Managed Transportation Archives

Editor’s Choice: When to Switch From In-House to Managed Logistics Transportation Services

Transportation | By Chris Cunnane • 08/19/2021

Note: Today’s post is part of our “Editor’s Choice” series where we highlight recent posts published by our sponsors that provide supply chain insights and advice. Today’s article is from GlobalTranz and looks at the difficult decision of transitioning in-house logistics to managed services.

The supply chain is evolving, and the standards used for managed logistics transportation services today are more data- and technology-driven than those of the past. As market volatility, delivery expectations and customer experience levels impact supply chain strategy, shippers are looking for new ways to drive operational and competitive advantage from external expertise. Shippers should consider the following as indicators for when to add an outsourced managed logistics transportation services provider.

Indicator 1: It’s Difficult to Track Your Inventory From Suppliers Through Final Mile

Poor visibility will lead to additional delays in executing shipments, sharing updates with network partners, and adverse impacts on customer experience. Inventory tracking and visibility must be present from the first mile through the final mile, reflecting the entire shipment lifecycle through white glove services.

Indicator 2: Freight Spend Seems to Be Spiraling Out of Control

Another indicator of switching from in-house to managed logistics transportation services is expanding freight spend. This can be a confounding issue. During times of high market volatility, freight spend will inevitably grow faster than anticipated. However, tendering shipments at higher rates in low volatility markets would suggest overspending, and for some shippers, those areas of excess spending may not necessarily be easy to identify. Gradually increasing freight spend that seems out of pace with the current expansion of your network and shipment volume is the defining indicator that it is time to consider outsourcing.

In a well-set-up, managed logistics solution, 3PLs should serve as strategic partners and ensure financial controls are in place across various levels, point of execution through financial forecasting, auditing, and the last mile delivery.

Indicator 3: Obtaining Coverage Is Taking Too Much Time From Your Back-Office Workers

Difficulty getting coverage for shipments, a top issue within a capacity tightened market, is another indicator that it may be time to outsource with a managed logistics company. Depending on the typical workflows in your organization, spending too much time trying to get coverage for a load will lead to added back-office expenses. Take an example.

If it takes a team member 20 minutes to obtain coverage for a given shipment, that effectively limits the number of shipments covered for a week to 116. Now, let’s assume that that team member makes an hourly wage of $20. That amounts to $800 in cost just for finding coverage across 116 shipments. Meanwhile, an automated tendering process within a TMS that could reduce the time needed down to mere minutes, such as five, would have the net effect of increasing the total volume of shipments tendered to 464 without necessarily increasing the back-office cost for that team member.

To read the full article, click HERE.

GlobalTranz And Echo Global Logistics Both Report 40% Fourth Quarter Revenue Growth

Logistics Service Providers | By Steve Banker • 03/03/2021

Managed Trans — Bob Farrell, Chairman and CEO of GlobalTranz

GlobalTranz, a logistics service provider, put out a press release on February 23rd where they mentioned that they had achieved 40% growth in revenue, fourth quarter of 2020 compared to the fourth quarter of 2019. GlobalTranz’s main service lines are freight brokerage – less-than-truckload and truckload – and managed transportation services. As such their closest peers who report their earnings are C.H. Robinson and Echo Global Logistics. Echo’s revenues increased 41.9%.

That makes C.H. Robinson’s last quarter earnings in North American Surface Transportation, up 10.8% – which many companies would be delighted with – seem paltry in comparison.

In a Cyclical Market, Brokers/Managed Trans Providers are Winners

But two of the leaders, Echo and GlobalTranz, had revenues that increased by 40% or more! What the heck is going on in this freight brokerage/managed transportation sector?

It might be worth starting by defining terms. A broker is a third party that finds customers a product or service they are looking for and takes a fee for this service. A truck broker helps companies find trucks to carry their freight on lanes they are having difficulty covering.

A managed transportation service provider, “managed trans” for short, uses transportation management software and internal expertise to plan and execute freight moves for their customers. Thus, instead of a shipper using their own planners to plan, tender, and execute truck moves, shippers work with a third party who they believe can do this more effectively than their internal staff.

