Five Keys to Transportation Planning and Optimization Success
How do you Find the Balance Between Low Cost and Higher Service Requirements and Optimize Transportation Management in Today's Fluid, Global, Omni-channel World?
Demands on today’s logistics professionals are at an all-time high and this pressure shows no sign of letting up. The steadfast focus on keeping costs low while delivering a greater level of service can tax even the most seasoned professional.
So, how do you find the balance between low cost and higher service requirements? How do you optimize transportation management in today’s fluid, global, omni-channel world?
Success requires the ability to think strategically while exploiting tactical opportunities. This has become a crucial challenge for any company with products to deliver. Here we will review the latest business challenges that are driving initiatives in transportation and outline five key factors that help achieve transportation success, control costs, take charge of the transportation process, and ensure outstanding customer service.
Pritz Says: |
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| ...Best-in-class companies distinguish themselves by understanding how to handle the "big data" created by shipments, customers, items, and products that flow day-in and day-out |
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Challenges
Today companies must solve an ever more complex transportation puzzle within the global supply chain context and global economic environment. Transportation Management Systems (TMS) have become an essential system for best-in-class companies to plan, automate, optimize, and collaborate in proactively tackling transportation challenges such as:
Controlling Cost. When inbound and outbound transportation costs are both considered, they often represent the single largest cost supply chain teams face. Inbound costs, often buried, should never be overlooked; best-in-class companies strive to compete more effectively by reducing these costs while maintaining service levels.
Embracing Omni-Channel. Service levels are tougher to optimize in an omni-channel world. For some companies, Logistics flows now extend to the residence, requiring a more granular look at transportation. In some markets Same Day and Next Day delivery capabilities with varying levels of service are required in order to compete with the likes of Amazon, Walmart and many others. This type of service—and its associated costs—must be incorporated into transportation management strategies.
Meeting Multi-Enterprise Requirements. For efficient business processes, the need for robust internal and external collaboration is a commonly accepted requirement across the enterprise, including both inbound and outbound flows, spanning carriers, vendors, 3PLs, and customers.
Utilizing Visibility to Improve Operations. It’s one thing to have a general “awareness of events” as items move through the Supply Chain – whether from overseas onto the ocean, from ocean to rail, fleet, TL, and LTL, then to distribution points and, in some cases, to the customer. But it is crucial to have full visibility into these events and their costs. Best-in-class organizations exploit visibility and proactive planning to give themselves maximum flexibility.
Five Keys to Transportation Optimization Success
I asked several supply chain executives what they would consider their keys to transportation success. The following are the top five capabilities they shared with me. These efforts have reshaped their organizations’ competitiveness and profitability.
1. Contract and Rates Management
What to do: Work with partners to establish rates, anticipated volumes and capacity requirements. With rates for all modes and carriers and their service levels in a centralized database, a rating engine will automatically calculate costs and provide cost/service/transit time information for qualifying carriers.
Result: Through the use of advanced rating engines with a centralized database of rates for all modes to capture costs and verify compliance, companies achieved systemic improvements in supply chain efficiency from automatically planning least-cost, most efficient shipments across multiple modes and carriers.
2. Routing and Service Level Agreement (SLA) Compliance
What to do: Base contracted rates on a correlated set of volumes by lane and mode.
Result: Confidence that fulfillment matched the desired level of service at the target cost. Executives noted that their actual shipping execution would comply with the plan as intended while taking all constraints into account.
3. Mode Shift, Rate/Lane Aggregation and Consolidation
What to do: Periodically assess the ability to shift modes, and perform rate and lane aggregation and consolidation.
Result: After aggregating, consolidating and streamlining the supplier mix to take advantage of available volume/discount/service level opportunities, supply chain teams found they had a systematic approach to planning, executing and analyzing shipping activities. They also reported their teams built trust in the system’s recommendations for potential mode shifts, sourcing changes, and channel and lane shifts.
4. Route and Stop Optimization
What to do: Optimize across all modes (e.g. multi-stop trucks, inter-modal, rail) to carry loads on both inbound and outbound routes.
Result: By applying sophisticated transportation management technology to build an optimal transportation plan and drive a “continuous move” approach, organizations achieved comprehensive visibility to transportation in motion and tracked all shipments in transit. This developed a proactive rather than reactive problem-solving approach.
5. Settlements and Financial Payments
What to do: Capture the actual freight cost of every shipment, and allocate the cost to the channel, customer, and product. Develop KPIs for your business. Create a feedback loop that links results back to strategy and tactics.
Result: By taking a look at actuals to evaluate how locations and carriers were performing, companies discovered just how well they had done against contract rates, understand their costs by channel and customer, and ascertained the level of compliance they achieved by location and mode. Many also noted this has led to continuous improvement initiatives and year-over-year benefits.
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