INSTITUTING A CULTURE OF CONTINUOUS IMPROVEMENT IN TRANSPORTATION MANAGEMENT

Transcription

1 WHITE PAPER INSTITUTING A CULTURE OF CONTINUOUS IMPROVEMENT Factors such as rising freight rates, shrinking capacity, an increased desire for global supply chain visibility, have all worked together to drive the need for instituting a culture of continuous improvement in logistics operations and transportation management systems (TMS).

2 2 WHITE PAPER MAXIMIZING THE VALUE OF A TMS Transportation Management Systems (TMS) play a critical role in both domestic and global supply chains. Charged with planning freight movements, handling freight rating and shopping across all modes, selecting appropriate routes and carriers, and managing freight bills and payments, TMS enables streamlined planning, optimization, execution, and settling of global transportation movements. By replacing manual processes, spreadsheets, and phone calls, a TMS lowers freight spend by approximately 5 to 10 percent via greater visibility and optimization. But not all organizations are optimizing their TMS investments. In fact, just one in four companies fully leverages the features and functions of its system. By ignoring a TMS status as a platform for innovation and continuous improvement, the other 75 percent of companies miss out on key benefits and cost savings. Those that do leverage their TMS rich capabilities also gain access to real-time decision-making the Holy Grail for companies in today s competitive business environment. In many cases, corporations try to find the low-hanging fruit of the TMS, in search of functions that will provide the most value, said Greg Aimi, research director, supply chain, at Gartner in Boston, in Logistics Management. They then integrate those functions as phase one of their TMS implementations, and never go beyond that point. Whether a TMS capabilities are fully optimized depends on three factors, according to Aimi: The amount of time the system has been in place The strength, involvement, and expertise of the team that s running it The level of sophistication of the software itself In many cases, corporations try to find the low-hanging fruit of the TMS. They then integrate those functions as phase one of their TMS implementations, and never go beyond that point. Greg Aimi, Gartner A sophisticated TMS that s been in place for five years and has been largely left to run on its own, for example, is probably not being leveraged to its full capacity.

3 3 WHITE PAPER Companies that are only using a TMS basic functionality miss out on a big chunk of savings and benefits. Industry surveys show that more than 60 percent of TMS users gain at least an 8 percent savings in freight costs, while over 20 percent report cost reductions of 10 percent or more. To achieve double-digit savings and myriad other benefits from a TMS requires a culture of continuous improvement around transportation. GOING BEYOND THE TMS BASICS At the most basic level, a TMS is used to plan freight movements, do freight rating and shopping across all modes, select the appropriate route and carrier, and manage freight bills and payments. Dig deeper, however, and you ll find that a TMS actually handles a much broader scope of capabilities and provides functionality that goes well beyond just picking the right routes and at the right time. A TMS also enables: Control, budgeting, and auditing of freight expenses the largest operational expense for most organizations Advance order fulfillment and shipment planning to save costs, consolidate shipments, and select optimal routes Manager alerts about better shipment plans and alternate options that could save both time and money Access to advance booking capacity to avoid issues such as driver shortages More than 60 percent of TMS users gain at least an 8 percent savings in freight costs. CCO, MercuryGate International Integration with warehouse management systems (WMS) and other solutions to create an end-to-end supply chain loop and minimize costs Optimization of total inbound and outbound freight movement, including returns and inter-company freight movement (both of which are typically undermanaged) Positioning and allocation of inventory in a manner that minimizes total supply chain costs These capabilities rank among the most critical and measurable for organizations that use a TMS, but the systems also address numerous company-specific requirements and needs, as you ll read in the case studies that are included in the white paper.

