Shippers and service providers today are facing increasingly complex requirements for transportation planning. Increases in the use of parcel and intermodal transport, and more common usage of multi-level networks and private fleets, have all too often resulted in companies implementing static guidelines for shipping that leave too much money on the table. It is a tactic from which companies need to move away, but how can those leaders alleviate the problem?
Let’s consider a couple of examples. Perhaps more than any other industry segment, the big box retailer’s distribution networks require a totally streamlined transportation management operation. These companies often manage four different types of shipment:
1. Inbound from vendors to warehouses
2. Outbound from warehouses to stores
3. Direct to consumers, in support of Web orders
4. Home delivery of certain items purchased in the store, including furniture, home theatre and others.
Retail leaders follow a number of practices to maximize efficiency and productivity in their shipping operations. First, efficient retailers are managing multi-leg import moves, making appropriate modal decisions based on both cost and efficiency. Second, those businesses are planning inbound and outbound shipments together to maximize fleet utilization—carrying out operations like backhauls to distribution centers, for example. Third, these companies deploy a solution to automate and direct parcel shipment execution, with functions for rating, manifesting and carrier-compliant electronic communication. And fourth, and perhaps most importantly, leading companies have a single system in place to direct all of the above based on centralized planning and decentralized execution. Taking measures like these allows for a more unified and productive shipping operation overall, with significant savings.
Retailers aren’t the only companies implementing these tactics to manage complex transportation operations—the most efficient manufacturers and distributors are too. Dealing with large cross-dock networks—and usually an even larger number of suppliers—has resulted in those companies putting a number of automated systems in place to deal with complex scheduling and distribution requirements. To handle those challenges, some organizations are integrating parcel, less-than-truckload (LTL) shipments, or dedicated fleet solutions to manage resources.
But truly improving the efficiency of an entire transportation management operation requires a company to have a single, streamlined system in place that can manage resources based on both the capacities and constraints of the facilities and assets that business has, while handling both fixed and dynamic routes. Systems like these might consequently determine if an out-of-route stop for a truck from their fleet is better than using a common carrier, or vice versa. The overall goal for those organizations, therefore, is to maximize the asset use of a dedicated fleet, while balancing the cost against available market carriers. With multiple carriers spread across a distribution network, the system needs to ensure that handoffs between those carriers occur smoothly, and line hauls between their hubs are optimized.
A fundamental requirement for supporting today’s complex transportation environment is thus a comprehensive, single platform transportation management solution (TMS) that includes parcel shipment planning and execution, as well as private fleet management. Optimal modal decisions require that system to have full visibility into costs, time and constraints for each mode when planning orders, where all modes are optimized at the same time. According to an April 2010 AMR report, implementing a single TMS can mean an average annual savings of 10-15% of freight spend. So while it’s important for any shipping organization to continuously evaluate new tools available to improve its business, the ultimate goal should be movement toward a seamless, unified system that can direct transportation operations as a whole, rather than in pieces.
Mona McFadden is the director of transportation solutions at RedPrairie, which delivers productivity solutions to help companies around the world in three categories: inventory, transportation and workforce management.
