Many organisations are driving down costs by introducing a transportation management system (TMS) into their business. Nick Berry, Executive Director at RedPrairie, argues that while TMS can help increase efficiencies across the business, it can also improve the customer service experience.
According to the Council of Supply Chain Management Professionals, transportation costs soared to 4.7 per cent of sales in 2008, while total logistics costs, including inventory carrying, warehousing, administration, and customer service costs, were 9.3 per cent of sales for the average company. With such large sums being spent, logistics and supply chain directors need to ensure costs are as low as possible while meeting customer demands. No wonder AMR Research found that global TMS spending will grow at a rate of 26 percent over the next five years.
Automating manual processes
Whether your world involves orchestrating shipments across complex global supply and demand networks, or simply delivering goods to local customers, a TMS can serve your requirements across all areas of transportation management. Managing activities such as procurement, load planning, consolidation, carrier selection, route optimisation, freight settlement, and collaboration in a coordinated fashion is the path to lower cost and higher quality of service. For example, one of RedPrairies customers experienced that after implementing TMS it processed 75% of its business without human involvement. Similarly the TMS helped the customer better manage its 430-470 daily truckloads across multiple shipping sites and transportation modes and resulted in improved customer service with on-time shipping at 99% and allowing just-in-time deliveries.
Creating the optimal plan
But gaining the greatest value from your transportation spend starts long before you have a load to route or a shipment to tender. It begins with getting the best possible rates for your lanes through a structured procurement process. Truckload (TL), less-than-truckload (LTL) and ocean carrier bids can be modeled into multiple transportation scenarios to determine the best carrier options for each lane. A TMS will select and assign the optimal carriers based on rates, modes, pre-booked capacity, delivery constraints and so on.
Maximizing the usage of a private or dedicated fleet can be factored in - as can the joint planning of inbound and outbound shipments, using consolidated routing to minimise empty miles and rates. Unused capacity can be carried over from one plan to the next to determine whether an underutilised load should be held for more freight or if the load needs to be shipped as is to meet delivery windows. Systems can also determine whether freight could be held at pool points or consolidation facilities to leverage pre-booked capacity, or if using market carriers will be necessary to meet commitments. Automated border crossings can be factored into route planning and international shipment documentation printed accordingly.
Efficiency and visibility right down to the last mile are just as important. So long-haul planning and execution should be combined with local fleet routing and tracking. Fleet management optimises daily routing and scheduling of private and dedicated fleets while load balancing and stop assignments ensure efficient capacity utilisation, making it possible to serve more customers each day and potentially reducing the number of vehicles in operation. In-transit routes and performance can be monitored by GPS or in-vehicle monitoring devices for the ultimate in tracking and control.
Coordinating with partners
The internet provides the ideal platform for communication between parties. A portal can connect shippers, suppliers, carriers, customers, stores and remote sites. It can facilitate actions such as load tendering and response, status updates, track and trace, and delivery receipt.
For vendors and suppliers, a portal can support inbound shipment routing requests for consignee-controlled freight and advance ship notices on vendor-prepaid inbounds. Retail DCs can use it for scheduling appointments with suppliers and alleviate inbound receiving congestion. Stores can initiate stock transfers and arrange returns. And event management can alert users and customers to disruptions, enabling alternative plans to be made.
Once freight is delivered, a TMS can allow shippers to automate carrier settlement through match-and-pay or self-invoicing. In match-and-pay, the system compares invoices to executed shipments to either issue payments or flag exceptions for investigation. Self-invoicing allows payment based on shipment records without carrier invoices. Both approaches reduce the time and cost of settlement while ensuring accurate payment for actual shipments. For logistics service providers, a TMS enables accurate billing and reporting on profitable and unprofitable customers, lanes and loads.
How to deploy?
If the functional scope of a TMS can be somewhat mind-boggling, deployment options are more straightforward. Transportation management systems can be purchased either as a fully-integrated, single platform or you can pick and choose the components you require. Likewise, a TMS can be licensed as a traditional on-premise application or it can be hosted by the vendor on a software as a service (SaaS) basis. Whatever your service, strategy and IT needs, theres a TMS out there that can bring dramatic improvement across your transportation operations, lower costs, and deliver a better customer service experience. And if you need to establish a centralised transportation function to serve the needs of multiple business units, installing a TMS can be a good way to do it.