July 2010 | Sponsored | Thought Leaders

What’s Ahead in Transportation Forecasting?

Tags: Logistics I.T., Transportation Management

Robert Byrne is President and CEO, Terra Technology, 203-847-4007 x111

Transportation forecasts enable planners to shift from reacting to orders to proactively managing capacity. By synchronizing transport forecasts with manufacturing and distribution plans, your entire company can respond to the same demand signals.

Q: Why isn’t transportation planned with the same level of rigor as finished goods?

BYRNE: Transportation cannot be planned with the same level of rigor as finished goods because transportation management systems rely on one piece of information— current orders— to schedule shipments. There is no forward-looking view of requirements that would let the planners understand promotion timing, capacity issues, or seasonal patterns. If transportation planners want to shift from reacting to orders to proactively managing capacity, they need a lane-level transportation forecast. Moreover, this forecast needs to be synchronized with the manufacturing and distribution plan so the whole company is responding to the same demand signals.

Q: What are the requirements for a transportation forecasting solution?

BYRNE: A successful transportation forecasting solution must generate a forecast that is not only tied to the corporate demand plan, but also provides the granularity required by transportation— for example, mode, protection class, carrier, etc. The solution must have visibility into promotions so that planners can adjust shipments in advance of promotion-induced spikes in demand. It should also reflect current manufacturing and distribution capabilities and strategies, and should not be based on historical averages. All currently available demand signals, including POS, should be used to ensure the most accurate shipment forecast. The solution must also be flexible enough to evolve as manufacturer and distribution capabilities change.

Q: What are the benefits of transportation forecasting?

BYRNE: Transportation forecasting solutions ensure that logistics, manufacturing, and supply chain are executing to the same plan. Transportation and warehouse planners have visibility into promotions so they can plan for spikes in demand, reducing their reliance on the spot market and enabling more accurate staffing.

Although premiums are not high now, transportation is a cyclical business and rates will rise as capacity has dropped and business is improving. Manufacturers can increase intermodal shipments and decrease deadhead miles with the ability to plan for increased demand weeks in advance of actual orders. Switching to intermodal shipments reduces carbon emissions and fuel consumption, decreasing costs and improving sustainability efforts. Visibility into future transportation requirements enables manufacturers to identify capacity issues in advance, giving logistics the time to resolve them. Visibility into future shipments and receipts improves warehouse staffing. Separating truck procurement from order creation both lowers costs and improves responsiveness. Forecasts that match current manufacturing and distribution capabilities and strategies generate more effective strategic sourcing and give manufacturers the opportunity to collaborate with carriers and retailers, benefitting manufacturers, retailers, carriers, and consumers.

Transportation forecasts can be integrated with Transportation and Warehouse Management Systems to further improve efficiency. Manufacturers can cut costs, improve service, and increase sustainability by forecasting transportation requirements rather than just reacting to orders.