In my previous guest commentary on the evolution of transportation management, Driving Value from a Transportation Management Center: Think Global, Act Local, I discussed how transportation best practices were evolving from more rigid, centralized control towers to more flexible and collaborative Transportation Management Centers (TMC). The TMC merges technology, organization and processes to establish a set of services leveraging the scale and efficiency of consolidated network planning, procurement and unified metrics with the agility of localized execution. I said that the next phase in this evolution would be to expand the scope of the TMC from a largely domestic view to the complexity of global transportation operations. I will pick up that thread here.
The evolution to global transportation management is possible because the coalescence of three trends is creating additional value for companies able to master the complexities of global logistics. These trends are:
Consumer Demand – Consumers now have greater control over the omni-channel buying process and their preferences change quickly, putting increased pressure on supply chains to respond agilely without raising costs.
Shift in Control – Just as shippers have taken control of many domestic transportation functions from suppliers and third party service providers to drive greater efficiencies, they are now taking control of the more complex global transportation processes to gain increased agility and cost control in responding to global consumer demand.
Technology – Fortunately, more sophisticated technology is now available to enable shippers to more agilely and cost-effectively plan and manage their global transportation.
When considering the complexities of transportation operations in many different markets, cultures and regulatory environments, shippers must address questions such as:
- Where to draw the line between planning and execution?
- What should be the scope of control centrally versus at each location?
- Where can I best leverage scale?
- Ultimately, what mix of cost, risk and agility will create the greatest value for the organization?
To answer these questions, shippers must examine both global process issues and the application of technology.
Navigating Global Processes
Taking control of global shipments is a lot more involved and complex than routing a domestic truckload. There are many more legs to the trip, typically with a mixture of modes, many more parties and languages involved, and hundreds of regulations to comply with. Shippers must make important decisions about “who does what” in this complex, multi-step process, and must evaluate a series of complicated financial trade-offs.
Some of those decisions may be straightforward, such as understanding that carriers in many parts of Asia tend to be smaller operators with varying equipment types and sizes, so it makes sense for those decisions to be made locally. Other decisions are more complex, for example, whether accepting shipments under CIF or FOB Incoterms will best balance risk and financial benefits. You will also need to weigh where transportation management technology adds value versus contracting services from third party providers, such as using customs agents to clear cargo through ports.
The key to making these global process decisions is understanding who has the best upstream and downstream visibility to information critical to each decision and what technology do they have to support the process.
The complexities of global logistics, the volume of data involved, and the frequency of changes and disruptions make it difficult to gain sufficient agility and maximize potential value using spreadsheets and manual processes. They lack the real-time visibility and capacity to expeditiously balance risk, cost and service to select the optimal solution for each shipment, or to re-optimize shipments when disruptions occur.
Domestic transportation management systems have sometimes been extended to support global movements as well. But these systems are seldom robust enough to take you to the next level of agility and optimization. They typically are not designed for the unique requirements of each point of origin, port or consolidation site across vastly different countries, cultures and regions around the world. Instead, global transportation management systems developed by vendors who have the “feet on the street” in each market are needed to fully understand and leverage the intricacies and best practices for each market.
Why is this important? Because these systems must both empower the local planners with the situation-specific information to optimize local decisions and provide complete visibility and control along the entire journey so TMC planners can make intelligent decisions across the network.
For example, using Incoterms to balance costs versus risk, the TMC planners may change how they group orders into shipments, spread shipments across outbound or destination ports, and select carriers based on sailing dates and service levels. Because of the long lead times for sea legs, needs and priorities may change during the shipment. Planners must be able to re-plan subsequent legs to satisfy priorities and service commitments.
As I hope you are getting the sense of, these are not infrequent or trivial decisions. Managing global transportation involves important process design decisions, the use of sophisticated centralized planning and local execution processes, and support from advanced transportation management solutions specifically designed for the global complexities and local intricacies of international movements. The rewards are greater agility, visibility and control with reduced risks and costs.
As Vice President of Global Logistics at JDA Software, Fabrizio Brasca (@FabBrasca) is responsible for developing innovative transportation and logistics strategies across all industry verticals, strengthening executive-level relationships with JDA’s key customers and prospects, and advising companies on best practices to become more profitable. He holds an Honours Bachelor of Mathematics co-op degree with a specialization in business and information systems from the University of Waterloo, Waterloo, Ontario.