Archives for January 2017

Trouble Justifying a TMS?

By Chris Jones | 01/26/2017 | 2:14 PM

Based upon my conversations with customers, industry analysts and others, you would think that TMS justification shouldn’t be an issue. But it still is. In the recently completed transportation management benchmark “Transportation Management Strategies and Tactics of Top Performers”, only 1 in 4 respondents indicated that they had no issue justifying a TMS, but half did. Responses to other questions clearly demonstrated that companies are not thinking broadly enough about the value that a TMS can bring. It’s time to expand the benefit horizon beyond the transportation department and even beyond the supply chain organization.

Figure 1 shows the breakdown of the survey respondents that said that they had obstacles justifying a TMS. For those companies struggling with justifying a TMS, “Payback not clear” was the top issue. However, “Not a priority to the executive team” was number 2 and is a proxy for not having a compelling value proposition to get management’s attention. Clearly, the potential value of TMS is being short-changed.

Figure 1
Just TMS Fig 1
                                                                                                                                                                        Source: Descartes

Why the disconnect? There are 2 other questions from the survey that point to the challenge that companies face.

The first one addresses how TMS value is measured (see Figure 2). The top measures of customer service (71%) and cost (63%) are just focused on transportation itself and not its impact to the greater organization. Metrics that get executives’ attention are revenue- and competitively-focused. There are many instances where transportation-based services are making a difference, but if you don’t measure them you won’t know the true value that a TMS can deliver.

Figure 2
Just TMS Fig 2
                                                                                                                                                                          Source: Descartes

The second question addressed the use of TMS information across the enterprise and beyond. Transportation management is a multi-party process. Keeping the valuable transportation bottled up in the transportation department or even the supply chain organization diminishes TMS value and management understanding of its strategic role. See how, in Figure 3, there is a drop off in the sharing of TMS information with some of the most critical company organizations, like sales and even customers – the ones that get the “lion’s” share of management focus. Some of the problem is self-inflicted. If a company does not believe that transportation management can provide competitive differentiation, then it is considerably less likely to broadly exploit that information.

Figure 3
Just TMS Fig 3
                                                                                                                                                                        Source: Descartes

The value of transportation management is there, but too many transportation organizations struggle to externalize that value in areas where management will give it greater emphasis and more readily buy-in to new transportation strategies and technologies. Top performers – the ones who see the competitive advantage opportunities - are much more likely to act and measure their success more broadly. The results are a self-prophecy.

If you would to learn more, join us on February 22nd at 2:00 pm ET for a web seminar where we review the results of the “Transportation Management Strategies and Tactics of Top Performers” study. See how top performers’ transportation strategies, tactics and technologies differ from the rest of the pack and what recommendations will make a difference for yours.

Inbound Transportation: The Elephant in the Room

By Chris Jones | 01/16/2017 | 3:05 PM

For a lot of reasons, outbound transportation gets more management focus than inbound transportation. It’s what the customer sees and the costs are more easily quantified. Inbound transportation gets much less focus because it’s typically embedded in the supplier’s costs and not controlled by the transportation organization. Preliminary results from a recently completed survey “Transportation Management Strategies and Tactics of Top Performers” shows that only 24% of the respondents considered inbound strategies important to improving the value of transportation management to their company. Yet, 50% of the respondents struggle with showing the value of transportation management. If your organization is looking for logistics cost savings and improving supply chain effectiveness, inbound transportation could be the welcomed “elephant in the room”.

What are the transportation opportunities?

There are numerous inbound transportation strategies that can be deployed to significantly lower inbound transportation costs. Here are just a few.

  • Suppliers don’t optimize their logistics for your supply chain. This means that, across your supply base, there are transportation inefficiencies where smarter consolidation or leveraging economies of scale can lower transportation costs. For example, a midsize distribution company had many bulky LTL shipments could save $4M per year by taking control of the freight from those high-volume suppliers.
  • Parcel is another area where there may be a high volume of small time-sensitive shipment and even “drop shipping” to customers where inbound is now actually outbound too.
  • Utilizing the delivery fleet open backhaul to minimize inbound costs or take advantage of supplier pick up incentives can quickly result in lower overall transportation costs.
  • Companies who are considerably larger than their suppliers can use their higher shipping volumes to create considerable savings without significant reengineering of the inbound transportation network.

Savings beyond transportation

Controlling the inbound movement of freight can also benefit other areas of the supply chain. There will be better visibility to the status of purchase orders and their related shipments. Volume can also be leveraged to have smaller shipments more frequently to drive down inventory and reduce out-of-stocks. Cycle time can be reduced as goods can be pre-deployed and cross-docked when they arrive at your DCs. There is also greater ability to make last minute changes due to supply chain disruptions or other events when freight can be controlled in transit.

Total supply chain effort

Creating an inbound transportation management program requires broader supply chain involvement. Inbound transportation costs are owned by purchasing/buyer organizations and tend to be set during supplier negotiations or baked into the product costs. Getting their buy-in is critical to establishing and maintaining an inbound transportation program. Establishing a case for reduced costs and faster and more flexible delivery will be consistent with their objectives and creating shared metrics will keep both organizations aligned. Another important ally is the finance organization. There is no company I know where the finance organization isn’t looking for cost reduction opportunities. They will also be an excellent source of information you will need and the validators of the opportunity.

Where to focus

There is money and other benefits to be had, but transforming to direct control of inbound transportation is real and continuous work. The focus should be on high-return inbound shipments and defining where not to put any effort. For example, start with the top 20 suppliers in terms of inbound shipment volume, LTL shipments of larger goods, or geographies where there is a significant concentration of suppliers. Equally, question the need to take control of goods where shipments are infrequent or there are no real opportunities for consolidation.   

What about the rest of the inbound freight?

Just because you won’t control it, doesn’t mean that your organization won’t want the same detailed purchase order and transportation information you will have for the inbound freight under control to better utilize the goods as they arrive at your facilities. Establishing communication guidelines for the purchase order to delivery life-cycle and leveraging visibility and dock appointment scheduling technology can help provide better the key information to improve inbound operations.

With all the pressure for better customer delivery performance, it’s easy to miss the inbound transportation opportunities that exist. However, the cost savings could be significant and it’s time to stop stepping around the inbound elephant that is in your transportation room. How is your company tackling its inbound transportation opportunities? Let me know.

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Chris Jones

Chris Jones

Chris Jones is Executive Vice President of Marketing and Services at Descartes Systems. Jones has spent more than 30 years working with manufacturers, retailers, distributors, and logistics providers to improve their supply chain operations. One of his primary missions is to identify and leverage new and counter intuitive activities that make a difference in the business. Jones has held senior positions at Kraft Foods, Descartes, and Gartner. He has a B.S. degree in Electrical Engineering from Lehigh University.


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