R ETransportation S E A R C H BManagement RIEF Tackling M A Y 2TMS 0 1 5in a complex world The value of omni-modal Tackling Transportation Management The value of an omni-modal TMS in a complex world
Introduction With the transportation landscape becoming increasingly complex and global in nature, shippers, third-party logistics providers, and other entities involved in transporting goods need a reliable transportation management system (TMS) that can handle myriad different shipping methods. In some cases, these omni-modal TMS must be able to tackle international shipments with ease, and in other instances be able to effectively orchestrate the movement of multi-leg shipments across a variety of different modes. Combine these demands with the growing omni-channel retailing trend where shippers must be able to meet the end consumer s individual delivery demands and schedules and the case for an integrated TMS becomes clearer than ever. On the shipper side, orchestrating the end-to-end transportation process hasn t gotten any easier over the last decade. Neither has the efficient coordination of customers, suppliers, carriers, freight forwarders, government agencies, and customs brokers. The fact that world trade grows at an average of 5.3 percent annually, according to the World Trade Organization, only exacerbates the challenges making it that much more difficult to control transportation costs in the most efficient and effective manner possible. Third-party logistics providers face their own lineup of transportation challenges. With most of their customers relying on multiple shipping methods, these organizations require an omni-modal approach to transportation management. It s their responsibility, after all, to introduce other modes that achieve the same goal, either in a more cost-effective fashion (which is usually the customer s primary focus) or in a way that allows them to better meet their service requirements. To better understand the transportation challenges and pain points that transportation managers are experiencing right now and look further into how they are addressing any issues and deficiencies in their shipping practices Peerless Research Group (PRG) and Logistics Management, in conjunction with MercuryGate International, Inc., a leading provider of transportation management solutions, conducted a study among 204 transportation, logistics, and supply chain executives to examine how shipping practices could be improved. To frame our findings, it would be helpful to provide a brief overview of our study participants. Among those surveyed, nearly three out of four organizations (71 percent) are managing universal freight transportation networks encompassing both domestic and international shipments, with slightly fewer than one out of three (29 percent) shipping within North America only. On average, these companies transacted nearly 36,000 international shipments and about 75,000 domestic shipments in 2014. About one out of three (31 percent) international shipments are multi-modal while one in four (26 percent) domestic shipments are multi-leg. Looking at 2015, the volume of these companies overall shipping levels will either increase or, at the very least, remain on par with last year. The number of shipments is forecast to jump both on an international basis as well as domestically, where shipping activity will increase 39 percent and 51 percent, respectively. Correspondingly, the amount organizations will spend on shipping is also expected to rise. Almost one-half of those surveyed (41 percent) predict they ll spend more on international shipping and one out of two (50 percent) believe their spend level on domestic transportation will climb in 2015. 2
Changes in the number of shipments for 2015 8% 41% 51% 11% 50% 39% Less The same/no change More Domestic International As shipment numbers increase, the transportation landscape becomes increasingly complex. And, as that level of complexity increases, the need for a holistic technology platform that can handle myriad different modes and business models grows exponentially. Manual systems, spreadsheet-based processes, and disparate technology no longer suffice. In lieu of these traditional, ineffective approaches, both importers and exporters are turning to single-platform TMS that can effortlessly handle international multi-leg freight shipments using all modes. Changes in shipping spend for 2015 9% 42% 50% 9% 51% 41% Less The same/no change More Domestic International In light of the increase in the number of shipments and the amount of money businesses will invest in their transportation services, the need for greater efficiencies, smarter execution of domestic and international shipping procedures, and real-time, accurate information from which to base critical transportation decisions will become more vital to an organization s sustainability.w Yet, our survey results show that organizations management over transportation operations is spotty and unorganized. 3
Contributing to this plight is the multitude of modes, systems, and resources that shippers rely on to handle their transportation activities. Unless transportation systems are well integrated, organizations may not be employing optimal methods for transporting goods. The results can be costly, shipments can be lost or delayed, and the timeliness of orders shipped to customers is likely to suffer. How shipments are managed by mode 18% 31% 25% 32% 27% 38% 28% 16% 11% 22% 8% 10% 19% 33% 32% 24% 17% 12% 14% 23% LTL TL Parcel Air Ocean Rail Intermodal For example, many industries now depend on ocean and air freight as natural and vital links in their supply chains. Industries such as apparel and automotives keep the ocean carriers humming, while pharmaceuticals and high-tech keep the air freight industry busy. But ocean and air freight differ from truck freight in several ways. Take the scheduled nature of the freight movements, for example. When shippers are considering which carriers to use, traditional decision points like cost and capacity alone are insufficient. Sailing schedules and flight schedules need to be integrated into the TMS, for example, to enable logistics practitioners to make informed decisions. The list of challenges that shippers face in today s omni-modal transportation world doesn t end there. Also impacting companies ability to effectively Shipment tracking satisfaction ratings streamline and optimize their Rail transportation networks are the many disparate systems. 