4 4 WHITE PAPER WHY AREN T COMPANIES OPTIMIZING THEIR TMS INVESTMENTS? Most companies don t optimize their TMS very well, so said Stephen Craig, managing partner at envista Corp., a Carmel, Ind.-based supply chain consulting firm. In most cases, he continued, what makes top companies stand out from the pack is their ability to move beyond basic blocking and tackling and apply a culture of continuous improvement to the TMS. A transportation organization must gain the trust of the stakeholders whom it wants to positively influence, Craig explained. In most cases, what that usually means is running a good operation that manages transportation well including the handling of contracts, planning, and running good bidding information. When shippers begin using the associated data analytically, said Craig, they earn a seat at the table and move up a notch on the continuous improvement scale. What tends to trip most companies up during this process, according to Craig, is a lack of integration support across outside business partners. In the TMS space, MercuryGate has done a very good job of making it easy to incorporate carrier connectivity; this is something most software providers have a difficult time maintaining, said Craig. This is important because a TMS that s not connected to your carriers is about as useful as an ATM that s not connected to the banks. According to Craig, shippers that put time and effort into maximizing their TMS investments not only gain direct transportation savings (as a result of improved load consolidation, routing, carrier selection, and bidding), but they also realize a large number of indirect benefits. Labor becomes easier to manage, for example, and accurate information translates into better decision making. Shippers that put time and effort into maximizing their TMS investments not only gain direct transportation savings, but they also realize a large number of indirect benefits. Managing Partner, envista Corp. The benefits go beyond just the transportation budget and also positively impact inventory, the transportation network, sales, marketing, and other functions, said Craig. When the data visibility is in place to drive these additional benefits, that s what generates the real value of an optimized TMS. MANAGING MULTIPLE FUNCTIONS Financial capabilities are frequently bypassed as organizations focus on routing and scheduling and carrier selection. For example, a TMS can help manage all accrual accounting, auditing, commission management, and match pay seamlessly through the system without having to export that information to an outside system.

5 5 WHITE PAPER Many companies often don t realize that there s a full freight pay and audit solution built right into their TMS. Companies can manage both the buy and sell sides of their business through the financial function. From there, they can use a similar philosophy to find other areas of the TMS that aren t being maximized and see where they fit into the organization. The good news is that many firms do view TMS as a platform for innovation and are speaking up about their success in this arena. CELESTICA: SQUEEZING BENEFITS OUT OF ITS TMS As a shipper and a 3PL, multinational electronics manufacturing services company Celestica of Toronto, relies heavily on MercuryGate s TMS to manage its own transportation component and that of its customers. Ryan Bloor, Logistics Services Director, said that while some of those clients simply want access to a system that provides the best rate for a single type of shipment, others have much more complex transportation management needs. When working with new customers, Bloor kicks off the process by reviewing three months of shipping data. Uploaded into MercuryEdge (a MercuryGate tool that scrutinizes the data and transforms it into valuable knowledge), that data lets Bloor conduct a mass rating analysis against all of Celestica s existing contracts. The same process is used for existing customers that are, say, bidding on a new traffic lane or that want to conduct baseline analyses against current and/or past rates all with an eye on continuous improvement. I use this when I m prospecting and then again one, two, or three years down the road against the baseline, said Bloor. Networks change over time, so going back and doing those regular comparisons is basically a requirement. We rolled these functions out very early in the TMS implementation process in order to achieve cost optimization, productivity, and visibility. Logistics Services Director, Celestica For Celestica s core electronics manufacturing business, the TMS provides best-cost shipping options and the opportunity to do very early consolidation of shipments in order to accommodate pre-planned, overseas freight activity. We rolled these functions out very early in the TMS implementation process in order to achieve cost optimization, productivity, and visibility, said Bloor. Once those three elements were in place, Bloor said Celestica realized that its TMS could be applicable for other companies in the market namely those that had smaller freight spends than Celestica did. Maybe they were startups or mid-cap companies that just didn t have the maturity of processes that a TMS could offer, said Bloor, noting that the typical customer saves percent on portfolio spend over time. Whatever the impetus, we knew we could provide that value seamlessly because we d already done it for ourselves.

