Transportation management (TM) is no longer just about moving freight and doing it at the lowest possible cost. Companies are using it as a competitive advantage tool, in the ever-challenging economic and commercial landscape.
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 3PL/TM service providers, whose service fee is based on reducing cost and streamlining the customer's supply chain.
Bob Daymon, Vice President of Transportation Management Operations for Penske Logistics, offers his tips.
1. Gain visibility to freight cost drivers. Freight movement has become all about data mining — you have probably heard the buzzword Big Data being bandied about. 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.
2. Offer increased customer service and the ability to service different size orders. Highly sophisticated order optimization capabilities can be provided by the TM team, without compromising the delivery requirements and freight spend budget. Load planners use sophisticated algorithms to determine the optimal mode of transportation.
3. 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.
4. 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.
5. Become shipper of choice in the highly market-sensitive carrier base. By putting in strategies that drive capacity commitments, offering easy pay terms, and rewarding performance, shippers are 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.
6. Provide visibility to shipments and communicate en route deviations. 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.
7. Ensure scalability to leverage across business units and functions,. As your organization expands through growth and acquisitions, will your TM platform meet the increased demand and complexity? Having a scalable solution is 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.
8. Manage by metrics. Utilizing the right metrics to monitor the health of your network is critical. TM 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. Having the ability to transform data into usable knowledge is the goal.
9. Manage relationships. When selecting a 3PL to manage your business, defining the rules of engagement is critical to success. Empowering people to make decisions and holding them accountable for the outcome is a foundational aspect for any program. Understanding the client's business environment 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 project sponsorship on both sides will ensure a suc cessful outcome.
10. Prepare for change management. Does your company embrace or challenge change? Having the mindset to accept changes is critical for any 3PL to deliver value. Engaging with a 3PL or TMS software provider and asking them to not change anything, but deliver a different outcome will lead to disappointment. Being able to accept change is critical for the success of any program.
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