Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

Takeaways from Descartes Evolution 2012 Global User Conference

Cloud/Software-as-a-Service | By •

I attended the Descartes Evolution 2012 Global User & Partner Conference a couple of weeks ago. When Art Mesher took over as CEO of Descartes Systems Group eight years ago, I wasn’t sure the company was going to survive. Today, it is a thriving company. What are the secrets of its turnaround?

Descartes (a Logistics Viewpoints sponsor) was one of the first enterprise software companies to move to the software-as-a-service (SaaS) model. Moving from upfront license fees to recurring subscription fees hurts revenues for the first few years, but then revenues become much more dependable and predictable.

The SaaS model can also be very good for clients. At the conference, a Director of Logistics at a retail company spoke about the results his company achieved after implementing Descartes’ SaaS routing and mobile resource management (MRM) solution. The solution was inexpensive enough that he could pay for it out of his operating budget. The solution was also implemented fairly quickly. The savings in the first year were 20 times larger than what the retailer spent on the product! Three quarters of the savings came from better routing of the company’s private fleet, the other quarter from reduced driver idling. I thought, “Where else have I heard of such an impressive ROI?” And then I remembered: at a Descartes conference a couple of years ago.

The second key to Descartes’ turnaround is its Global Logistics Network (GLN), an electronic communication network with 63,000 connected parties. About 4.5 billion messages are exchanged annually on the network, which is focused largely on logistics documents. At the core of Descartes’ strategy is what the company calls the “Federated Network,” which is similar to our Supply Chain Operating Network model. The idea is that applications that run on a network can achieve synergies that are just not possible with standalone applications. The difference is that by speaking of a “federated” network, Descartes makes the point that it connects to about 50 other EDI networks.

Descartes’ IES warehouse management system (WMS) is a good example. This solution is used by freight forwarders and 3PLs with port (air and ocean) facilities, and it is particularly well suited for facilitating shipment consolidation and deconsolidation. While the core WMS does not support advanced labor saving activities like directed put-away, the electronic communication component has rich functionality for coordinating seller, carrier, and buyer interactions to facilitate the consolidation process. This is where Descartes seems to excel, finding the white spaces and inefficiencies in logistics processes that involve more than two parties. Other examples include the company’s DC Bypass and Logistics Flow Control solutions.

At the conference, Descartes announced its intention to leverage its network to build what it calls the Descartes Community. The solution, which was demonstrated at the conference, looks similar to LinkedIn, although it’s much more specific to people interested in logistics, and with more in-depth profiles of logistics companies. Ultimately, this solution could help shippers find new carriers to do business with.

This brings me to the third thing that has aided Descartes’ turnaround. For the company, acquisitions are a core competency. IES, the source of its IES WMS solution, is just one of many examples. Descartes likes to buy small, profitable companies that are focused on logistics processes most other supply chain software companies seem to ignore; companies that offer SaaS solutions that will drive new traffic to its GLN, and are strong in particular geographic regions where it has a limited presence. Descartes’ acquisitions fall into the three product categories it supports – global trade compliance, mobile resource management, and supply chain execution. The company’s most recent acquisition, Exentra, is an example of this acquisition strategy in action. Exentra is UK based, a SaaS solution, and falls into the MRM product category.

In conclusion, there is a lot to be said for consistency. When I go to other supply chain vendor conferences, there seems to be a new vision every few years. At Descartes, the vision has remained consistent ever since Art Mesher took the helm.

Best of Breeds are Dead. Long Live Best of Breeds!

Logistics Technologies | By •

Last week, RedPrairie and JDA Software, two leading providers of supply chain and logistics software, announced that they are merging together (see our commentary here). Both companies had grown through the years by acquiring best of breed vendors, and now that they have reached a certain size, they are joining forces to offer customers “a full spectrum of solutions for planning and execution across the entire value chain.”

In a call with analysts last week to discuss the merger, Hamish Brewer, JDA’s CEO who will also lead the new company, shared his perspective on what customers are looking for today with regards to IT:

“Most of our customers today have an IT strategy that I would broadly describe as best of suite, which is to say that they don’t…want to do everything with one supplier, but they don’t want to go back to having hundreds of suppliers either. They want to have a handful, usually a single-digit number, of suite providers that can handle sizable pieces of their IT infrastructure, which can work together, especially now that we have much better common platform integration tools. So, in general, that is the IT strategy that I hear from most of our customers.”

