September 16, 2014
This post is a guest blog by Adam Robinson at Cerasis.
Transportation management solutions are no longer just about moving freight at the lowest possible cost. Companies are using effective transportation management as a competitive advantage tool in the ever-challenging economic and commercial landscape. Additionally, shippers are now seeing transportation management solutions both internally or those provided by a logistics services provider (such as a 3PL) less as a commodity and more as a collaborative relationship between themselves and carriers and third party logistics services providers.
With carrier capacity tightening and demand for shorter delivery cycles growing, the best bang for the buck comes from supplementing traditional procurement cost-saving and shipment consolidation strategies with innovative solutions.
This is especially relevant for 3PLs who are transportation management solutions providers with service fees based on reducing cost and streamlining the customer’s supply chain.
What do you mean by Transportation Management Solutions?
First, let’s get on the same page with our definition of “transportation management solutions.” You will first need to understand the term transportation management. Transportation management is defined according the CSCMP Glossary as the management of transportation operations of all types, along with associated activities, including managing shipping units, labor planning and building, shipment scheduling through inbound, outbound, intra-company shipments, documentation management (especially when international shipping is involved), and third party logistics management.
10 Transportation Management Strategy Considerations from a Third Party Logistics Company that any Transportation Manager Could Employ
- Focus on “Compliance, Enforcement, and Expectations”: In today’s advanced technology environment, visibility to shipments and communication of any en route deviations should be a given. One of the most overlooked success factors to shipment tracking is simply defining what the expectation is. Too often the 3PL and customer are not aligned on expectation of shipment tracking. Additionally, having a robust process, and authority to act when shipments do not go as planned, is important to effectively manage distressed shipments. If you are not using technology such as a web-based transportation management system, you may not have the competitive advantage your competitors are realizing.
- Remember Collaboration in All Areas to Become “Shipper of Choice”: By putting in strategies that drive capacity commitments, offering easy pay terms, and rewarding performance, shippers will make it easier for carriers to do business with them. Understanding ways to aid your partner carriers is crucial in tight capacity markets. Is this a lot of work to accomplish? Yes, it can be, if you’re managing carrier relations in house, but it’s an important focus so make sure you budget for these resources. If you don’t have the resources, it is a good indicator to outsource expertise to a logistics services provider where carrier relations is a focus.
- Think about Transportation’s Relation to the Overall Business: Remember, transportation doesn’t exist in a vacuum; look at transportation’s effect on the entire supply chain. Further, a focus on transportation management solutions from an organizational view can enhance inventory control to drive warehouse efficiency. Effective transportation planning takes into account material availability and order fulfillment requirements, ensuring warehouse capacity and optimally utilized resources. Attempting to “levelize” flow through a DC or inbound to manufacturing is a critical aspect to controlling overall logistics costs.
- Use Freight Data to Gain Visibility to Freight Cost Drivers: Freight movement has become all about data mining — you have probably heard the buzzwords “Big Data” being thrown around ad nauseum. The ability to analyze freight spend down to a single customer, at an order or even at a product level, can be a key input to developing competitive product pricing and identifying opportunities for change.
- Look at Mode Optimization: Highly sophisticated order optimization capabilities can be provided by a 3PL or internal transportation management solutions team, without compromising the delivery requirements and freight spend budget. Transportation management systems use business logic and technology to determine the optimal mode of transportation.
- Consider the Environment in Transportation Management Planning: Go green through sustainable business practices. A smaller carbon footprint can be had in nearly any operation by consistently and continuously seeking shipment planning options, consolidation opportunities, and mode shift capabilities.
- Set Up the Transportation Department to Scale and Sustain: As your organization expands through growth and acquisitions, will you simply be adding more to the freight and transportation budget with not only increased costs but additional resources such as technology and labor to meet the increased demand and complexity? Having scalable transportation management solutions are critical to meeting today’s rapidly changing business environment. Integrating all your business units and acquisitions onto one platform will allow you to manage your business through a single lens.
- Understand and Manage with the Right Transportation Metrics: Utilizing the right transportation metrics to monitor the health of your transportation practices and strategy execution is critical for long term success and analysis for continued performance improvements. Transportation management systems provide a wealth of information, but it can be overwhelming finding the right metrics to manage your business. Identifying key process indicators will help focus your search for the right data.
- Nothing is 100% Predictable, Except Change: Prepare for change and exception management by employing these transportation management solutions:
- A focus on partnership, collaboration, and adherence to process execution driven by a strategy
- Having the mindset to accept changes is critical for you or even any 3PL to deliver value
- For your bosses and leadership to expect from you or even when engaging with a 3PL or TMS software provider and leadership asks that no one change anything due to a lack of resources or focus on strategy, but deliver a different outcome will lead to disappointment
- Consider Getting Outside Help from a 3PL to Provide and Conduct Transportation Management Solutions: When selecting a 3PL to manage your business, defining the rules of engagement is critical to success. This first starts with understanding your own needs and setting out to find the 3PL who is able to provide the solutions you need to align with those needs. Use our handy checklist to first determine your needs.