You can’t change the price of fuel, but you can optimize your supply chain to eliminate empty miles, require fewer trucks and ensure productive use of all resources.
“Supply chain uncertainty has been sited by many as a prime cause of increased costs,” according to a recent study by Tompkins Associates (Uncertainty Is Certain, Perceptions of Future Risk on the Rise, The Supply Chain Consortium, December 17, 2010). The study, based on a survey, goes on to say:
Uncertainty impacts the supply chain in four key areas:
- Adding cost
- Increasing inventory levels
- Increasing lead-times
- Reducing speed to market
Eighty-three percent of respondents are experiencing at least moderate cost increases as a result of uncertainty; 69 percent show a higher than average increase in lead-time; and 62 percent see their speed to market either moderately reduced or greatly reduced. In general, 60 to 80 percent of companies responding indicate that there is a high to medium impact from a cost and time standpoint due to uncertainty.
The first step to managing in the realm of uncertainty is to know where you stand by benchmarking your operation in terms of KPIs (performance and service) and rates (price). To have that you must establish what you want to measure, and how that measurement drives out cost while maintaining or sustaining service levels.
While transportation professionals possess the skills to maneuver through the challenging cycles of tight capacity or rising fuel costs, they often lack visibility into their immediate and long-term options available to overcome these hurdles.
This lack of visibility is inherent in manual transportation management processes, as well as on-premise software, where a transportation management system (TMS) is typically a ‘closed’ environment, lacking any sort of reference to what is happening outside a shipper’s operation. Benchmarking in that type of environment is usually against historical data or against budget, not against current market indices. Therefore, shipper options in turbulent times are limited by the scope of its current resources, which often leads to reactive transportation procurement and an uncomfortable degree of supply chain uncertainty.
Software-as-a-Service (SaaS) technologies, on the other hand, offer a single platform that yields a common data set for shared visibility into network activities. More importantly, this visibility empowers the collaborative Business Intelligence necessary for proactively managing the highly-variable nature of transportation activities.
Although much of the focus regarding BI has been at the strategic and tactical levels, many companies are striving to implement business intelligence at the operations level where it can be leveraged on a daily basis. This BI gives users enhanced visibility to operational metrics and exceptions, and also allows them to compare current results against historical data and planned targets.
The right TMS not only enhances supply chain visibility, but also serves as the central collector of data:
- Distribution costs and rates
- Network behavior
- Supplier compliance
- Internal and external resource performance
- Department performance
Specifically, ‘knowing where you stand’ and having visibility over who is doing what in your supply chain, allows you to act on fact, not on hunches. It also ensures your knowledge set is comparable, if not more comprehensive, than any of your supply chain trading partners. This, in turn, allows you to:
- Compare rates: use benchmarking to determine how your rates compare to those in the market.
- Eliminate waste: identify ways to mitigate fuel costs for excessive dwell time, empty miles, rush or odd-lane LTL, poor appointment scheduling.
- Become carrier friendly: regardless of where you are in a pricing and capacity cycle.
- Negotiate from a position of strength: knowing which areas of your network are within norms and which are out of tolerance.
- Develop predictive response or ‘Plan B”: identify redundant and alternate network options.
- Identify areas of collaboration: network users may require capacity in lanes where you move less than truckload.
- Evaluate true cost of service: identify those areas where you’re paying for superior service when it is not required.
- Unbundle inbound charges: take control of inbound transportation.
- Exercise greater control over spend discipline within the organization, with all transportation buys factored against the latest index.
Information is great, but knowledge is power. Utilizing today’s enhanced data and performance information and leveraging the visibility that can be gained through the use of enabled technologies is the genesis for managing and eliminating uncertainty in our respective supply chains.
Jeff Potts, a co-founder of LeanLogistics, is Vice President of Sales at the company responsible for overall sales and customer relationships for the Eastern region. Jeff has 25 years of experience in the logistics industry and prior to LeanLogistics was Senior Vice President for a Third-Party Logistics Company where he managed operations, sales, business development, logistics engineering, warehousing, and transportation.