David Menzel, the President and Chief Operating Officer at Echo, in the earnings call transcript, explained it this way, “strong freight demand combined with tight capacity were the two themes that dominated Q4. This environment triggered a significant increase in spot freight, as routing guides begin to break down due to continued escalation of truck rates… Truckload rates hit another all-time high in the quarter.”

Another company that combines freight brokerage and managed trans is Transplace. Like GlobalTranz, Transplace is private. While Transplace did not report their revenue growth, they did put out a market update report where they wrote about key trends in the freight market:

Demand remains strong with a continued surge in consumer goods manufacturing, retail shelf restocking, and a strong housing market.
Drivers continue to be in short supply with 34,000 drivers in the Federal Motor Carrier Safety Administration drug clearinghouse. The drug clearinghouse went into effect in January of last year. This electronic database tracks truck driver’s who have tested positive for prohibited drug or alcohol use. It was designed to keep commercial drivers who have violated federal drug and alcohol rules from lying about those results and getting a job with another motor carrier. Those that have tested positive can drive again, but they first must go through a Department of Transportation return-to-duty process. 78% who tested positive have not started the return to duty process.
The truckload and less-than-truckload market is cyclical. Most of the time shippers have the upper hand. Many shippers are tough negotiators who work diligently to drive down carrier rates. But every so often the market gets tight and power swings to the carriers. In these times, asset-based carriers become more selective on which lanes to bid and which shippers to work with. Carriers make more money when their trucks are moving. Shippers that are slow to load and unload the trucks find it much more difficult to get trucks.
“While rates and costs are top of mind, sourcing and capturing capacity is the first priority in many industries.” In short, partners that can help shippers capture capacity have become more “strategic.”

Managed Trans is Strategic

In a press release put out by GlobalTranz, Bob Farrell, Chairman and CEO of GlobalTranz, addressed the increased strategic role GlobalTranz is playing in transportation. “In the last year, the global economy’s reliance on logistics was unmistakable, as awareness of supply chain expanded from the board room into everyday conversations. By working closely with our customers and carriers to solve extraordinary challenges created by the pandemic and changing consumer behavior, GlobalTranz posted a strong finish to 2020, and we are continuing that momentum into 2021.”

What makes a broker strategic? The managed trans business. For GlobalTranz, the company’s managed trans business unit grew its revenue by over 61%. The largest providers of managed trans have all built their own transportation management systems. They all believe differentiation on the basis of technology is key to winning in this segment, and they want to control their own destiny.

ARC’s research shows that a shipper that uses either a transportation management system (TMS) internally or works with an external managed trans supplier with robust technology, will get strong freight savings. For many shippers, these are double digit savings accompanied by improving service levels. Shippers looking for these solutions usually have their directors or vice president of transportation, logistics, or supply chain involved in vendor selection. In a conversation with me on 2/25, Mr. Farrell of GlobalTranz reports that they are increasingly dealing with chief financial officers and even chief executive officers when it comes to managed trans deals.

Savings are great, but if companies that have sharply declining service levels when they can’t find carriers willing to carry their loads, will lose customers and market share. That is strategic.

Three things make broker/MTS suppliers increasingly relevant when capacity is tight. First, in a tight market reliance on small and regional carriers becomes increasingly important. That is the bread and butter of the brokerage business model. Mr. Farrell mentioned to me that not all their revenue growth comes from organic growth. One category of companies they seek to acquire are regional brokers with good relationships with the local carriers in their coverage area.

Second, a large managed trans supplier has hundreds of millions or even billions of dollars in freight under management. FUM is freight these providers are managing on behalf of their customers. The larger the freight under management, which comes from both the broker and managed trans, the greater the visibility that provider has to open capacity.