So, where does this leave best of breed providers of supply chain and logistics software? Must they become “best of suite” providers to survive? Are best of breeds going the way of the dodo bird?

First, it’s important to note that (to paraphrase Mark Twain) the death of best of breeds has been greatly exaggerated in the past. Back in 2003, for example, Oracle CEO Larry Ellison emailed a colleague that “Within the year every analyst will agree that best of breed is dead — except at dog shows.” He was referring to CRM best of breeds, but the belief extended to other applications too. Almost a decade later, best of breeds are alive and well, with new startups entering the market every year. The bottom line is that as long as there are new supply chain and logistics challenges and opportunities to go after, as long as there are continued innovations in technology, and as long as there are entrepreneurs with new ideas and the drive to realize them, there will always be a role for best of breeds in the market.

That said, many manufacturers and retailers, especially large ones, are indeed pursuing the IT strategy outlined by Brewer. So, aside from expanding their solution footprints, either organically or via acquisitions, what else can best-of-breed software vendors do to succeed in the market?

I believe there are at least four areas where best of breeds can set themselves apart from the competition:

Provide network-based solutions: Supply chain and logistics processes are inherently network-centric — i.e., they involve many external parties, such as suppliers, customers, transportation providers, 3PLs, and customs. Best of breeds that provide customers with software designed for cross-enterprise planning and execution, and also provide a built-in network of trading partners, will have an advantage over vendors that provide software designed only for “inside the four walls” and also require their customers to build and maintain their own B2B networks. For related commentary, see “Revisiting Supply Chain Operating Networks” and “An Overlooked (But Critical) Component of Transportation Management Systems” and “SAP Buying Ariba: Because Software Alone is Not Enough.”

Leverage Social and Mobile technologies to innovate user interfaces and workflows: Startups always have the advantage of designing their solutions from the ground up using the latest technologies and software innovations. Two of the hottest areas in technology today are social and mobile capabilities, which are opening new paths to innovation, particularly in user interfaces. For related commentary, see “Guest Commentary: Next Generation of Visualization and User Interaction” and “Maps: The New ‘Killer App’ in Supply Chain Software?”

Focus on under-served vertical industries: This has been a formula for success for many best-of-breed vendors in recent years. Instead of following the herd into consumer packaged goods and retail, they have differentiated themselves by serving 3PLs (including freight forwarders and brokers), transportation providers (including trucking companies, railroads, and airlines), and companies in the chemical, pharmaceutical, oil and gas, and other industries with specialized requirements.

Address the “white spaces” in existing solutions: In other words, identify the functionality gaps in existing solutions and fill them. For examples related to transportation management systems (TMS), see “Transportation Forecasting: A ‘White Space’ in TMS” and “Innovation: Addressing the White Spaces of TMS” and “What’s Next in Transportation Management Systems (TMS)?”

Finally, there are two more important points to remember:

  • It doesn’t matter what software application or suite you implement, it won’t deliver much value unless you have the right people, with the right training and know-how, to use it effectively. And this is where 3PLs and managed services providers come in. As a 3PL told me recently at a conference, “A shipper can deploy a TMS themselves, but many of them don’t have the resources internally to effectively use and manage it, so they don’t get the full value from the application or stop using it. What a 3PL brings is not only the technology, but also the experts that know how to use it to continuously deliver value.”
  • “Best-of-suite” might matter more to customers today than in the past, but not at the expense of time-to-value and speed of innovation. In some cases, speed and flexibility actually matter more to customers than functional breadth and depth, which is why software-as-a-service (SaaS) solutions continue to gain traction in the market.

(Note: JDA Software, Oracle, and RedPrairie are ARC clients and/or Logistics Viewpoints sponsors)

Guest Commentary: Why Do Only 1/3 of Companies in North America Have a TMS?

Cloud/Software-as-a-Service | By •

Independent research groups report that a transportation management system (TMS) can save a company anywhere from 3-20% of transportation spend as compared to manual management. It is easy to see why many companies that currently do not have a TMS are now searching for one for their business.

But why have so many companies waited so long?

