Getting benefits from a modern transportation management solution that has just gone live is just the first wave of value available. There’s a lot more that can be gained when companies recognize that transportation management solutions are more than execution systems. With the ability to model alternate scenarios, logistics organizations can more accurately model the benefits and challenges of proposed changes to transportation strategies and processes, and continue to enhance the business value they receive from their transportation management solution.
Somewhere in the last 20 years, the term supply chain execution got created and transportation management solutions got dropped into that category. However, modern transportation management solutions have robust planning capability and the ability to optimize a broad spectrum of transportation scenarios. While optimizing day-to-day transportation requirements is important, this same capability can be used to evaluate alternative transportation management strategies and processes to determine more cost-effective and better ways to operate and serve customers. Modern transportation management solutions are critical to solving tactical, and even strategic, logistics challenges.
You Already Have Most of the Data
Ironically, the execution aspects of transportation management allow logistics organizations to capture the transactions that occur in the daily transportation processes and are needed for planning scenarios. This operational data enables the logistics organization to establish and validate baseline models and performance needed to correctly evaluate the impact of alternate scenarios. While alternate scenarios are based upon hypothetical assumptions (e.g. what if I changed my carrier contract structure?), the models are using actual order information and business constraints, and have real results that can be matched to the scenarios. This approach makes the assessment process more concrete and objective, and minimizes risk to achieving the value when deployed.
Key Scenarios to Assess
There are a lot of factors that determine where best to start, but the ones that can be implemented without structural changes to the transportation network produce the fastest results. Here are five areas where transportation scenario modelling can produce great results.
- Rates and carriers: Changes in freight mix, carriers used in the market and their rates provide excellent and ongoing transportation opportunity scenarios. These potential changes can be readily evaluated to determine the best structure or combination of structures, what structure should be put into bids, when to add or subtract carriers, and when to lower costs or get better service for the same spend.
- Consolidation rules: Assumptions about consolidation rules can change after getting a better understanding of historical freight mix and forecasted demand. Optimization scenarios allow logistics organizations to evaluate changes to their consolidation rules before putting them into effect. For example, what is the cost reduction opportunity to consolidate deliveries across days in a service region (e.g. make deliveries 2 days per week instead of 5 days) and what will be the impact on customer service?
- Process changes: Changes in technology and relationships between shippers and carriers provide plenty of opportunities to streamline and create greater flexibility in transportation management. A close examination of how current processes are used (or abused) will show how those processes and solutions can be reconfigured and simulated to evaluate their impact on transportation responsiveness and flexibility.
- New customer service and delivery models: Transportation has become a critical factor in the customer’s overall experience. Whether selling to consumers or B2B, concepts like same/next-day delivery and value-added services are now important parts of transportation management. Rapidly modelling and assessing new transportation services models and their costs are part of leading companies’ competitive differentiation, revenue growth and profitability strategies. These new strategies need to be evaluated as part of the overall transportation solution to leverage economies of scale and ensure a consistent customer experience.
- Suppliers and Distribution Locations: With changing sales and delivery models, assessing where your suppliers are and their capabilities in conjunction with your distribution locations can also be scenarios to analyze. Working with your suppliers on drop-ship programs and reviewing the right order profiles (frequency & size) can improve both costs and customer service. Assessing the locations and product mix in your DCs can also highlight opportunities. This might include more consistent product inventory across DCs (or the reverse), using retail locations for same day or next day delivery, or leveraging a 3PL for specialized products or areas that do not yet warrant your own facility. Each of these has implications on your transportation network and can be analyzed.
Got to Have Expert Talent and Time
Obviously, there is a whole new level of value that can be unlocked – if you have competent resources and time to do it. Without solid domain expertise and thorough knowledge of your transportation management solution, the proper level of analysis will not happen and the right scenarios won’t be built. Defining the problem/opportunity is the most critical task. Having the time to conduct the analysis to get there is equally important. If your transportation planners are spending their entire day building loads, executing shipments and fighting fires, they’re not planners, they’re dispatchers. Leading transportation organizations carve out more than half of each day for their planners to work on improvement programs and new business models. Encouraging more strategic analysis across the supply chain, operations, and procurement teams can unlock strategic transportation opportunities and facilitate adoption.
Transportation management is dynamic and so are modern transportation management solutions. Logistics organizations need to understand that transportation strategies and processes should be regularly evaluated and optimized to enhance their value to the company. Modern transportation management solutions provide a great platform to analyze and realistically evaluate those changes. It only takes resources to deliver the results. How is your organization using its transportation management solution to extend its value to the enterprise? Let me know.
As Executive Vice President, Marketing and Services, Chris Jones <CJones@descartes.com> is primarily responsible for Descartes marketing activities and implementation of Descartes’ solutions. Chris has over 30 years of experience in the supply chain market, including the last 10 years as a part of the Descartes leadership team. Prior to Descartes, he has held a variety of senior management positions in other organizations including: Senior Vice President at The Aberdeen Group’s Value Chain Research division, Executive Vice President of Marketing and Corporate Development for SynQuest and Vice President and Research Director for Enterprise Resource Planning Solutions at The Gartner Group and Associate Director Operations & Technology for Kraft Foods.