Finally, the freight under management feeds the ability of the managed trans provider to leverage Big Data in their systems to provide better insights and value to their customers. Mr. Farrell of GlobalTranz talked about how by building scale they are increasing their ability to do price discovery. On many lanes GlobalTranz will have detailed demand and supply data. The data allows them to understand which lanes the carriers really desire to work in, the lanes where the carriers are most profitable. This allows them to better predict what price a carrier will take for a move. They can send an electronic message to the carrier, “will you take $1,200 for this move?” Meanwhile, they know the carrier is likely to see it as a fair price. This speeds the tender process by preventing back and forth negotiation; doing this increases capacity by increasing the proportion of first tender acceptances.

On the broker side of the business, this predictive capability can allow them to bid an unprofitable lane because they know that there is a high probability that they will get a backhaul that is profitable. Similarly, Big Data can make them more valuable to their carriers by providing them the visibility that is necessary to reduce empty miles – the miles trucks move unloaded.

Mr. Farrell acknowledges that this is a favorable market for freight brokers/managed trans providers. But GlobalTranz’s aspiration is to grow organically at close to 20% regardless of the market dynamics. “The freight industry has long operated as a cyclical business, but we’re not relying on historical trends to hold in the post-COVID environment.” The company views itself as a technology company first. But through its’ technology platforms, access to capacity, and creative solutions – based on strong logistics domain expertise – GlobalTranz believes that they can provide unique customer value in the midst of the uncertainty of the current environment” and beyond.

Transportation 101: Understanding How to Manage Your Freight Spend

Transportation | By Chris Cunnane • 09/09/2020

When it comes to managing your freight spend, there are a few options to consider. The three traditional methods are the use of a transportation management system (TMS), transportation execution system (TES), and managed transportation services (MTS). Ultimately it comes down to whether shippers want to manage their freight spend in-house or outsource it. We have created a handy Supply Chain 101 cheat sheet, but this article will go into a little more depth.

The most common application for in-house management is a TMS. A TMS offers optimization capabilities across multiple modes to improve service levels and reduce freight spend. The alternatives to TMS include transportation execution solutions and managed transportation. Transportation execution solutions are mode specific and lack optimization capabilities, but for shippers with simpler transportation requirements, that is often all they need.

Large shippers with complex needs may turn to managed transportation services providers to plan and execute their loads. These MTS providers may use an in-house developed TMS. Or, if they use an off-the-shelf TMS, they may get a volume discount. In some instances, they may not use a TMS at all in managed trans deals, although these providers lack a significant presence in the market.

Transportation Management Systems

ARC’s definition of transportation management systems (TMS) is freight centric; we do not include solutions that help companies move passengers more efficiently and solutions for mail. The TMS market can be segmented into two types of applications:

Planning & Execution: This application focuses on freight moves involving a carrier. The complete process would include procurement, creation of a route guide, planning and optimization, electronic communication with carriers (tendering), visibility and exception management, freight audit, and performance management. For international shipments, it would also include advance shipment notification to government authorities. Many solutions don’t support the end-to-end process described here. For classification purposes, if the solution includes a route guide, planning optimization, and electronic tendering/acceptance execution, it is included in this category.
Fleet Management: This application focuses on freight moves involving transportation assets owned by the company. The complete process would include routing and optimization, visibility and exception management (including GPS style solutions), transportation asset management, and performance management. Transportation assets include both power units and container cars. Many solutions don’t support the end-to-end process described here. For classification purposes, any solution that includes routing plus any of the other modules listed above will be deemed a fleet management solution.

ARC’s research shows that the planning and execution solution can contribute to significant reductions in freight spend while preserving or even improving service levels. The fleet management segment is growing because of the shift to e-commerce and omni-channel and the need to fully utilize drivers during a time in which it is increasingly difficult to hire and retain drivers.

The freight spend required to invest in a TMS solution is lower than ever. Historically, if a company did not have over $20 million in freight spend, purchasing a TMS was out of the question. The emergence of SaaS solutions, and less sophisticated on-premise applications, has reduced that number significantly. Now, essentially companies of all sizes can afford a TMS. This includes companies with as little as $1 million in freight spend. With lower barriers to entry in the market, smaller Tier 3 and 4 customers that needed to rely on a 3PL for their transportation needs can bring those functions in-house. This change brings a wide variety of new companies into the TMS market. The leading providers of TMS are SAP, Oracle, Blue Yonder, Descartes, and TMW.