I believe there are eight reasons why many companies delay their decision to integrate a TMS into their operations:

  1. Size. Some companies believe that their size and shipping volumes are too low to realize a return on their investment within a reasonable time frame. On the software vendor side, it might also be difficult to justify an expensive sales cycle with a small shipper, as it may not be profitable.
  2. Cost. Upfront hardware, solution software, third party software, and long implementations with potential upgrades after four years make it cost prohibitive for a shipper to deploy a TMS unless they are very large with heavy volumes.
  3. Complexity. System complexity requires staffing “super users” (such as MIT graduates) along with a few dedicated IT personnel to manage the TMS database, hardware, and operating system. Prospects might then make reference site visits and find that each client is only using a subset of the TMS functionality.
  4. Flexibility. Some solutions available today were first architected and written more than a decade ago. This older technology requires either a change in business process on the customer side or expensive custom modifications in order to make the system fit each business. Another problem is that these systems may also run on a completely different operating system than the company has experienced within their current IT department. This makes it difficult, if not impossible, to deploy and support the TMS with their current resources.
  5. Fear. The first move towards making TMS available for every company started in the late 90s when several software-as-a-service (SaaS) vendors set out to prove that companies could access their shipments via a web browser without the infrastructure costs. This approach lowered the price of ownership, but many prospects were initially nervous about speed, security, reliability, and the lack of customization because all the shippers were using the exact same code base. Third party software technology and hosting facility costs were very expensive at that time which meant the vendors had to target higher volume shippers in order to survive.
  6. Outsourcing.  Some companies wanted to have visibility and other features from a SaaS TMS, but did not have the manpower to run it. They hired 3PLs, brokers and carriers with TMS systems to run parts of their operations for them.
  7. Scope. The majority of today’s TMS solutions started out by managing outbound shipments in the US. There was little focus on the global supply chains that exist when you introduce international inbound freight. Most shippers today are looking for both global inbound and domestic outbound all in a single solution.
  8. Awareness. Many companies have not yet discovered the value of automating the execution process. The ability to know where all of the moving inventory is located, who moves it with the best service and lowest cost, what it costs to move it, and invoice payment through an auto-pay format once proof of delivery is provided, are all valuable features of a TMS that many shippers have overlooked.

Technological improvements in TMS, however, are starting to eliminate these eight obstacles. The next generation of TMS solutions will enable shippers of all sizes to automate their manual tasks and improve efficiencies at a fraction of the cost. The newer architectures will also make TMS solutions much more user friendly so that eventually all of the carriers and suppliers can click on a link to join a shipper’s network without training and implementation fees.

Ultimately, the shippers themselves may be able to register online in a software-as-a-self-service (SaaSS) model where they test interfaces remotely and go-lives are measured in days instead of months.

Simply put, technological improvements will continue to drive costs down and eventually allow every company the ability to enjoy the benefits that TMS solutions deliver.

Mark Nix serves as Cloud Logistics‘ chief executive officer and a member of the Board of Directors. Mr. Nix has 27 years of supply chain software experience in helping clients of every size address their global needs. Mr. Nix serves as a Partner with Nix Venture Partners, is on the Board of Directors with the One Step Closer Foundation, and advises various charities. Mr. Nix served as VP of Major Account Sales at Manhattan Associates, an EVP with One Network Enterprises, and worked with IBM’s Nistevo division, Metasys, and the TranScape/Vocam/PBTS divisions of PBI. He holds a Bachelor of Science degree from The University of Tennessee.

The Science Behind the Benchmarking of Lane Rates

Business Intelligence | By •

Gathering benchmark data to drive better procurement is a very valuable exercise. In the realm of transportation, this means getting benchmark data on what companies are paying to move freight on particular lanes. However, for a benchmark to be valid, you need a sufficiently large sample size, which is not a  problem if you are moving freight from New York City to Chicago, but what if you have regular flatbed shipments between Helena, Montana and Evansville, Indiana? There is little chance you can find a sufficient number of companies shipping on this lane to have any sort of validity to your benchmark data.

In a benchmarking exercise, you also need to make apples-to-apples comparisons. What this means for lane benchmarking is that you need one origin-destination benchmark for reefers, a different benchmark for flatbeds, and so forth.

Yet CH Robinson, LeanLogistics, and Chainalytics provide truckload lane benchmark data for the United States. All three are using a similar methodology that I am convinced is valid even for lanes with little traffic. How can this be?

This is where the magic of clever mathematical modeling comes in.

I attended a presentation on this topic by Kevin McCarthy, CH Robinson’s Director of Consulting Services, at TMC’s Interactive Client Forum last November. I recently had a follow up conversation with him about benchmarking, and also with Chris Johnson, the VP of Research & Development at LeanLogistics. Both CH Robinson and LeanLogistics are Logistics Viewpoints sponsors.

