One thing is clear for anyone in the transportation industry: logistics and logistics technology is changing at a rapid pace. For transportation managers who are constantly seeking more efficient ways to move goods, Amazon has perhaps been the one to watch for the latest and greatest in shipping and delivery strategies. Amazon’s latest announcement in recent months, Delivery Service Partners, encourages entrepreneurs to start their own logistics companies using Amazon’s built-in customer base.
But it’s not just Amazon that is seeking new and more cost-effective delivery methods (think same-day shipping, last-mile, and parcel). More and more organizations are looking to take their transportation strategy to the next level. One strategy to bring shipping operations to that next level includes optimization. Shippers and 3PLs are being pushed to examine every aspect of their transportation processes for increased efficiencies in order to stay competitive and meet the growing expectations of consumers.
The pressures of today’s omnichannel distribution and e-commerce channels are making it progressively more difficult to develop efficient load and route plans. This is where optimization comes into play. The best optimization tools allow companies to look at freight movements holistically, analyze their shipments, rates, and constraints, and ultimately improve decision making. By optimizing every aspect of your transportation network, you can reduce transportation costs and improve efficiency. Moreover, by making this optimization dynamic and updated in real time, companies can use this as a serious competitive advantage both for delivery times and productivity.
Data-driven decision making
Those who have already implemented a transportation management system (TMS) have at least one advantage for keeping up: they have all transportation data in one location, better arming them to take a detailed look at their shipping processes. Often, TMS users can use the TMS data and their intuition to make impactful changes. Today’s TMS offers powerful tools for decision-making and reporting, providing a solid building block for true business intelligence. By using a TMS that has business intelligence already built in, organizations have the visualization and data query tools to analyze things like freight spend and other shipping processes to make data-driven decisions.
Optimization further provides an advantage as it feeds your transportation data directly into the TMS with automated, intelligent instructions on how to best move forward. When you input data into an optimization tool, including shipments that need to be moved, available pool points for consolidation, cross-docking and deconsolidation, and any desired list of constraints, it will build an optimal plan that is then ready to be executed in the TMS. Over time, however, the assumptions and data that went into the optimization decision can change. For your transportation strategy to perform its best you must be able to quickly understand impacting changes, which can include delays from unforeseen circumstances, market demand, the actions of your competitors, and the performance of your suppliers and partners. Real-time, continuous improvement transportation optimization goes beyond standard optimization and can empower you to identify opportunities in-route for adding efficiencies and providing competitive differentiation. While all of these considerations and variables may sound complex, sophisticated tools help simplify the process of continuous optimization.
While many organizations have already replaced their manual processes with TMSs, transportation optimization has not been as widely adopted, and it is still an elusive concept for many logistics operations. Yet, transportation optimization can be crucial for analyzing shipments, rates, and constraints to produce a load plan that can address today’s rapidly-changing environments, while meeting customers service expectations and ultimately reducing freight spend. Clients have seen the cost savings from optimization range from three to 20 percent depending on many factors.
Using optimization to combat the capacity crisis
The recent capacity crisis has also played a key role in necessitating improved transportation processes and the use of optimization technologies across all modes of delivery. This crisis has been driven largely by increased freight volume, a driver shortage, and reduced hours of service. In 2018, we saw a surge in freight volume, with an increase of 10.6 percent in freight activity according to The Cass Freight Index – its highest levels since 2007, and the sixth double-digit increase for the index in 2018. While freight volumes are starting to level off at the beginning of 2019, it’s still a crucial time for transportation managers to be more aware of optimizing your loads.
Perhaps what the latest capacity crisis revealed, more than anything, is that supply chain leaders should be elevating every aspect of their transportation operations to overcome efficiency issues. And, while there is no silver bullet that can solve a capacity issue overnight, this is one more area where load optimization should be a key consideration. In capacity crunches, load optimization across all modes can help transportation managers fully load their trucks, which means fewer loads that need coverage and fewer drivers. On average it’s estimated that most trucks are only around 60 percent full. Worse yet, an estimated 25 percent of trucks are completely empty.
Optimization can help identify where it makes sense to take shipments from multiple sources and consolidate them into the lowest possible number of vehicles and shipments, using mode shifting to yield benefits across the supply chain. A real-time, continuous optimization is employed by some shippers who optimize to start building loads on their docks early in the day, but then keep re-optimizing to add new shipments to the right loads as they come in throughout the day. Shippers may also want to consider pairing truck options for continuous truck utilization, versus having one “inbound” carrier and another “outbound” carrier. Logistics service providers (LSPs) even have greater means of consolidation and collaboration looking across their many customers.
Leverage opportunities from across the entire transportation network and beyond
Just as the transportation industry is constantly evolving, so should your transportation processes and technology. Powerful, real-time optimization tools can help shippers and LSPs compare detailed results from different parameters and even determine actual costs by customer, carrier, or business division. An optimization tool helps balance service and cost tradeoffs and handles the complexities that are too hard to consider by simple intuition. An optimization tool also enables shippers and LSPs to easily quantify savings from optimization and use this data to establish best practice guidelines, while also continuing to build upon and refine these processes.
Change is inevitable in the transportation industry. We are continuing at the forefront of innovation in the area of optimization. It’s the companies who successfully adapt to change, or even embrace change, and align themselves with an innovator that will move to the top. Having the right tools in your arsenal could be the key in elevating your transportation strategy from “good enough” today to industry leader of tomorrow.
Karen Sage is MercuryGate’s Chief Marketing Officer (CMO) responsible for the company’s global marketing, communications, sales enablement, and go-to-market efforts. She is a veteran with 20+ years of experience in business-to-business marketing and communications helping several industry leaders launch disruptive new categories, accelerate revenue growth, build leadership brands, and establish marketing organizations that scale globally. She comes to MercuryGate most recently from spend management solution provider, SciQuest. Prior to SciQuest, she was at CA Technologies where she served as vice president of marketing leading rapid growth initiatives. Her experiences leading growth also include multiple leadership roles during a 15-year stint at Cisco. Karen started her career having invented the NETSYS Performance tools at NETSYS Technologies, Inc., which was acquired by Cisco in 1996.