Transportation Execution Systems (TES)

Transportation Execution Solutions (TE) allow shippers to connect to multiple carriers and then tender, track, and pay in the system. Visibility solutions allow real-time asset tracking across the entire distribution network. This enables improved estimated arrival times of goods. Visibility solutions are playing a larger role in the market, as real-time tracking of assets becomes more important. Suppliers of visibility solutions continue to bring in additional data streams for better ETAs.

Visibility solutions are becoming more necessary. The need to know where products are, whether they are on the way to the warehouse, store, or customer, is critical to ensure a positive customer experience. The rise of visibility solutions at the container-level is helping to drive the transportation execution market to new heights. While this application is helping to fuel overall market growth, there are a number of other growth factors and trends that are pushing the market forward as well. These growth factors touch upon emerging technologies and general trends.

The transportation execution and visibility systems market has seen significant growth over the last few years due to a variety of factors, including the growth of e-commerce, the strong ROI tied to these solutions, the rise of control towers and visibility requirements, capacity fluctuations, and the expansion of e-commerce. Buyers and suppliers need to have the right tool set in order to make the most of the solutions available. Potential buyers need to do their due diligence about the solution, its strengths, and potential shortcomings. Additionally, buyers need to minimize customizations to speed up the implementation and upgrade cycles. Suppliers need to continue to enhance machine learning and look to the cloud. An emphasis on last mile will also be important as the e-commerce market continues to grow. The leading companies of TES solutions include Descartes, INTTRA (E2open), GT Nexus, Transporeon, Pitney Bowes, and Metapack. The leading visibility companies include FourKites, project-44, and Descartes MacroPoint.

Managed Transportation Services (MTS)

In an MTS arrangement, a shipper contracts with a third party to plan and execute their moves for them. In other words, instead of having internal planners plan and execute moves, those planners are employed by the MTS supplier, but work on the shipper’s behalf. While growth has slowed considerably in the 3PL market as a whole, this segment of the market is one of the fastest growing of all 3PL service lines, although from a much, much smaller base than carriage, brokerage, forwarding, or warehousing services.

Similar to the TMS market, freight spend requirements for engaging in an MTS arrangement have changed. Just a few years ago, the majority of MTS arrangements sold to shippers with freight spend over $100 million. These large customers demanded a customized solution, which is just not the case today. Instead, most MTS providers have standardized on one TMS and do not customize that solution. This results in speedier and lower cost implementations. Lower costs increase the ability to sell MTS to smaller customers, especially those in the $25-100 million and $5–25 million freight spend segments. These two segments are now considerably larger than the freight spend of over $100 million category.

As mentioned above, one difficult decision shippers need to make is whether to bring transportation management in-house or outsource it to an MTS provider. The freight savings and service improvements associated with TMS are quite similar to MTS arrangements. However, many shippers lack network design capabilities or a continuous improvement culture. Many MTS providers have expertise in these two areas, which can help shippers make that decision.

There are a number of key growth drivers for the MTS market including the strong ROI attached to these arrangements, the rapidly improving technology of MTS suppliers, the need for real-time visibility and accurate ETAs, and the fact that the MTS market is massively underpenetrated. Even with this last fact, the amount of freight under management in MTS arrangements is quite high. The leading MTS providers based on freight under management include Transplace, CH Robinson, Ryder Supply Chain Solutions, DHL, and Penske Logistics.

Managed Transportation Service Providers Compete on their Tech Stack

Logistics Service Providers | By Steve Banker • 06/29/2020

I’ve completed a market study and I am nearing the completion of a supplier selection guide on the managed transportation service (MTS) industry. I’ve had conversations with executives across the industry. One way these logistics service providers (LSP) compete is on the quality of the technology they use to plan and execute loads on behalf of their shipper customers.

When companies want to reduce their transportation costs, while maintaining or even improving customer service, they have two main choices: implement a transportation management system (TMS) or outsource transportation to a managed services firm. The managed transportation services (MTS) –providers have planners in a control tower using a transportation management system and other technologies, who plan and execute loads on behalf of their customers.

