For the majority of mid-sized to large shippers, there is a wide range of factors and possibilities to consider when determining the appropriate strategic approach to supporting the transportation function, particularly when evaluating the critical need for the right enabling technology. Transportation has routinely been considered a function ripe for ROI given the right application of technology. Despite this, the latest Gartner research indicates that only about one in three companies that could potentially benefit from a transportation management system (TMS) have made the investment in this technology.
So perhaps it’s time to demystify some of the understanding about what a TMS can do and the types of benefits it can provide. It may be easiest to think of the solutions and capabilities within the context of five functional areas and their supporting processes and workflows.
The first and most strategic decision shippers make relative to transportation procurement is the type of relationship they intend to have with their providers. In a fully outsourced 3PL relationship, choices made with respect to partner technology should center around the types of capabilities being utilized by the 3PL(s), the value they create for the shipper, and the shipper’s level of access to the solutions and supporting data. It’s important to recognize that shippers can also benefit from technology if they’re smart about the 3PL partner(s) they choose. If the shipper chooses to contract directly with carriers instead and manage their own transport operations, there are multiple technology offerings available to assist in conducting either complete or partial carrier bid events. Many of these are offered in a SaaS-based model, and/or are available for limited, project-based licensing or via consultants on a project basis. There are also numerous companies that provide freight rate benchmarking data/solutions to compare individual shipper rates by carrier/mode to a cross-section of shippers utilizing similar modes, in similar industries and operating geographies. Learn more about insourcing vs. outsourcing.
The value of transportation planning/optimization technology can vary greatly by shipper and is largely dependent on each individual shipper’s freight profile. However, the goal always remains the same, which is to determine the optimal way to plan freight for a given solve. Each planning solution needs to respect rates, routes, carriers, and other network components, while also considering both costs and service constraints. Typically, greater value is derived when the planning strategies enable “moving up by mode,” e.g., from parcel to LTL or from LTL to full truckload (FTL). This can be accomplished through a variety of optimization techniques (shipment consolidation, multi-stop routing, cross-docking, continuous moves, and zone skipping, to name a few) that can generally be configured uniquely by shipper, again based on unique network constraints, parameters, etc. And for large, complex shippers that fit this type of freight profile, the total freight savings on a percentage basis can often range from 5% to 15% of total annual freight spend, which is typically more than enough to justify the investment.
From a TMS technology perspective, some of the key value extracted from the execution phase is in having more accurate, complete, and timely transactional data that reduces administration and offers proactive monitoring and tracking of shipments. An enterprise-grade system helps manage large volumes of transactional data, which can translate directly into administrative savings. Often, the ability to operate transportation functions with a lower headcount comes from having this timely, accurate data and automated processes. For example, the ability to automate carrier communication means organizations can eliminate the time-consuming faxes, phone calls, and one-off conversations needed to confirm and track shipment pickups. Automating and standardizing communications via EDI means shipments can be tendered and retendered quickly and effectively without human oversight. From there, the transaction (state) processing phase begins, which leverages EDI for relevant status updates and overall visibility to the shipment as it moves from pickup to delivery. Alerts and notifications of changes in the original plan, e.g., carrier delays, breakdowns, etc., can also be carried out electronically when GPS information in the tractor and/or trailer is associated with an individual load and can trigger recalculated ETAs and other valuable information.
It’s critical to the financial health and accuracy of your transport operations that the right freight rate data is associated with the right transaction every time. Tracking and managing the vast amounts of carrier rate data is a job best handled by TMS technology, which can ensure this happens seamlessly. A TMS can aid in the audit/reconciliation process by pulling in the tariffs maintained in the rate engine and attaching them to the transaction. The TMS can often automate the invoice accounting/allocation process as well by receiving carriers’ electronic invoices via EDI, matching them to the appropriate transaction, and scheduling payment. Even billing discrepancies that fall within pre-defined tolerances can still be automatically approved for payment in a touchless environment, with only transactions that fall out of tolerance requiring any manual intervention. Many companies are successfully processing 80-90% or more of their transactions in a totally hands-free way. And once the invoice is approved, it can be billed to the appropriate business unit or allocated across two or more G/L accounts as required, via integration with the financial/accounting system.
The final step of creating detailed reports based on historical analytics can also be done in the TMS. A complementary solution for business intelligence (often referred to as online analytical processing or OLAP) can generate sophisticated ad-hoc reports that highlight the root causes of identified problems not apparent in standard reports, including connecting data from other solutions as needed, e.g., ERP, WMS, OMS, etc. There are also a variety of modeling solutions, that while desktop-based, can connect to TMS master data, especially tariff/rate data, and are useful for forward-looking/what-if scenarios that include different variables in anticipation of potentially significant changes in the transport network. Examples may include finding ways to handle seasonal peaks in shipments or eliminating redundancies in the event of a planned acquisition.
Don’t Go It Alone
The amount of data involved in the transportation function is significant. 4SIGHT understands the intricate needs of this market and how to evaluate the options available.