When the Organization is the Problem

There are so many aspects of supply chain management and logistics, such as transportation management, that lend themselves to enterprise-wide deployment strategies. Certainly, there is enough evidence that says, the transportation costs can be lowered AND service can be improved when the entire organization takes advantage of the leverage that exists.  Yet an alarmingly high number of companies fail to get there or they find that the chosen solution doesn’t deliver the anticipated results. Is it a product problem or a lack of organizational alignment?

Here are some thoughts to consider before diving into a well-intended, but potentially career-limiting, enterprise-wide TMS deployment.

Horizontal versus vertical control. Is your enterprise organized by line of business with the business unit leaders in charge of their operations? These are typically conglomerate or holding companies. Without the ability to strip out control of transportation, no GM is going to give up control of any part of his or her operation. Do you think they want some “corporate guy” to be able control part of their destiny? You can bet that their own transportation folks won’t be pitching for enterprise-wide rollout because they know they will most likely lose their jobs. The defining test will be when one of the business units shows how their current TMS implementation is better than the proposed standard – they exist in every organization, BTW. I have seen one company, for instance, where their third-largest spend was transportation, only get through a fraction of the rollout and only achieved partial potential results because there was no organizational alignment. I don’t care if you have the president or CEO saying the company needs to do it, if you can’t get to a shared-services operating model, the project will be protracted and either doomed to failure or mediocrity.

The myth of the 80% “standard” solution. The basic naive assumption here is that the first 80% of the functional requirements are the hard part. It’s actually the last 20% that is tough, varies by business unit and is significantly worse as the number of distinct business units grow. This is because all of the standard stuff is not what differentiates or addresses the unique operating conditions of the individual organizations. In addition, the last 20% is never 20% because you repeat it in every business unit. It’s almost a multiplying effect on the work required. If you can’t get most of the last 20% standardized and harmonized, every business unit will be an adventure. If you are a multi-billion dollar organization, you can expect this situation to result in a many-year rollout with significant budget overruns.

The “financial “back-door” play. This one starts with someone in your corporate financial organization saying that they could save millions if only the freight payment process could be standardized and consolidated. It’s an interesting intellectual exercise for the transportation novice, but there is one problem. The financial and operation sides of transportation can be highly linked. So the scope expands and your enterprise gets embroiled in an enterprise-wide rollout that the transportation operations weren’t organized to execute effectively. See the previous paragraphs for the expected results.

So what do you do if doesn’t look like you can rollout a common TMS solution across your enterprise, but you want to take advantage of the potential synergies that might exist? There are a number of areas to focus, such as rate management, carrier consolidation and shipment visibility.

Rate management and carrier consolidation is where the 80% principle works. By databasing all of the carrier rates and lanes at the corporate level in a TMS, enterprises can see where rates vary widely across business units, commonality of carriers and lanes exists and the opportunity to get lower rates through higher volumes running through a smaller number of carriers may make sense. Contracts can be executed at the corporate level, but the operational control that the business units seek is maintained.

Freight audit and payment as a corporate wide function do make a lot of sense. Just make sure that you can draw the line in the sand there. The business units still keep control of the operational processes. But once loads are built and shipped, there is no real value-add for individual business units to manage their own audit and payment processes. 

Shipment visibility at corporate level provides the opportunity to show business units the ability to collaborate to reduce freight costs and improve customer service. By placing all of the shipments and their statuses into a common visibility system, enterprises can evaluate the movement of shipments to determine if synergy and coordination opportunities exist and how carriers are actually performing. Visibility is essential for shipments that need to be coordinated across multiple business units.

I am not advocating that enterprises should not pursue concepts such as an enterprise-wide TMS solution. However, without organizational alignment, these types of projects are fraught with failure. There are ways to extract significant value from an enterprise-level TMS, but they all don’t translate into the need to execute shipment from a single platform.