February 2008 | Commentary | IT Matters: Logistics & Supply Chain Technology

With SaaS, You Make the Rules

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Most companies spend 40 to 80 percent of their annual transportation budget on moving inbound shipments from suppliers.

Despite these whopping costs, businesses boast relatively little control over their selection of inbound carriers or their service levels.

Instead, most depend on suppliers to correctly assign carriers, then provide tracking information to the buying organization. This creates a lack of cohesive visibility to goods in transit.

The main problem is that most shipping management approaches are outbound-facing and don't work for inbound. Too many companies remain tied to outdated manual systems and lack standard ways for their suppliers to do business with them.

Others have outsourced to a third-party logistics provider, but in doing so have sacrificed competitive flexibility to control transportation costs.

But the industry is changing. Increasingly, companies are leaving both approaches behind for the emerging Software as a Service (SaaS) model, where a company pays a vendor to host a Web-based application and manage it over the Internet.

SaaS, first defined by pioneering companies that offered Web-based applications to replace complicated software installations, has moved beyond the four walls of the office to embrace outside partners and supplier networks.

Using the SaaS model, you can create a practical and easy-to-use global network that is accessible around the clock. Even for complex international billing scenarios, you can create policies your suppliers must follow.

Here are a few benefits of SaaS:

More control over cost management. You may have made deals with carriers that hinged on spending a certain amount annually. But you have no recourse if suppliers don't use your preferred carrier.

Using the SaaS approach, suppliers log into your system using a secure ID and password. You decide what they will be allowed to view on the network, and their transactions are based on what the supplier is shipping.

Automated business rules. The system you build with your vendor automatically identifies the correct carrier and service level for a specific shipment from a supplier. Then the carrier is notified. The system automatically generates an email to the supplier with a copy of the carrier's bill, a tracking number, and the service level.

Visibility into the supply chain.At any time, you have access to worldwide carriers in any transportation mode. If rogue shipments are a problem, this approach helps your company identify the problem immediately.

It also provides new ways to cut direct freight costs by reducing the cost of invoice processing, decreasing the use of non-negotiated freight rates and surcharges, and stifling maverick spending, which often accounts for 15 to 30 percent of a company's annual shipping costs.

Creation of a central shipment database. This data repository allows you to search historical data and view shipping records, print real-time reports, distribute shipping documents by email or fax, and access reports in multiple computing formats. You can also use these reports to more accurately analyze shipping records, detect trends, and manage loss prevention more thoroughly.

Adopting a SaaS approach creates standards throughout your network, which saves money. And with attention turned from the daily headaches of tracking inbound shipping, your company can focus its efforts on improving other parts of the supply chain.

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