Several times this year, I’ve made the case that companies should view this economic downturn as a catalyst for a change, an opportunity to question the status quo and transform their business processes (see “A Google Approach to Supply Chain Management” and “Innovating the Way Shippers and Carriers Work Together“). In other words, this is a good time to innovate, and if you’re looking for a good place to start, I’d argue that transportation management should be on your agenda. Why? Because of the “Three Cs” that will impact shippers and carriers down the road:
- Reduction in trucking Capacity. Carrier bankruptcies are the primary culprit, but many carriers, like J.B. Hunt and Werner, are also “right sizing” their fleets and removing capacity from the market.
- Additional transportation Costs. Some form of carbon cap-and-trade legislation will likely pass this year, which will result in increased costs for shippers and carriers. Other new costs: California’s Clean Trucks Fee, increased toll fees, and a vehicle miles travelled (VMT) fee if it’s implemented to replace or augment the federal gas tax.
- Increased road Congestion. Over 18.1 billion tons of freight will travel by highway in the year 2020, a 75 percent increase from 1998. Despite the almost $27 billion in “stimulus” funds recently allocated to transportation projects, it’s unlikely that our road infrastructure will be ready to handle this increased freight volume.
If technology is an enabler of process innovation, then it follows that technology vendors-and TMS vendors in particular-need to innovate too. But what is the state of innovation in TMS?
This is one of the key questions that I’m exploring as I update our annual Transportation Management Systems Worldwide Market Outlook study, and it was the focal point of a discussion I had with the Fab Brasca and John Halbert at i2 Technologies yesterday in Dallas (as part of a video webinar I moderated). I won’t steal the webinar’s thunder here, but a couple of insights came out of the conversation that are worth noting.
First, when most people think about TMS, they think about short-term planning and execution (i.e., what do we need to ship today, tomorrow, and next week). But i2 is working with some clients (including a large CPG manufacturer known for pushing the innovation envelope) that are leveraging TMS further upstream-i.e., they are linking transportation with other supply chain factors, such as inventory constraints, to address more holistic, multi-variable problems.
Are all companies ready to operate at this level of sophistication? Of course not, especially when you consider that many companies still use spreadsheets and fax machines to manage their transportation operations. You can also argue that not all companies need to follow in the footsteps of this CPG innovator. However, for companies with complex distribution networks, leveraging transportation technology further upstream in the decision-making process would certainly result in greater network-wide benefits.
The second insight was about an aspect of transportation management that isn’t very sexy and doesn’t get much attention, but in my mind is probably one of the most critical aspects of the process: load planning and containerization. You have an asset (a trailer or a container) and you have some product that you need to load into that asset (cases, pallets, drums, rods, you name it). On the surface, this seems like a trivial task, but there’s actually a lot of complexity in doing this right. You have to take all sorts of factors into consideration: weights, dimensions, densities, stackability constraints, compatibility constraints, etc. (which implies you need accurate data for these factors, a problem in itself). Also, these factors vary by product and conveyance. The net result is that many “full truckloads” today are actually only 80-85 percent full, and some of this “leakage” is caused by poor load planning. Improving load factors by 5 or 10 points could lead to significant cost savings (e.g. fewer shipments or equipment required).
Granted, if my conversation had been with a different TMS provider, I’m sure that different insights would have emerged. But when I reflect on all the TMS briefings I’ve had this year as a whole, one thing is clear: vendors continue to innovate, and much of this innovation is not necessarily revolutionary, but aimed at filling the white spaces of TMS, those areas “on the growing edge of logistics” that were not priorities yesterday but are so today for a variety of reasons.
(If you’re interested in watching the video webinar, which will air on July 30th, you can register at this link).