TMC is a division of CH Robinson that uses its own software-as-a-service (SaaS), platform-style Transportation Management System (TMS) to plan and execute loads for its clients. Some customers have chosen to purchase the company’s TMS and not use TMC’s managed services. LeanLogistics is also a provider of platform TMS and transportation managed services.

Both companies have a nice data set. CH Robinson is one of the largest 3PLs in the world and it has extensive brokerage operations. The company is leveraging its internal lane data and supplementing it with data from TMC customers that choose to opt in. If TMC customers don’t provide data, they don’t get the benchmark data.

LeanLogistics is a division of Brambles, which also owns CHEP. CHEP makes a very large number of transportation moves, and that data can also be leveraged. At LeanLogitics, new customers sign a contract where they are told their data will be aggregated for benchmarking purposes. All LeanLogistics customers have access to the benchmark data in the form of in-line analytics that show the current lane benchmark as well as the historical trend.

All three suppliers create a regression model to create a benchmark rate for a low volume lane. They begin by looking at whether an origin or destination is a location with balanced demand and supply; whether it tends to have many trucks coming in full but going out empty (IN); or whether it has a lot of shipments going out (OUT) but has less demand for trucks coming back.

Going back to my Helena-to-Evansville example, there might not be any shipments in the data set between this O-D pair, but the model can use all the data on Helena outbound flatbed shipments to all other destinations to see whether this is an IN location or an OUT location.

I suspect Helena is an OUT. Helena probably has lots of trucks containing lumber going to other parts of the country, but far less demand for inbound flatbed shipments.

Because getting a load for the return trip will be difficult, a carrier needs to charge a premium that will cover the empty miles it has to travel in both directions. For example, once the load is delivered, the carrier might have to drive to St. Louis to get a load to Denver. The miles from Evansville to St. Louis and Denver to Helena are empty miles the carrier needs to be compensated for. By looking at what the average national rate per mile is and comparing it to the rate per mile of a particular origin or destination, the model can understand whether the location is an IN or an OUT and the extent to which that is true.

Kevin tells me TMC is getting r-squared values in the high 80s and low 90s. Although statistics was my minor in grad school, I’ve forgotten a lot of it, but I know that r-squareds that high indicate very, very high predictive value. Young professors trying to get tenure would kill for this kind of a result.

In addition to using this benchmark data for procurement, it is also extremely valuable for network design projects.

Chainalytics is the granddaddy for doing benchmarking in this area. But there are some advantages to getting this kind of data from a TMS provider with a SaaS platform. First of all, if you are a TMC or LeanLogistics customer, the reports are free. Secondly, this is not a manual process where you have to send your lane data to a third party on a quarterly or semiannual basis; LeanLogistics and TMC already have your data. And finally, while lane rates overall don’t change all that much over the course of a year, some rural locations can have a significant volume shift that would affect a lane benchmark. With TMC and LeanLogistics, the lane data is constantly refreshed, it is not one quarter out of date.

One of the things I love about platform-style TMS solutions is their ability to monitor network data and drive value in new ways. This is a prime example of that.

(For related commentary, see “The Missing Link in Transportation Business Intelligence”).

Guest Commentary: Bridging the Global Logistics Gap with Transportation Technology

Global Trade Management Solutions | By •

Global shippers today face the challenge of orchestrating end-to-end logistics processes while managing the interplay with other third parties, such as customers, suppliers, ocean carriers, freight forwarders, customs brokers and government agencies. Doing so effectively is difficult, regardless of whether the shipper is importing or exporting freight. Part of the challenge is dealing with international laws, global regulations and multiple languages, currencies, and units of measure; supply chain security and compliance programs, such as the Customs-Trade Partnership Against Terrorism (C-TPAT) and Operation Safe Commerce, place even more burdens on the proper execution of global logistics.

Simply put, there are numerous challenges, both from a systems and operations perspective, to ship product via any mode, anywhere in the world.

Currently, management of international freight is still largely dominated by manual processes and point/siloed technology solutions. Additionally, since many global supply chain organizations are decentralized with separate groups and often separate systems, the issues become multiplied. That is changing quickly, however, with the emergence of global transportation management systems (TMS) that have the functionality and built-in connectivity needed to manage all the moving parts of global logistics in one system.

Global SaaS-based TMS solutions provide multi-modal planning, execution, trade compliance, built-in carrier connectivity, financial reconciliation, and reporting features to effectively manage global transportation. Global logistics technology enables companies to successfully manage all modes of transportation under a common umbrella while providing complete visibility and direct communication between shippers and carriers.

