Antonio Pérez Carmona
10 Considerations in a Transportation Management Solutions Strategy & 6 Steps to Create One
Transportation management solutions are no longer just about moving freight and doing it 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 provide such as a 3PL less as a commodity and more of a collaborative relationship between themselves and carriers and as well as 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 often transportation management solutions providers, whose service fee is based on reducing cost and streamlining the customer’s supply chain.
What do you mean by Transportation Management Solutions?
But first, as we always like to do, let’s get on the same page with what we mean by transportation management solutions. You first need to understand the term transportation management. According to Wikipedia, transportation is defined as the movement of people, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline and space. The field can be divided into infrastructure, vehicles and operations. Transport is important since it enables trade between people, which in turn establishes civilizations.
However, as we stated earlier, we are seeing a step away from viewing transportation management as a simple function, but more as a strategy to derive more value (read: reducing overall costs and effectiveness) in order to stay competitive. Yes, at it’s purest form, transportation is moving on thing from point A to point B (and sometimes a few more letters depending on the specifications of an order), but really, transportation management is more than that. It involves several aspects now to stay competitive, and often acts more and is executed with more detail than ever before, like logistics management, than we have seen in the past. With the capacity crunch, creative forms of transportation procurement via different modes and programs such as pool point distribution, the definition of transportation management must include more than from point A to point B.
Therefore our definition of transportation management in order to better understand the below transportation management solutions you could employ in your strategy is really more of an approach, than a definition. It first starts with a strategy…..
6 Steps to Create a Strategy of Transportation Management Solutions
transportation management solutions strategy Conduct detailed analysis of your transportation practices in order to understand where you have been,
Set a benchmark of current metrics,
Declare new desired outcomes (such as improved relationships with vendors, carriers, etc. or improved overall costs) and KPIs (on time delivery or freight claims ratios) based on those key transportation metrics,
Document and share with leadership a strategy of transportation management solutions (the top 10 are listed below),
Execute on the strategy by employing the solutions,
And change tactics/activities based on new data from these core transportation metrics in order to continue to improve transportation best practices to reach your desired outcomes and KPIs.
10 Transportation Management Solutions Strategies From a Third Party Logistics Company or that any Transportation Manager Could Employ:
Focus and be Explicit around “Compliance, Enforcement, and Expectations”: In today’s advanced technology environment as it pertains to transportation management solutions, visibility to shipments and communication of any en route deviations should be a given. Having the ability to proactively identify service disruptions is critical. 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 making it easier for carriers to do business with them. Understanding ways to aid your partner carriers is crucial in tight capacity markets. Working with carriers and all the freight you manage to create continuous movement strategies is a win-win approach. Work with your carriers or stress that your 3PL’s carrier relations team regularly sit down with current carriers and new carriers to keep performance top of mind talk about your freight and transportation current state and outlook, and continue to establish rapport. 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 (perhaps the most important out of all of these) 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 live in a silo; 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. Some level of predictability helps in the carrier sourcing aspect of the business, too.
Use Freight Data to Gain Visibility to Freight Cost Drivers: Freight movement has become all about data mining — you have probably heard the buzzword 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. Speaking of getting all of the new locations or business units you’ve acquired integrated, you can also take your various operations technology and integrate them to your transportation management system.
Understand and Manage by 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. It’s also important to have flexibility in generating metrics. As your business changes, so will your metrics requirements. That is why it is vital to take a look at your strategy year to year and how you should change various transportation management solutions and tactics to make sure you are trending towards your stated desired outcomes. Having the ability to transform data into usable knowledge is the goal.
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. You must ask yourself and honestly answer the question: “Does your company embrace or challenge change?” If not, you may need to start working on expectation setting throughout the creation of your transportation management solutions 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. Being able to accept change is critical for the success of any program.
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. Additionally, what will the service level agreement look like? What is the business model of the 3PL? As stated in the idea of “Vested Outsourcing” models, it should be a “Win-Win” where both parties feel like there is a long term partnership environment, and not a transactional relationship as has been observed in previous years. Empowering people to make decisions and holding them accountable for the outcome is a foundational aspect for any program. That is why it is vital to first create a transportation management solutions strategy. Understanding your business environment/industry and aligning the right resources to the program is a must. There may be occasions when the relationship is challenged. Having a strong relationship and buy in from leadership on both sides will ensure a successful outcome.
If you’d like help in devising a better transportation management solutions strategy, first reach out to one of our Account Executives to start the process of analyzing your historical transportation management practices with a complimentary logistics and transportation consultation and freight invoice analysis.