29% 32% 39% As further proof that operations need help tracking and managing shipments, shippers consider carriers for some modes to be less than adequate. While parcel carriers are largely rated as favorable by our survey respondents, services provided by ocean, rail, intermodal, and even truckload carriers could be improved. 36% 6% 10% 17% 25% 9% Ocean Intermodal Truckload (TL) 13% 40% 10% Less-than-truckload (LTL) Air cargo 17% 18% 14% 13% 18% 18% Manual (i.e. MS Excel) Carrier s solution Freight forwarder 3PL A TMS We need to get a better handle on our shipments. The freight forwarder might have different information from the shipper. Logistics/Distribution Manager; Paper Manufacturing; $100M-$500M in annual revenues There s a lack of intransit visibility, which hampers the delivery schedule for the distribution centers. Logistics/Distribution Manager; Food & Beverage Manufacturing; $2.5B - $5B 29% 34% 37% 30% 35% 35% 41% 35% 24% 52% 28% 20% 42% 39% 19% Parcel 64% 26% 10% Excellent/Very good Good Fair/Poor 4
Some of these troubles, however, do fall back on the shippers. For example, according to survey findings, operations are not as methodical as may be necessary. Only one out of four shippers (26% percent) has highly integrated transportation and logistics systems and data. For those whose systems are disparate, the upshot is poor communication, manual data entry resulting in duplication of efforts, inaccurate information and additional labor costs, and a lack of supply chain visibility. This directly impacts costs, efficiencies, and satisfactory customer service levels. And, while others (19 percent) acknowledge a lack of cohesion as a barrier and are moving to a fully integrated platform, more than one-half of those we studied are only partially integrated or are managing fully disparate transportation solutions. These soloed systems that have been cobbled together over the years require extensive (and often unattainable) levels of integration in order to operate interdependently. The bottom line is this: When you can t look across all of your modes including small package, less-than-truckload (LTL), truckload (TL), and others, you miss out on possible freight savings by not consolidating or optimizing those freight movements. In the absence of an integrated, omni-modal TMS, supply chain visibility is virtually impossible and particularly when companies lack the dashboards needed to properly oversee their end-to-end transportation networks. Finally, contingency planning is next to impossible a point that can severely impact the way in which companies react and respond to network risk and variability. Level of integration of transportation and logistics systems and data All transportation and logistics systems are integrated and easily share data 26% Some are integrated, some are not but we will be moving to a fully integrated platform 19% Some are integrated, some are not. No plans to integrate further at this time 27% The biggest challenge is making sure information about shipments is communicated to the right person/system in a timely manner. Logistics/Distribution Manager; 3PL; $2.5B - $5B We can t always see all of our shipments and all he costs. It is difficult to pull all the data together from all the systems and compile the data. Logistics/Distribution Manager; Plastics & Rubber Manufacturing; $2.5B - $5B Our transportation solutions are disparate systems and don t share data 28% Even though most organizations have transportation systems and data that are unrelated to some degree, companies do recognize that logistics costs can, in fact, be better controlled. Submitting to load consolidation practices, for example, and automating processes, knowing the best shipping routes, and negotiating better contracts with carriers are all necessary approaches to containing rising logistics costs. Optimization across our business units is not possible until we have all business units on the same TMS. Corporate Manager; Rubber & Plastics Manufacturing; $1B - $2.5B 5
Ways to improve/control logistics costs Improve load consolidation Automate and integrate transportation management processes Identify the most efficient shipping routes/ Reducing miles Improve control over rate procurement for long term carrier contracts Implement more effective carrier data management Increase audits of freight invoices Improve management of parcel shipments Optimize the transportation network with pooling points More effective container and shipment tracking 46% 45% 43% 41% 37% 34% 28% 28% 26% A lack of integration had caused us delays in shipment processing and freight invoice management. We are looking at a TMS solution. Application Consultant; Fabricated Metals; $500M - $1B Increase use of market driven spot buying Implement control tower visibility for international shipments 18% 16% Not coincidentally, shippers are most concerned about areas that closely align with those procedures that are in greatest need of improvement. Data management, capacity and carrier availability, cost analysis and shipment tracking, and carrier accountability are the characteristics that shippers are most interested in fortifying. Characteristics considered important to logistics organizations (Rated extremely/very important) Freight invoice auditing Carrier performance KPIs 66% Carrier data management 64% Finding carrier capacity and availability 64% Shipment status information 59% Actual transportation cost analysis by lane and mode (fixed) 49% Control tower visibility with decision support 43% Dock door availability 42% Market rate analysis by lane, mode and equipment type (fixed) 40% Multi-carrier parcel shipment management 36% International trade management 36% Multimodal carrier/route optimization 33% 80% 6
