7 Steps to Transportation Management Excellence

For many firms, their current capabilities in transportation management are incomplete and they are, therefore, spending more money on freight transportation than necessary. They are caught in a dilemma because many recognize the critical importance of transportation management as the last mile in the customer service experience. Despite balancing cost and customer service precariously on the ability to manage the transportation function, they leave any project to improve transportation management to the next phase in their corporate projects planning process.

Taking these steps provides a solid execution plan whether the domestic transportation management process is managed internally or is outsourced. And for third-party logistics providers, it offers a view of what is needed to make the user’s network operate more efficiently.

Here are seven steps to help identify the potential for transportation management excellence and communicate your improvement project’s potential to top management by helping to “size the prize,” design the moving parts of the solution, and articulate the path forward.

1) Assess your transportation management capabilities.
2) Identify your “target state” of transportation operations performance.
3) Size the prize.
4) Determine the appropriate moving parts to move forward to the target state.
5) Determine the appropriate solution deployment strategy to move to the target state.
6) Plot the course.
7) Keep score for continuous improvement. Approaching the transportation management business process in this manner provides a series of facts and insights that guide improvement and can instruct top management on the value and importance of the transportation management discipline. To achieve these goals, people, process, and technology will be important. All three dimensions are central to progression toward transportation management excellence.

Steps one through four, work through the process of establishing a current performance baseline and setting goals. These steps also help determine how much opportunity exists, and will define what additional capabilities (people, process, and technology) will be required to realize those benefits.

Steps five through seven, focus on ascertaining which deployment strategy best fits your company’s environment and helps plot the path forward. The final step helps provide perspective on the importance of performance measurement and the need for a cultural commitment to continuous improvement.

Assess Your Capabilities
The first step in the process comes with some distinct challenges. Given the sheer volume of transportation management research and analysis, and the fact US companies spend more than $800 billion annually on moving freight, one would think that firms would be further along in achieving transportation management excellence. To the contrary, many shippers today report higher transportation expenses, lower customer service performance (defined as percentage of on-time deliveries), and a concerned outlook for their future transportation performance. While the causes for this degradation in performance are many and the depth of impact varies across companies, a few consistent themes emerge across sectors and size of company.

Those factors include:

• Globalization.
• Heightened customer demands.
• More complex sales channels.
• Increasing product portfolio complexity

In the context of these operational realities, many firms point to organizational skill deficiencies and inadequate information systems as consistent (bordering on chronic) challenges. The first step in determining where to focus attention and resources is to conduct a current capabilities assessment, in conjunction with establishing a forward-looking context for your company’s overall transportation strategy.

Capabilities Assessment
Company leaders at most firms can readily articulate their overall business strategy, the critical success factors associated with achieving success, and the operational outcomes necessary to achieve their financial targets. Product-based manufacturing companies consistently address attention to product quality, unit production cost, and product features and functionality. For retailers, having a presence in the proper markets (physical stores or e-commerce channels), delivering the right product mix, and following the proper merchandising strategy are critical. In the middle of these two ends of a supply chain, however, the leaders, laggards, and also-rans are separated. Attention to detail and operational excellence in the supply chain distinguish the winners.

To determine where your firm rests on the leader-laggard continuum, you must assess your performance against your industry peers and supply chain trading partners. Once you have done this assessment, you will have your baseline of performance against which to take proactive steps.

Leader, Laggard, or Middle Ground?
While your specific assessment will need to be tailored to your industry and conducted in the context of your company’s business strategy, you can take a high-level snapshot of your current performance to place yourself in a directionally correct position on the leader-laggard continuum. Use the People, Process, Technology Scorecards to assess your current “As-Is” state.

Select on Scorecard to enlarge

 

Identify Your Target State
Step two helps you determine where along the transportation management excellence continuum your company needs to be to support the realization of the business strategy. To determine where your company belongs, consider what it means to be best-in-class.

To be best-in-class, your company must have transportation performance metrics that place you in the top quintile of performance for your competitor grouping. The categories of performance consist of the following three outcome-based metrics:

What's Best in Class? Select image to enlarge

As you total your high-level assessment, determine if there is a particular area within transportation management that you see as most in need of management attention. For example, if you scored yourself in an aggregate positive number, but you were significantly in the negative in one area (people, process, or technology), then this is your first indication of where attention needs to be focused.

Scoring Your Report Card
Clearly, a deeper assessment of your business is required to make definitive statements about your overall level of transportation management excellence. However, to conclude the first of the seven steps to transportation management excellence, let’s determine where your company stands at first review:

If you scored your company at or below -10 …then your company is most likely a laggard.

If you scored your company between -10 and +20 …then your company is a middle performer.

If you scored your company at or above +20 …then your company is most likely a leader.

With a reference position in mind, you can now move to Step Two in your pursuit of transportation management excellence.

While your company’s participation in more than one industry sector might make aggregate scoring difficult, these figures will give you a sense of where your company sits in relation to other competitive benchmarks. With these three transportation management performance criteria, you can begin to assess what capabilities and attributes the leaders exhibit, and where you need to place emphasis and focus.

Attributes of the Leaders

Top-ranked companies in transportation management share a set of common attributes across industries. The most significant attributes are:

• Process rigor.
• Centralized leadership.
• Strategic Sourcing.
• Utilization of Transportation Management Systems (TMS).
• Consideration of transportation management in the context of the firm’s overall supply chain strategy.
• Reliance upon fact-based metrics and score-carding to drive performance.

As your company determines its aspirational or “To-Be” state for transportation management, you must give due consideration and focus to all five attributes listed above. While there is no hard-and-fast sequencing of topics to undertake first, second, and third, there are guiding principles. The first is to have an appropriate appreciation for the importance of process. Without adequately detailed process design, good leadership, and automation; technologies will not yield your desired outcome. A process design phase, coupled with leadership and change management, helps draft the proper roadmap. With process and organizational considerations addressed, making technology decisions and designing performance metrics reports will proceed much more smoothly, and with far less ambiguity.

The Aspirational Report Card
Using your responses in step one as your baseline, complete the same assessment process with your aspirational view of where your company needs to be. This aspirational vision should be completed in the context of your company’s overall business strategy. At the conclusion of this step, you will have a summary picture of where you are, where you aspire to be, and the resulting performance gap to be addressed and remedied.