It's 2009. Do You Know Where Your Freight Dollars are Going?
The last two years have proven to be very stressful ones for most supply chain managers. Hundreds of firms have failed and thousands of jobs have been lost throughout the industry. Most managers of virtually all functions are under more pressure to meet corporate goals than ever before.
According to the recent CSCMP State of Logistics report, transportation costs were up only 2% in 2008, but of course volumes were down—probably the lowest in a generation, so there still is a tremendous amount of pressure on supply chain managers to monitor and manage their transportation spend as closely as possible. The good news is that the downturn in the volume of some firms has enabled the managers to find time to analyze their expenditures and take appropriate action where they can. Even so, this can be a difficult task, and increasingly they are relying on some aspect of technology as a necessary management tool. In the case of transportation, they are turning to transportation management systems.
Transportation Management Systems (TMS) have been used by managers since the 1980s, but the modern systems are much more sophisticated, and afford greatly improved functionality to the users. Available modules provide systems for such functions as load planning and optimization, posting and tendering, order management, documentation, rate management, and modeling and benchmarking. Some systems are more elaborate than others, but some form of TMS has become critical to the successful management of a transportation function.
The selection of the system itself can be a daunting task. A TMS can be complex and expensive, and there are hundreds of vendors and a wealth of functionality to choose from. CTSI, for example, offers its TMS in modules, whereby the user can buy only what he or she needs and add on where appropriate. Most users will agree, however, that no matter which vendor is selected, a viable system must have four main components—the ability to plan, execute, settle, and measure.
Most users also would agree that the data capture is the major challenge to implementing a useful system. One of the advantages of using a TMS from a freight bill audit and payment company, for example, is that it has the proven technology necessary to capture its client's data and, therefore, is in an excellent position to provide an effective system. These are usually sophisticated web-based applications for organizations seeking an enterprise-wide solution, managed through centralized administrative tools.
Effective transportation management systems should provide the ability to plan shipments in advance. Available tools will enable the selection of the carrier, the preparation of shipping documents, and optimization of both loading and routing, whatever mode is selected and whether the shipments are full loads, LTL, pool shipments or stop-offs.
The shipment execution modules should provide automated load tendering, quoting, and confirmation of delivery that matches the specific requirements of all parties. Routing guides can easily be updated online. Most important, they should afford visibility at any point in the process. Proactive monitoring can identify all pre-shipment, in-transit, and post-shipment activity.
Settlement systems will provide for the efficient audit and payment of all invoices, as well as the data capture necessary to utilize the measurement modules. It is absolutely necessary that the TMS chosen is able to capture data manually, through electronic data interchange or through online entry. Without the efficient capture of data, the measurement tools will be ineffective or incomplete.
Through the measurement functionality, tracking and reporting can be accomplished all the way down to the SKU level, and carrier performance can be measured according to any number of metrics. Executive dashboards can be generated, as well. These combine an intuitive graphical interface with the capability to drill down to any KPI. Many systems also contain a modeling capability.
In this economy the successful supply chain manager will be the one who is innovative and aggressively seeks the tools necessary to manage his function. He or she will also understand that the utilization of efficient and cost-effective transportation management technology can be one of the most important steps toward spend management goals.