, remote from headquarters, keeping his own rates and carrier choices in a notebook or the salesman allowed to pick his own carriers are the enemies of controlling transportation activities and costs. Database technology and the Internet are powerful technology enablers for eliminating non-conformance. When all trip rates (inclusive of line-haul accessorial and fuel surcharges) and routings are included, optimization and savings opportunities are greater. Additionally, when all rates, routes and shipments are in a single database, shippers can pay the carrier without an invoice and gain the 1-2 percent reduction in freight rates that many larger shippers now enjoy.
4. Focus the initial implementation on a narrowly defined, but moderately complex, geography. Shippers will be better off picking a well-defined multifacility region for developing and testing the new business processes enabled by the new technology. With a narrower focus, managers can closely monitor business process improvements, organizational response and benefits. Success in a narrow environment, if it is sufficiently complex, helps create the impetus for rolling out improvements across the company: nay-sayers become converts and then evangelists for improvement, because transportation improvements create scale economies that can quickly affect and benefit the entire company.
Following these steps, medium-sized companies can achieve the business and economic benefits mostly reserved to larger companies. Investing in a TMS and transportation-related business process improvement typically pays back within 15 months. Moreover, the newly capable business is structured to avoid many of the current challenges in managing transportation, thus delivering the bottom-line results that the executive suite expects.