6 6 WHITE PAPER Bloor, who is satisfied with Celestica s commitment to squeezing the biggest possible benefits from its TMS, said consolidated shipping is one area where the manufacturer and services provider could be doing even more. We do have load planners that offer value to customers, but as we grow I can envision employing more load planners to do the more complex shipping that the TMS offers. ROCKFARM: TAKING OPTIMIZED TMS OUT TO ITS OWN CUSTOMERS In place since the company was founded in 2008, Rockfarm Supply Chain Solutions TMS is an integral part of the supply chain solutions that the 3PL offers to its own customers. Headquartered in Dubuque, Iowa, the worldwide supply chain management, technology, and consulting company takes a control tower approach to TMS by serving as the central provider of logistics services for its varied customer base. When using its TMS as a pre-sales tool, for instance, Rockfarm lays out all of the system s potential processes and workflows and then ties them into the specific customer s operational needs. During those presentations, Brad Stewart, president, said Rockfarm puts the spotlight not only on the obvious transportation management functions provided by the TMS, but also on the many other functionalities that can be optimized and leveraged over time. We show them how all of the different pieces come together on a single, live platform that s built on continuous improvement, said Stewart. Emphasis is also placed on MercuryGate s integration capabilities yet another selling point that Rockfarm uses during the pre-sales process. We ve yet to find an ERP that our TMS couldn t integrate with, said Stewart. That s really important because we have information from our clients ERPs and into our TMS and vice versa. We show them how all of the different pieces come together on a single, live platform that s built on continuous improvement. President, Rockfarm Using status qualifiers, Rockfarm s TMS identifies carrier routing pro numbers, pickup times, and other variables. Stewart, who first learned about MercuryGate while working for a different 3PL in 2000, says Rockfarm wouldn t be where it is today had it not been for the MercuryGate TMS and the commitment to continually improving and optimizing the software.

7 7 WHITE PAPER CLEARING A PATH TO TMS SUCCESS When it comes to a TMS, there is no one-size-fits all approach. Every company has different requirements and operational nuances that can be most effectively addressed by a TMS that provides a common platform across all industry verticals. To get the most benefit from that technology investment requires an ongoing commitment to continuous improvement that many companies ignore at their own peril. In addition to realizing double-digit reductions in transportation spends, companies that optimize their use of a TMS also realize significant time savings, manpower savings, and improved decision-making capabilities. To achieve these and many other benefits, think about configuring TMS to meet your firm s unique requirements and workflow on the path to automated transportation network management. And realize that the companies that are gleaning the biggest benefits from a TMS are those that use the system to manage all aspects of the transportation component. That includes domestic and international, inbound and outbound, all business units, divisions, and companies. Once the TMS is in place, don t overlook the need for continuous review and optimization of the system. As a company scales up or down, adds new lines of business, and/or expands into new markets, its transportation management requirements may change exponentially. We ve yet to find an ERP that our TMS couldn t integrate with. That s really important because we have information from our clients ERPs and into our TMS and vice versa President, Rockfarm Optimizing transportation provides the availability to select the best carrier and equipment for each shipment or load, while simultaneously managing inbound and outbound shipments in a way that maximizes equipment utilization, plans for backhauls when available, and provides the best possible executable plan for success.

8 8 WHITE PAPER ABOUT MERCURYGATE MercuryGate provides powerful transportation management solutions proven to be a competitive advantage for today s most successful shippers, 3PLs, freight forwarders, brokers, and carriers. MercuryGate s solutions are unique in their native support of all modes of transportation on a single platform including Parcel, LTL, Truckload, Air, Ocean, Rail and Intermodal. Through the continued release of innovative, results-driven technology and a commitment to making customers successful, MercuryGate delivers exceptional value for TMS users through improved productivity and operational efficiency. MercuryGate offers business intelligence to improve transportation processes, increase customer satisfaction, and reduce costs. Find out why MercuryGate has set the industry standard for the most adaptable, comprehensive transportation solutions suite in the industry at To learn more, sales@mercurygate.com MercuryGate International, Inc. 200 Regency Forest Dr, Suite 400 / Cary, NC USA