7 Steps to Transportation Management Excellence

With this vision of your prospective “To-Be” transportation management capability, you are now ready to begin step three of the program.

Size the Prize
In steps one and two, we established an understanding of what it takes to be a transportation management leader. The third step, “sizing the prize,” is perhaps the least often applied step in the program, and the one which most often causes a company to remain in the baseline position of performance.

While many logistics managers aspire to transportation management leader status, this ambition and passion must be conveyed to the corporate C-Suite in a form and fashion that will compel them to act. To gain the attention for transportation operations, you must answer your C-Suite’s essential question: Is this a $1,000 problem or a multi-million dollar opportunity? With a proper baseline established, and a set of competitive benchmarks to gauge your company’s performance, your next task is to quantify the potential economic impact delivered by a properly sponsored transportation management excellence program.

The Case for Action
In brief and clear language, seek to answer the following questions:

• What is the potential economic benefit of moving from our current state to industry average?
• What is the potential economic benefit of moving from our current state to best-in-class performance?
• What additional operational benefits will the business see by pursuing improved transportation management capabilities?
• What potential impacts in customer service and customer satisfaction will the business see by pursuing improved transportation management capabilities?
• What steps and specific actions are required for the company to migrate from our “As-Is” condition to our desired “To-Be” Model?
• What are the organizational and leadership requirements?
• What are the process and business methods requirements?
• What are the infrastructure and technology requirements?
• When will we see operational benefits?
• When will we see positive economic results?

This might appear daunting, but having completed the assessment work in steps one and two, you have the bulk of the information required to put a number on the potential project. You will know your own company’s culture in terms of project sponsorship thresholds and funding/staffing requirements. Unlike other logistics business cases, in transportation management business cases, every dollar identified in the analysis drops immediately to the bottom line of the company’s financials.

Move to the Target State
At this point, the case has been made to top management and either gained C-level sponsorship or confirmed that your company’s leadership does not see transportation management excellence as a critical component of its business strategy. The good news is, much of the tedious and challenging work is done. It’s time to determine the specific attributes and capabilities (the moving parts) of your transportation management program.

The first action item is to lay out your “To-Be” transportation management business processes.

Business Process Requirements
Determining and agreeing on the process model is the single most important step in this journey. The complexity of this task is directly related to the complexity of your business. If your company has a single division, the business process blueprinting is less complex. However, if your company has multiple divisions that compete in a cross-section of industries and markets, the task at hand is more challenging.

In either case, begin with the most complex business process scenario or situation. By hammering out the details of the most challenging scenario first, the design of the remaining scenarios will run much more smoothly and require far less re-work. Considerations in this step include:

• How many customer types must we segment our customer base into for transportation execution purposes?
• How many shipping order types will we need to manage the complexity of the business?
• How many (and what types) of supplier relationships will we need to manage the business?
• How many (and what types) of transportation carrier relationships will we need to manage the business?

In this portion of the project, you will most likely discover that your business has evolved over time to include too many order types, too many customer classifications, and too many trading-partner-specific business rules. This project is your opportunity to streamline and simplify the business.

With a clean and logical set of business rules, established by customer, supplier and carrier class, the path to transportation management excellence becomes much clearer and more achievable.

Supply Chain Relationships
Another consideration at this point is to define specifically and document the nature and types of relationships in your company’s supply chain ecosystem. For instance, most of your existing suppliers may control the transportation and shipping process as part of their current relationship with you. Many companies have discovered that when they altered this relationship and opted to take control of the transportation process, they enhanced on-time delivery while reducing the total freight costs associated with the relationship. In your company’s supply chain, some trading partners will find it operationally viable, as well as economically advantageous, for you to control and arrange transportation. For others, this will not be advisable. The key is identifying and understanding the grouping of suppliers and customers in which your company can be the lead transportation coordinator and those where you cannot. By doing so, you refine your controlled freight spend, and identify those trading partner relationships where you must employ performance scoring methods to ensure that your trading partners’ transportation management performance is of leader quality.

Transportation Network Design
The next area of consideration is to get a full view of your transportation network. This is a visual representation of your company’s freight flows—typically depicted with mapping software. Seeing the “as-is” map for the first time can be surprising (or even a little shocking). The visualization offers an excellent opportunity to analyze your transportation network and identify cost and service opportunity areas. Once identified, these can be integrated into the overall project’s change management strategy.

While considerations such as the optimal number of distribution centers and their locations are not easily made at this point, it is appropriate to include that type of analysis in the scope of the project. Transportation network design and modeling can help identify significant long-term supply chain savings in terms of transportation rates, inventory carrying costs, and real estate considerations.

Transportation Carrier Relationships
Yet another essential ingredient in a transportation management excellence program is the nature of your company’s relationship with your transportation carrier community. Asset-based companies, whether manufacturing firms or transportation carriers, concern themselves with asset utilization. High levels of asset utilization make the difference between profit and loss for asset-intensive firms. You can help your carrier community achieve the visibility and predictability it needs to manage its assets for your needs. Your “to-be” transportation management model should recognize the strategic importance of having a strong and healthy relationship with your carrier community.

Some of your lanes will be easy to cover with adequate and highly consistent capacity, while others will consistently present challenges. In your subsequent core carrier selection process and resulting awarding of business, be certain that you leverage and combine your total freight profile to ensure that your tough lanes get as much attention and care as your easy lanes.

Enabling Technology Requirements
The last step at this stage is to define the necessary technology enablers for your “To-Be” model to deliver results. In this portion of the project, it is important to keep your “To-Be” process model top-of-mind.

Technology requirements can quickly become power-user wish lists if not managed within the context of the stated process objectives. To achieve transportation management excellence, your technology requirements list should address the following areas:

• Business process enablement–via a transactional system that instills process rigor via business rules.
• Business process measurement–via an analytical application or reporting toolkit.
• Trading partner collaboration–via communications infrastructure and application tools.
• Trading partner relationship management–via procurement and sourcing applications, as well as financial settlement applications.

A final consideration at this point in the journey toward transportation management excellence is the determination of what method is best for acquiring the technology needed to enable the vision. If your company’s long-term vision includes transportation management as a mission-critical success factor, your company might make infrastructure investments in communications tools (e.g., Electronic Data Interchange), and applications licenses. On the other hand, your leadership might consider transportation management a domain and discipline that is best outsourced to a third-party specialist that can be held accountable for results. Many companies fall somewhere along the continuum in this respect.

Two key questions to consider are: 1. If we make a capital appropriation for new transportation management technology, will a third-party be able to use the purchased system if we choose to outsource key transportation functions somewhere down the road? 2. If we outsource much of the transportation management process to a third-party early on, will our company have the ability to bring the third-party’s technology in-house later, if and when our strategic direction shifts?

These are questions of deployment, which are addressed in step five. Steps five through seven will be presented in the next issue.

Scott Sykes is senior director of soluton sales for Transplace. Matthew Menner is senior vice president of sales and alliances for Transplace. Vincent Chiodo is senior vice president of solution sales for Transplace.