A TMS is Core to a Managed Transportation Platform

Managed transportation service providers have two choices: build their own transportation management system or implement a best of breed solution from a software supplier. Among the largest managed transportation service providers that go the off-the-shelf software route, Oracle Transportation Management (OTM) or Blue Yonder’s TMS are the solutions that are implemented. DHL Supply Chain, Kuehne + Nagel, and Penske Logistics use OTM. Ryder Supply Chain Solutions uses Blue Yonder.

Among the big MTS suppliers, the build your own TMS is slightly more common. 4flow, BluJay Solutions, CH Robinson TMC, Odyssey Logistics & Technology, Transplace, and XPO all built their own transportation management systems.

In some cases, the off-the-shelf application becomes heavily modified by the MTS provider and the solution, in effect, becomes almost proprietary. Ryder used a robotic process automation solution from Kofax to increase process speed and reassign labor associated with producing and executing transportation plans. Robotic process automation is software that is used to automate high volume, repeatable tasks. Through the application of process automation Ryder is able to customize process and manage exceptions at a fraction of the time it would take to accomplish through a user interface. RPA’s automate work by performing the same computer keystrokes and opening the same modules humans do. Or in some cases, the robots write data right into the application database.

GlobalTranz, who developed their own TMS, also uses this technology. Using RPA, which they built internally, GlobalTranz has improved its up-to-the-minute information and insights on rates for loads that need to be tendered to the spot market.

For managed trans providers that build their own TMS, there is the opportunity to build out industry specific functionality that does not exist in off-the-shelf solutions. Odyssey Logistics & Technology, which is one of the market leaders in providing managed trans to the chemical industry, can execute loads that comply with the transportation security plans that certain hazardous materials are required to have. Similarly, 4flow has combined transportation network design and optimization to provide robust solutions valued in the automotive industry.

Managed trans providers that built their own TMS do not like the terms ‘off-the-shelf’ and ‘best-of-breed’ to be used interchangeably. Some of the MTS providers that built their own TMS solution argue they are best of breed solutions. The fact that they have been able to sell their transportation management systems to shippers validates that assertion. 4flow, BluJay Solutions, CH Robinson TMC, and Transplace all have a successful business selling and implementing TMS solutions to companies that are not their managed services clients. Further, I’ve talked to TMS clients from all the aforementioned suppliers; they have told me that they got a good payback from these supplier’s solutions.

However, the TMS/MTS distinction can be a little tricky for these suppliers. Some customers get into a hybrid arrangement where they have some planners from their company that are using the TMS solution from the MTS vendor to plan certain modes or lanes. But they also rely on planners from the managed trans provider to do the rest of the freight planning and execution.

Augmenting TMS with Best of Breed Applications and Visibility

While TMS is the core of an MTS platform, the managed transportation providers augment the transportation management system with other best of breed applications and near real-time visibility.

A transportation management system has a module that helps in providing the procurement analytics and workflows used in negotiating long term contracts with carriers. Kenco did not feel this solution was robust enough. They augmented their off-the-shelf TMS with Jaggaer’s transportation procurement solution. The logic behind Jaggaer’s procurement optimization is that rather than bidding on individual lanes, carriers can bid on a basket of lanes. Sometimes a carrier will be able to give a discount on one lane if they get a related lane that fits their network and thus helps them reduce empty miles. Meanwhile DHL has built their own solution – D3 Transportation Optimizer – for transportation network analyses.

DHL also argues that having a platform stack that includes tightly integrated WMS and TMS, like they do, allows them to do optimization that crosses from the warehouse to freight transportation. This presents opportunities to add nodes that might lead to better milk runs, or add additional pool points for load consolidation, and thus deliver better solutions.

In recent years, the visibility surrounding in transit moves has gotten much better for truckload and less-than-truckload shipments. Visibility is what turns a managed transportation platform into a control tower. In the US, truckers have been required to use electronic logging devices that verify that they are not exceeding the number of hours they can safely drive. When this data is accessed in near real-time, the result is visibility. Solutions from FourKites, Descartes’ MacroPoint, and other freight tracking solutions, can be used to flow this data into the MTS providers’ TMS.

