Are 3PLs Better Able to Leverage TMS Solutions than Shippers?

We have a new generation of transportation management systems (TMS) based upon more powerful in-memory technologies. What this has created are more advanced transportation simulation capabilities. The way this works is that a user would have dual instances of the TMS. They would have an operational TMS that continues to plan, manage, and execute transportation moves. They would also have a simulation/test environment that can take months of actual historical shipment data (forecast data can also be used), loads massive amount of data into the tool (this is truly a Big Data application), and answers the question, “What would have happened if we had done this instead of what we actually did?”

I believe this is the most underutilized TMS functionality in modern TMS solutions. So I was glad to come across a company actually using this feature set. I talked to Steve Sensing, the President of Global Supply Chain Solutions at Ryder Systems, and he described how Ryder is using this.

Steve Sensing jpg

Steve Sensing

Ryder’s Supply Chain Solutions (SCS) division is the unit that provides managed transportation as well as integrated supply chain services. SCS purchases and executes nearly $5.0 billion in freight spend for their customers. From a modal perspective, they plan and execute across all modes with a particular focus on truckload, LTL and parcel. The range of services includes transportation optimization and planning, execution, carrier procurement/rate negotiation, and freight bill audit. They also use their visibility into their customer’s moves to provide capacity management services, essentially helping customers discover backhaul opportunities. Their transportation optimization and execution, procurement group, and freight audit groups are located in control towers in Novi Michigan, Roanoke Texas, and Nuevo Laredo Mexico. They have over 450 employees associated with these towers.

While Ryder uses a variety of other tools for specific logistics problems, their primary TMS is JDA TMS. This is the TMS solution they use for the TMS-based simulations. Steve pointed out that one of the nice things about having a mirrored simulation environment is that you can test a new transportation policy – perhaps looking at the impact on total landed cost and service levels from the change – and if the change makes sense, it becomes very easy to flip a few changes in the TMS and make the change. In fact, it can make sense for policies to change by season, or even more frequently.

I asked Steve for an example of what kind of policies they test, Steve mentioned testing whether a pool point – a location for shipment consolidation – should be used. He also gave the example of one customer, a technology manufacturer that was getting ready for peak season deliveries to a retail client at stores over a two week period. They ran different scenarios to drive the cost per hundred weight down while hitting service targets. Those scenarios involved looking at product mix, modes, and cross docks.

I also talked to Tom Knutilla, Ryder’s Supply Chain Services divisional CIO, about this solution. He mentioned that they use TMS simulation in three types of situations. First of all, the tool is used when Ryder is in a managed transportation sales cycle. They can load a TMS with the potential customer’s historical transportation data, then load in the carrier rates that they could drive using their carrier base, and thus be able to understand the potential savings they could drive for a customer.

Secondly, if Ryder wins the business, they can use TMS simulation to validate the savings they have achieved for a customer.

Finally, Ryder can use transportation simulation to look at potential policy changes, and then ask customers if they agreed that the policy change would make sense. So, for example, if the customer can agree to a latter pick up time at a warehouse, that may create the opportunity to move some freight from parcel to less expensive less-than-truckload shipments. If policy changes will not affect service levels or require any changes in the way a customer’s operation are run, Ryder can implement cost savings changes without going through an approval process with the customer.

When shippers need to improve their transportation capabilities they have one of two primary paths they can take. They can buy and implement a TMS.  Or they can work with a 3PL. One possible reason to work with the 3PL is that they may be able to get more out of that TMS solution than a shipper that implemented a TMS would be able to achieve.

ARC has recently completed a supplier selection guide for MTS.  This guide include market share data based on a recently completed MTS global market study; the features, functions and service capabilities a shipper should be looking for from MTS providers; and ROI data on what kind of payback is common in these kinds of engagements.  If you are interested in learning more about this guide, you can contact Conrad Hanf at chanf@arcweb.com.

Comments

  1. Steve – I believe the real reason 3PL’s leverage TMS solutions more than shippers is because for 3PL’s their system IS their business. Without a TMS a 3PL (or broker) simply does not have a business.

    However, for shippers, transportation is usually just a part of their overall business and thus usually gets relegated to “more important” projects. Shippers see TMS as an “added cost” that can be avoided…and are always slow to get a TMS or to upgrade an old one.

    For a 3PL, they had better have a well oiled TMS system and know how every feature works. After all – their very existence depends on it. For shippers – TMS comes much later in life.

    Tim Higham
    CEO
    InMotion Global, Inc.
    Maker of AscendTMS
    http://www.TheFreeTMS.com