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Transportation Management Comes of Age
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May 14, 2009 - Supply Chain Digest Newsletter



Transportation Management Comes of Age

Is there anything more striking in the supply chain, really, than the incredible advances we have seen in the skill, sophistication, technology and importance of transportation management?

Yes, a few pioneers and leaders have operated this way for decades. 3M is generally credited with creating the first “load control center” (as our weekly trivia fans will know) in the mid-1980s. PPG Industries and a few others weren’t far behind.

But overall, most companies treated transportation management as something of a back water. “Here’s the stuff – get it here on time.” A cost center mentality only. The “traffic department.” Offices in some obscure parts of the building, and a lot of ash trays and “good old boy” relationships. I worked at a major manufacturer for a few years that operated just like that in the early 1990s.

Gilmore Says:  

"We will see a steady stream of companies pursue a “transportation transformation” over the next few years."

What do you say?

Send us your Feedback here


I am being extreme for an effect, but think I am mostly on the right track.

A few things started happening in the last part of the 1990s. Companies started to get supply chain religion, and realized that the darn glue connecting about every part of the supply chain was transportation.

That became especially critical as we “leaned out” the supply chain, went to just-in-time, were pummeled with customer demands, and realized just how much we were spending on transportation.

True story: about 6 years ago, we were having a social type event in our backyard for our kids, their friends and their parents, and I entered into a casual conversation with one dad who worked for a $400 million steel tube division of an even larger metals company. We found we had “logistics” in common. He said the previous year they had spent nearly $50 million of that $400 million on freight. Someone had decided to take a look. They had cut out $5 million just by paying a bit of attention. He was confident many more millions in savings were achievable. I never did hear “the rest of the story,” but I have no doubt he was correct.

Then came rising costs, the capacity crunch of 2005/06, driver shortages, globalization, rising fuel prices, you name it. The “perfect storm,” as we called it too often.

But we are past that now. Not only past it in the sense that right now we have a freight depression, and supply well exceeds demand and rates are in the toilet, but in that we understand we will always have challenges of some kind, and that transportation management simply has to exist at new levels of integration, flexibility, collaboration, and business savvy.

I recently spent some time with the excellent Dr. Chris Caplice of MIT, and one of his main themes right now is that the talent pool in transportation needs to dramatically increase to meet these new demands. “Technical skills” are still important, but perhaps no more important than communication and business skills, he told me. Transportation managers and executives need to become “influencers,” and help shape and drive overall supply chain strategies early in the process.

It was with that sort of underpinning that we moved forward on our latest issue of the Supply Chain Digest Letter, on Transportation Management. If you didn’t receive a copy in the mail, or would like an electronic copy regardless, you can find it and a wealth of other information on our Transportation Management Resources Page.

We note, for example, that while the “load control center” has been around for more than two decades, a huge number of companies have yet to move to this model. The world’s largest chemical company, BASF, for instance, just recently implemented a series of “command centers” (by mode) to manage transportation centrally in North America across its 15 business units.

Meanwhile, others are taking the LCC concept even further, in what we refer to as the “Load Control Center 2.0.”

That involves moving the LCC to become, as appropriate, a truly global transportation hub. It also means in some cases, as with PepsiCo (actually in two different dimensions – more soon) developing a “shared services” logistics group across business units – sometimes very heterogeneous business units.

That is something very different from even the traditional load control center – different services are likely required across those unique businesses. There are tricky accounting issues. In some cases, we are seeing these functions operating as a profit center, and even taking on outside transportation management business.

In this economic downturn, transportation management systems (TMS) sales remain relatively strong. Due to all the factors cited above, they were blazing hot until the financial crisis. When CEOs are telling Wall Street that the reason they missed the earnings estimate was due to rising logistics costs, as happened often in 2007-08, getting the OK for a TMS was as easy as it has even been.

The market, like everything else, is down – but not out. Companies realize that they just have to get better in supporting transportation management with the appropriate level of technology. I just finished doing a video interview with my friend Greg Aimi of AMR Research relative to an in-progress study they are doing on TMS (available next week), and he said the penetration in large companies of a true commercial TMS is still only about 38%. Many of those, he told me, have only been implemented in the last 1-3 years.

Circling back just a bit, as Rauzat Gaurav of i2 and Gene Tyndall of Tompkins Associates/SCDigest keep reminding me, getting the structure right for this new transportation world order is critical.

What can or should be centralized, perhaps even at a global level? What should be regional responsibilities? What local? And therefore what technology capabilities need to be available to teams at each level?

Is this just not at a totally different level of discussion and dialog than we really have had in transportation until just recently?

I have no doubt that we will see a steady stream of companies pursue a “transportation transformation” over the next few years, the core of which will be thinking globally, getting more strategic, and integrating tightly with the rest of the supply chain and customers.

As I hope you can tell, I love transportation management, both as a process and a technology.  For more along this theme, download the SCDLetter and access other good stuff at the Transportation Management Resources Page.

As we reported a few weeks ago, for a “boring” function in the eyes of many, transportation managers pursue their craft with an exceptional amount of passion, as Rob Long, Director of Transportation Development at Lowe's, recently observed.

From Chris Caplice at MIT to Steve Carter of Target stores to Matt O’Connor of Rockline Industries and so many hundreds of others - I agree.

Do you agree we are really in a new era of transportation management in terms of skill levels, sophistication, etc. Are we taking the load control centers to even higher levels? How important is the need for more complex skill sets in transportation management? Let us know your thoughts at the feedback button below.


Let us know your thoughts.

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The Next Generation Supply Chain: Integrated Planning & Execution

Part 2: Achieving the Vision

May 19, 2009

In part 2 of the series, we’ll take you through CSCO Insights’ three-phase model from moving from a baseline state to highly integrated planning and execution, as even the two processes start to blur in “sense and respond” networks.