In some cases, the logistics service providers have press releases reporting they have a technology that has built these interfaces to electronic logging devices, telematics devices, or carrier systems themselves. However, it is difficult to know if they have taken an off-the-shelf freight tracking solution and private labeled it – given it their own solution name – or if they have built their own solution for freight tracking.

CH Robinson TMC argues that there is a difference between transportation visibility and supply chain visibility. Their platform also provides visibility into inventory. TMC can let a customer’s supply chain team know when it appears that too much of a certain product is being stored at a warehouse, how the lack of inventory at one node in a supply chain can be mitigated by pulling that inventory from a different location, or in the event of a natural disaster or pandemic, they can rush inventory into or out of a region before it shuts down. With this kind of visibility, the TMC analysts can become more than transportation analysts, they can become part of a shipper’s supply chain team.

A supply chain control tower should also provide visibility to potential and imminent risks. Odyssey enhanced their platform with a COVID-19 risk map based on Johns Hopkins data. The most robust real-time risk solutions come from RiskMethod, Resilinc, and Resilience360. These solutions provide an end-to-end supply chain risk assessment and monitoring solution. Resilience360 was incubated in DHL’s global Innovation Center, and then spun off. DHL still owns a stake in the company. DHL has integrated this into their platform and reports that about one third of their MTS customers have elected to pay for this augmented risk visibility.

Advanced Analytics

Finally, a robust MTS platform needs advanced analytics. Some of the MTS providers have public cloud TMS solutions that gives them visibility to billions of dollars’ worth of freight spend that is transacted across their network. This network visibility can be used to provide lane freight cost and service benchmark data. A shipper can be told, “on this lane you are paying above the average rate for this type of shipment, but you are getting above average service levels.” Transplace, BluJay Solutions, and CH Robinson TMC all use their large networks to provide this kind of visibility.

But the large networks also provide the Big Data needed to do advanced analytics. Several of the providers mentioned making big investments machine learning. Big Data plus machine learning, for example, can improve estimated times of arrivals (ETAs). CH Robinson TMC mentioned that their network data can be augmented with outside data like weather, traffic, and geopolitical events to further improve the ETAs.

DHL is also doing predictive analytics. They are looking at freight capacity levels and spot market pricing to predict what freight prices in the following week or weeks will be. That price can differ based on the day of week. Knowing this, DHL can help shippers understand what kind of savings they could generate by changing their shipping schedule. Freight price predictions can also be based on seasonality and whether transit times are rising or falling on a lane. DHL is in the early stages of this work, but they tell me they are getting promising initial results.

GlobalTranz has done something similar. They have created a Cost Prediction Model, which they use to provide intelligence on pricing, market trends and to create more dynamic information sharing between 3PLs, shippers and brokers. A good example of this capability is their COVID-19 Rate Per Mile Heat Map. This live dashboard shows real-time changes in spot and contract markets across the top 20 COVID-19 hot spots in the U.S. They made this available to their shipper customers to help them make sense of the rapidly changing marketplace during the early peaks of the pandemic.

The network data in combination with optimization also opens the prospect of doing collaborative transportation and digital freight brokerage. This is something I wrote about in a previous article and won’t cover here.

Conclusion

There is a lot happening on the technology front. The technological advances that have occurred in just the past few years are impressive. My colleague Chris Cunnane is updating ARC’s research on the ROI and service benefits associated with managed trans. It will be interesting to see if the improvements to the tech stack lead to improvements in the ROI generated by these services.

Managed Transportation Experts Speak on Digital Freight

Transportation Management Systems | By Steve Banker • 06/22/2020

I’m doing a market study and a supplier selection guide on the managed transportation service (MTS) industry, so I’ve had conversations with executives across the industry. Executives at these managed trans firms are some of the brightest in all of logistics. I wanted to know how digital technologies are affecting shippers, carriers, brokers, and managed trans providers.

