February 2012 | Commentary | IT Matters

Use Transportation Planning for Competitive Advantage

Tags: Logistics I.T.

Robert Byrne is President and CEO, Terra Technology, 203-847-4007 x104.

Learning to thrive in a volatile market goes beyond simply controlling its effects; successful companies must navigate challenges to create competitive advantage.

Three factors add complexity for today's transportation planners. First, the U.S. gross domestic product grew by two percent in the third quarter of 2011, with personal consumption up 2.3 percent. Increased spending creates competition for the nation's limited transportation capacity.

Second, total U.S. shipping capacity decreased over the past few years, with more than 2,000 trucking companies going out of business during the 2009 recession. This loss is expected to create a shortage of 400,000 drivers, and a 40-percent reduction in over-the-road trucks.

Finally, market uncertainty has become a constant fixture in the daily news.

a Weak Link

Transportation planners often have limited visibility into future shipping needs. Aside from seasonal patterns, transportation traditionally operates reactively, disconnected from sales and operations planning (S&OP), without visibility into promotions or other changes in demand or supply.

This weak link means logistics professionals must react to unexpected orders and scramble to bridge capacity gaps. They face increased costs and the possibility of missing shipments because capacity is simply not available. Failure to deliver product on time often results from an unexpected increase in orders, and carriers that simply cannot secure equipment in time, notes one large U.S. shipper.

Breaking the Cycle

Innovative shippers can break the reactive cycle if they forecast transportation needs by lane, mode, and carrier. When synchronized with S&OP, these forecasts ensure the entire company executes against the same demand plan.

Transportation forecasting technology tames the effects of market volatility and forges a strong link in the supply chain by turning logistics into a competitive advantage. The benefits include:

  • Operational efficiency. Gaining visibility into promotions and volume changes due to supply chain shifts allows shippers to proactively identify capacity issues and cost-effectively secure transportation.
  • Carrier collaboration. Accurate forecasts by lane, mode, and temperature class can produce better customer service, which in turn improves shipper loyalty. They also help carriers use assets more effectively, and reduce costs for both parties.
  • Spot shipment reduction. Avoid paying premium rates for spot shipments by gaining the confidence to reserve capacity in advance of orders.
  • Mode conversion and sustainability. Long-range visibility into shipping needs facilitates conversion to more efficient intermodal transportation, reducing costs and carbon emissions. Visibility also helps shippers better organize assets to reduce deadhead miles and partial truckload shipments.

Strengthening transportation planning helps companies survive—and even thrive—in a volatile market. Neglecting this function risks undermining the good work and sizeable investments made over the years to create demand-driven networks.