Transportation Management: A Layered Approach
Q: Why bother managing the inbound aspect of the supply chain?
A: Historically, organizations built their transportation management strategies and tactics around the outbound aspect of their supply chain. The gravity of customer revenue pulls the attention in that direction. This inattention in the supplier direction often leaves the inbound supply chain exposed to margin-draining activities.
By setting expectations with trading partners about how product should be routed, documented, and prepared for shipment, the organization is set up for the most efficient induction of materials into the enterprise. Establishing business rules by publishing policies and tactical instructions is an effective extension of the purchasing contract.
In addition to publishing policies, integrating a cloud-based solution that facilitates bi-directional communication between trading partners will create a dynamic portal for interfacing the inbound supply chain.
Q: Is a TMS right for my organization?
A: At the core of any effective layered approach is the transportation execution engine. Commonly referred to as a transportation management system (TMS), this solution provides the ability to accurately predict shipping costs and manage shipment execution.
While traditionally used on the outbound or downstream aspect of the supply chain, a comprehensive TMS solution offers the ability to add functionalities such as managing inbound shipments, serving as an RFP analysis tool, or facilitating real-time spot market quoting for appropriate modes. The benefits of cloud-based TMS have been lauded and extolled extensively, but the power and simplicity for an organization to easily plug into a comprehensive solution organically cannot be overstated.
Q: How can businesses close the transportation data loop?
A: Having the solutions mentioned above in place is a good start, but measuring transportation execution performance allows the enterprise to gauge the effectiveness of their controls. Certainly freight audit and payment systems come to mind as an example of these systems, but the opportunity for transportation data analysis extends beyond traditional freight audit and payment functionality. Businesses of all sizes must exert control over the ever-increasing costs of transporting goods by gathering and analyzing the data that is available.
If we consider that the transportation of goods and materials is a commoditized space, then the differentiation comes from how an organization manages this space. By establishing and communicating business rules to trading partners, leveraging carrier pricing agreements in a robust TMS solution and closing the loop with data aggregation and analysis, an organization positions itself for success with a comprehensive approach to controlling one of the most costly aspects of its business. When working in the commoditized space, the business with the lower cost model is positioned to win.