When companies want to reduce their transportation costs, while maintaining or even improving customer service, they have two main choices: implement a transportation management system (TMS) or outsource transportation to a managed services firm. The managed transportation services (MTS) – also called managed trans – providers have planners in a control tower using TMS technology, who plan and execute loads on behalf of their customers.

With the rise of Uber Freight, digital freight brokerages have gotten a good deal of investor and shipper attention. A digital freight brokerage uses technology to make the process of working with a broker to secure a move more automated and less time consuming.

Managed Transportion Providers Partner with Digital Freight Providers

In some cases, MTS providers partner with these brokers. Brett Minner, Director of Logistics as a Service at BluJay Solutions, said “We are investing in partnerships for digital brokerage.” BluJay has developed application programming interfaces within its TMS to Uber Freight, Loadsmart, Convoy, and Sleek Fleet. This integration allows for “a real-time rate quote with guaranteed service. Our customers do need freight contracts with those providers.”

Mr. Minner added, “We’ve seen some shippers that use digital broker technology solutions have been competing or over-performing network metrics. In the case of one specific shipper, we’ve seen primary tender acceptance 3% higher than their network average, on-time performance 3.6% higher than their network average, and savings against BluDex of $54,000 (11%) over 702 loads in the month of April ($77 per load).”

Managed Transportation Providers Build their Own Digital Freight Solutions

In other cases, large MTS providers and brokers are building their own digital freight brokerage solution. For large freight brokers the Uber Freights of the world are a threat. Mr. Commiskey from GlobalTranz mentioned they have 300 plus developers building out analytics to support their digital freight matching solution which is called GTZamp.

From Mr. Commiskey’s perspective, it is not the instant gratification of digital brokerage that provides the most value. “The greatest value of a digital freight brokerage comes from reducing empty miles. Nevertheless, they can get a spot freight rate quote to customers in minutes, not hours.

Mr. Commiskey also argues that the entire value proposition associated with a digital brokerage solution is overstated. “Execution needs to be seamless. At the end of the day, logistics is not perfect. You need great people who can do the right thing.” When there are exceptions, people are needed to fix things.

Another significant managed trans supplier, Transplace, has a different kind of digital platform for securing lower cost transportation capacity. Transplace acquired Lanehub, a cloud-based platform that encourages shipper-carrier collaboration, in January 2020. The platform encourages shipper-carrier collaboration by digitally identifying and connecting companies with complementary freight lanes to save on shipping expenses. The goal is to find recurring, consistent lanes at a sustainable lower cost from carriers and private/dedicated fleets by matching headhauls and backhauls. The platform creates visibility to over $23 billion in truckload spend over 180,000 lanes in North America. Over 150 shipper members have connected with 250 carrier members. This has resulted in more than 26 million matches.

In conclusion, the term ‘digital transformation’ has become ubiquitous. There is a good deal of hype around this term. But the freight industry is becoming digitally transformed in front of our eyes.

A Managed Transportation Success Story

Transportation Management Systems | By Steve Banker • 06/15/2020

What is Managed Transportation?

Managed transportation services providers have planners in a control tower using TMS technology, who plan and execute loads on behalf of their customers. ARC has been doing market studies, ROI studies, and supplier selection guides on managed transportation services for many years. My colleague Chris Cunnane is kicking off a new survey-based study on the ROI from MTS. The freight savings can be significant. Further, the trend is that the savings have been improving in recent years.

Managed Transportation Arrangements Can Drive Significant Freight Savings

There are different ways that managed transportation providers seek to drive freight savings for their shipper clients. One of the main ways is through a strategic procurement engagement where the managed trans supplier provides carriers a forecast on how many loads they expect to move on different lanes. Various carriers than bid on those lanes. The carrier that wins a lane typically becomes the lead carrier for those loads for a year or more. But the key to a carrier giving a good price is having a lane that fits well into the carrier’s network and the promise of predictable loads on a regular schedule.