This Week's Supply Chain News Bites Only from SCDigest

Supply Chain Graphic of the Week: Ambitious Goals for Integrated Supply Chain Planning and Execution

This Week's Supply Chain by the Numbers - Value of IT, Lowe's DC Workers, Sainbury's, US Truckload Carrier Market

Descartes Systems

Despite the stress of awaiting the results of the bank stress test last week, Wall Street investors remained calm.  Results for our Supply Chain and Logistics stock index were predominantly positive.  In the software group, Oracle fell 5.3%, while i2 climbed 18.2% and is now up 1.9% over last year’s mark.  In the hardware group, Intermec was up 5.2% last week, while Zebra fell 4.6%.  In the transportation and logistics group, Yellow Roadway soared 53.4% and is now up 51.3% for the quarter.  Others within the group with noteworthy gains were UPS (up 11.5%), and FedEx (up 8.9%).

See full stock report.

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Weekly On-Target Newsletter
May 12, 2009 Edition

The Executive View
by Gene Tyndall, CSCO Insights

Recession Offers Chief Supply Chain Officers Opportunities as well as Challenges

Where to Start? Rethink Your Operation’s Objectives and Excellence


Guest Column by
Nigel Davies
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KPI-Driven Supply Chain

How to Master Complexity, Optimize Inventories, and Meet Rising Customer Expectations

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What major supply chain innovation was developed by Andre Martin, then of Abbot Labs Canada, in the late 1970s?

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We received a ton of feedback on our First Thoughts piece on “Xbox Live is the Future of Supply Chain,” which argued that the network version of the popular gaming system showed the model for how technology would support real-time supply chain visibility and collaboration in the future.

Most respondents agreed with us, including our Feedback of the Week from Jeff Drimmer of Varian, who says we may be closer to this than many realize.

A few thought the article was interesting, but ultimately a bit far fetched. That includes a letter from our friend Lalit Panda of Harmon Consumer Group.

We think you will enjoy them all. More next week.

Feedback of the Week: On Xbox Live:

This really is a good article and, with a son that lives on Xbox Live, I can certainly relate. We have at least started this form of communication, but I don’t think people use it to the degree it could be used. It's called instant messaging. To have instant and continuous communication with people near and far, we would all have to look like those people walking down the street, driving, and sitting in trains with devices in their ears looking like they are talking to themselves.

If you work for a big company, there are already far too many meetings and analysis paralysis is the norm. IM can get you in touch with whomever you want (time difference notwithstanding as the same issue would exist with Xbox-type communication), you can share files and bring in others…..with no Xbox Live subscription required.

We’re not there as you suggest, but we’re closer than many people think.

Jeff Drimmer
Global Logistics Manager
Varian, Inc.

More On Xbox Live:

I loved your article, I couldn’t agree with you more!

We need to start thinking outside the box and really pay attention to these new ways of living that are emerging around us.

There is so much that we could do by adding some creativity to how we use the tools that are already available to us.

Azucena Y. Tamez
Operational Excellence
Cardinal Health Inc.

I work in the supply chain field and play Xbox live. You could not be any more right. The Xbox live service is like no other. Is it possible to see that type of networking in the supply chain field? I am not so sure, not because of technological restraints, but the current culture within the supply chain field. I cannot speak for all individuals, but at the age of 26, I am always the youngest at the table (by quite a few years). I do not have any issues with the older generation members, but being the first generation to see the transition from pen to mouse, I feel I am more open to significant changes similar to what the Xbox live service has brought to the video game industry.

Erick Barden

On your piece on X-Box live, it is an interesting connection and vision, but I have a somewhat different point of view. I think from a data and trend visibility point of view, there are enough tools out there to seamlessly share data. What is important in supply chain interactions is management by exception. My concern with real time communications is getting overwhelmed with too much contact, especially in a situation where there are many vendors, and reacting too quickly and dynamically before a trend has really occurred. I believe daily communications and exception-based communications is adequate and there are enough systems such as instant messaging, VOIP, video conferencing to make that pretty inexpensive and quick. So, in short, great idea, but to me, a virtual community for supply chain is overkill. Sorry to be a contrarian.

Lalit Panda
Harman Consumer Group

Your enthusiasm for connecting the supply chain participants is phenomenal – the Xbox metaphor is good and fun. The real metaphor that business owners, leaders, fiduciaries need to see is the trillions of wasted capacity, inventory, lost sales, etc., because most business leaders think their supply chain is “just fine.”

My experience is Xbox live combined with more of an asynchronous (loosely coupled) sharing of commitments, purchases and FYI activity is the correct approach. Inter-enterprise commitments of $ just cannot happen in real time – communication can, but the important part is after the communication, what is the commitment? We have used a series of spreadsheet working surfaces along with a number of asynchronous messaging/reconciliation tools back to structured planning data storage in S&OP and logistics tracking pretty successfully for years.

Today, the cycle times of inter-enterprise supply chain planning commitments can literally be months… just shortening the commitments and demand and supply netting to weeks cleans up a lot of the challenges. Probably takes out 30% of working capital for most firms and improves delivery commitment services levels by many % points. If there is 2 trillion in waste in today’s average supply chains, that is $600 Billion in value while opening up phenomenal new business models and solutions?

An example would be lower prices for consumers/business buyers who buy with longer lead time for delivery vs. high prices for product “off the shelf!"

Jon Kirkegaard


Q. What major supply chain innovation was developed by Andre Martin, then of Abbott Labs Canada, in the late 1970s?

A. Distribution Requirements Planning (DRP)

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