With SaaS global logistics management technology, companies can:

  • Manage the complexities of multi-leg, multi-modal movements by synchronizing international and domestic legs.
  • Connect instantly with ocean carriers, forwarders and NVOCCs.
  • Automate import and export processes to enable goods to flow unimpeded across international borders in the most efficient and compliant way possible.
  • Extend “track and trace” capabilities by configuring a multi-partner workflow with explicit milestones to tightly manage end-to-end supply chain process and provide real-time visibility with event notification to all stakeholders.
  • Eliminate third-party freight payment services by automating the freight audit process and authorizing payment to supply chain partners.
  • Manage supply chain partner performance and streamline operations by evaluating transportation spend management through the use of analytical and reporting tools.

By leveraging a global TMS, shippers can become empowered with a comprehensive solution for managing domestic and cross-border freight, which directly impacts the bottom line.

Automated communications, processes, and workflow between supply chain partners allow companies to improve efficiencies while gaining visibility into freight payment and discrepancies before they impact the company’s finances. Global transportation technology bridges the gap for multi-divisional enterprises, enabling global logistics management in a centralized system that delivers significant value for shippers and carriers.

Jon Kuerschner oversees sales and marketing at LeanLogistics and he has nearly 20 years experience in defining, building, marketing and selling innovative supply chain solutions.

Guest Commentary: Topco Associates: Executing Transportation Management with Sophistication

Guest Commentary | By •

Many industries have complex supply chains, but the food and beverage industry has some of the most unique issues. A great example of sophisticated transportation execution is Topco Associates, one of the largest retail grocery cooperatives in the United States. Topco provides sourcing, innovation, packaging, label management, quality assurance and nutritional assistance through store brand and private label services. The true competitive advantage Topco provides to members is based on the sourcing and aggregation of its volume. In addition, Topco offers a number of logistic services to its members, including managed freight services, consolidation distribution centers, dairy perishable distribution centers, and rapid replenishment.

Because of the complexity of member labels – 74 brands, 44,000 different items, and more than 1,000 different supply points – as well as the transactional nature of the company, Topco needed a transportation management system (TMS) with robust visibility and reporting capabilities. Topco also wanted to maintain control of its freight, while not adding any headcount.

After reviewing several solutions and deployment options, Topco selected a software-as-a-service (SaaS) solution. Since the nature of the SaaS model allows for an ideal cost structure for many organizations, Topco found the return on investment was large and easy to prove.

To benchmark and gain visibility into the supply chain, Topco leverages a freight rate intelligence tool that is integrated with the TMS. The tool aggregates shipper and carrier market transactions for dry van and refrigerated shipments across North America, and it tracks contract as well as spot markets. This freight rate intelligence tool also helps Topco by serving as a basis for procurement planning while providing an accurate, real-world window into the transportation market.

“The benchmarking tool is fantastic. It allows us to put in any two points and quickly understand what the price we should be paying is against what we are actually paying,” said Michael Cavill, Corporate Logistics Manager at Topco. “By using this tool, we are able to see that we have a 12% opportunity on all our lanes; we can put in an RFP to improve our savings opportunities.”

Another opportunity for Topco was developing a regional carrier base. By leveraging a procurement technology platform, Topco sources more carriers to continually expand its base, which in turn provides far better pricing and bid optimization, as well as contracting rates, capacity and lanes. Topco continues to see the majority of its savings coming from this technology.

A number of Topco’s transportation pressures – reducing costs, increasing volume, keeping headcount constant, improving service levels, and improving metrics that are reported back to the business – were addressed by implementing the SaaS TMS. Topco is able to better manage its transportation process by utilizing reporting capabilities to:

  • Track by carrier real-time acceptance and identify carriers that are not approving or accepting tendered loads very often;
  • Identify paid versus tendered versus upcoming expectations;
  • Run one-time service reports by lane, by carrier or by warehouse.

Topco expects to double its activity volume in the next year, and by leveraging transportation management technology, there will be very little impact to human resources in logistics. Furthermore, the visibility and reporting capabilities of the TMS provides Topco with critical metrics that allow the company to be proactive in a number of situations and focus on root-cause issues and continue to expand its membership network.

Chris Timmer is Chief Operations Officer at LeanLogistics. Chris is responsible for overall strategy, positioning and growth of the LeanLogistics solutions, including SaaS platform development and deployment and the expansion of the company’s service footprint internationally. Chris has over 20 years of experience in transportation and logistics management and he regularly speaks at industry events and has been recognized as a leader in the SaaS solution space.

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