A Managed Transportation Case Study

I recently had a conversation with a company that went into a managed transportation arrangement with GlobalTranz. GlobalTranz, in addition to providing managed transportation services and supply chain consulting, is a leading North American, multimodal freight broker. This shipper is American Freight Furniture. This retailer’s tagline is “discount furniture stores & mattress deals.” The company operates 170 furniture stores. American Freight Furniture has highly unpredictable inbound freight shipments. In short, working with a MTS surrounding strategic procurement was not going to drive value for them.

The retailer’s goal was to work with a partner that could help them with the chaotic nature of the inbound shipments from suppliers to their stores. This would allow them to achieve better in-stock positions in the stores, and in this way contribute to higher sales.

I interviewed Jason Conley, a Transportation Manager at American Freight Furniture. Mr. Conley began his career at the retailer at the end of 2018 after 20 years in logistics. The company has highly seasonal sales with many of the sales occurring in tax season. “Our customers live paycheck to paycheck.” Following the tax rebates, it is the one time during the year these consumers have extra income. Many of these customers walk in the store and walk out having purchased something as long as the type of furniture they are looking for is in stock.

But from a supply chain perspective, store storage is an issue. The retailer’s supply chain network has no warehouses to store furniture; shipments go direct from manufacturers to the stores. The stores are 20,000 – 30,000 square feet, but “in peak season, we could use 60,000 square feet to support sales.”

The furniture manufacturers are getting large orders months before peak and looking to ship goods out quickly rather than store goods in large warehouses. “We need to pre-buy early, we are not the only game in town,” Mr. Conley explained. “December, January – every furniture supplier is at maximum capacity.” If you don’t order early, you won’t have product when it is needed. In short, this is also not a supply chain where you can create highly reliable long-range forecasts and then have suppliers do time phased shipments based upon store-level forecasts.

The company does ship some high velocity sales items in shipping containers. These containers sit in the store’s parking lot, if that store’s lot is big enough. This provides on-site storage. This helps but does not solve the demand surge issue.

In 2019, American Freight Furniture was working with several brokers. “It became clear,” Mr. Conley said, “that more is not better.” Prior to the 2019 tax season, the retailer began their relationship with GlobalTranz. The relationship started small, with the understanding that if they performed well on their lanes the relationship could grow. The rates were “where they needed to be,” GlobalTranz had good technology, something the other brokers they had been working with lacked, and GlobalTranz performed well.

It was decided GlobalTranz would become their managed transportation partner for the 2020 tax refund season. All inbound freight, except for prepaid freight from big manufacturers, was planned and executed by GlobalTranz.

When this furniture retailer came out of peak season 2019, they realized they needed to look at their supply chain network. “From a replenishment perspective,” Mr. Conley said, “we needed a more scalable approach.”

GlobalTranz helped American Freight Furniture work with asset-based carriers, carriers that own trucks. These carriers shipped product from the suppliers into their yards. The trailers were staged there and served as a form of warehousing that could store products until needed by the stores. The carrier’s yards were all located within a 200-mile radius of the stores they served.

This took a lot of pressure off the stores. Goods did not have to be forced into the stores based on the needs of the furniture suppliers. The TMS technology GlobalTranz developed gave visibility to where yard inventory was staged, and store managers could pick up the phone have the goods delivered in 24 to 48 hours. This meant store employees were not frantically trying to unload trucks and cram the furniture in the stores. Deliveries could occur when product was needed and store labor was available to unload the trucks.

Mr. Conley exclaimed, “This was a game changer.” Even though the freight costs were higher, the total landed costs needed to support the higher sales were lower; to support the increased sales the store would have needed to grow their footprint. Further, the stores would only need the extra room 6-8 weeks a year. Additionally, their suppliers were happier. The asset-based carriers had better on time performance at the pickup locations than the brokers had achieved.

“The response from the field has been great.” Mr. Conley said. “Our regional sales vice presidents and the COO loved it.”

But there is more to do. In March, the company acquired 115 outlets that sell and fix appliances. The appliance stores do use replenishment warehouses. The two supply chain networks need to be integrated. GlobalTranz is helping with the analysis and will now have more stores to support with their managed transportation services.

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