Most tasks are automated to some degree, or for some, plans to automate are imminent. However, many are still slow to adopt and affirm that there are no plans to automate; roughly one out of four do not conduct critical tasks such as route planning and optimization or load tender requests using technology. Additionally, global trade issues such as customs documentation and compliance administration are also processes that many commonly handle manually. It s not surprising that, for many, the task of managing transportation operations is inefficient. Transportation solutions lack connectivity, tasks are not fully automated, and the sharing of data and information is limited. Level of automation of key transportation tasks Carrier and rate selection for shipments 25% 22% 13% A lack of technology makes freight analysis by mode and carrier by point of origin extremely manual. Supply Chain Manager; Fabricated Wood Products; $100M - $500M Shipment tracking and event management 21% 43% 23% 13% Proof of delivery (POD) 21% 39% 23% 18% Freight invoice audit and settlement 19% 44% 23% 14% Load tendering 19% 38% 21% 22% Carrier rate sourcing and procurement 18% 43% 23% 17% Transportation data analysis 17% 39% 25% 19% Route planning and optimization 16% 35% 24% 25% As we grow we need better integrated reporting and tracking is needed because our current manual process is becoming too time consuming and ineffective. Vice President; Retail; $100M - $500M Carrier data management 15% 41% 27% 16% Global trade management (i.e. customs docs and DPS) 11% 28% 26% 36% Dock door scheduling 7% 29% 22% 42% Highly automated Somewhat automated Plan to automate or advance within next 2 years Do not automate/ No plans We lack the ability to understand where our spend is, when we have sourced, our commitments, and what the compliance on our contracts may be. Purchasing Management; Paper & Printing Manufacturing; $5B+ 7
Adoption of TMS So, it s not surprising that transportation processes are in disarray across many shippers and third-party logistics providers. This is likely attributed to a restrained approach to integrate to a single platform. IN our survey, less than one out of three (30 percent) of companies currently manage their transportation tasks using a TMS. However, while others have been a bit slower to adopt a TMS, they are recognizing the benefits. One out of three recognizes that a TMS can improve their operations and are either implementing (11 percent), evaluating (14 percent), or upgrading their current solution (12 percent). Thirty-three percent, though, maintain they still have no plans to evaluate TMS at the present time. Organizations adoption of TMS Currently using a TMS 31% In the process of implementing a TMS 11% Presently evaluating for implementation of a TMS within the next 12 months 13% Planning to invest/upgrade our current application sometime during the next 12 months 12% No plans to run/evaluate at present time 33% When evaluating and using a TMS solution, the features and functionalities considered most important are: 1. Rate procurement and contract management 2. Single platform solution for managing all shipments 3. Carrier data management 4. Automated load tendering 5. Transportation data analysis 6. Multimodal route planning and optimization We have different departments using different methods. Visibility and capturing true costs is a challenge. Logistics/Distribution Manager; Electrical Equipment Manufacturing $100M - $500M These utilities clearly address the key areas where transportation and supply chain managers claim to see the biggest gaps in their transportation processes. These features apply directly to improvements in load and shipping efficiencies, ability to identify the best and most resourceful ways to ship, transport process automation and integration, and better-quality carrier performance. 8
The payback (ROI) on TMS investment can take time. On average, these managers expect the return on their TMS investment to take somewhere between 18 to 19 months. Interestingly, of those who ve implemented a TMS application, 17 percent are not even gauging ROI. Among those running or planning to implement a TMS solution, the preferred method of deployment varies. While one-third prefers to host the solution internally, another one out of three shippers opts for a cloud-based application; and, others claim they have no preference and would employ either method. Preferred method for deployment of TMS We prefer to host the TMS ourselves 36% We prefer a cloud-based TMS 33% We re open to considering either option 31% Nearly three out of four companies (71 percent) we surveyed use one or more third party logistics service companies to handle transportation and logistics tasks. Companies most commonly use 3PLs for assignments such as securing carriers and for international freight forwarding services. Tasks being handled by 3PLs Finding carriers for my shipments 62% International freight forwarding 51% Freight audit and settlement 33% Cross-docking Warehousing and fulfillment Dedicated fleet 24% 23% 21% Inventory management Packaging Entire supply chain operations 5% 9% 9% Conclusions As more companies conduct business globally, and as more customers demand a wider array of shipping and receiving options, the need for holistic, omni-modal transportation systems has become imperative. The days when manual spreadsheets, phone calls, and emails were enough to effectively manage the transportation component are long gone. Today s shippers need a single-platform TMS that can tackle both domestic and international single-leg and multi-leg shipments with the ease, timeliness, and visibility that customers have come to expect in today s tech-oriented world. Without these tools and platforms, shippers will quickly find themselves obsolete and unable to keep up with the demands of today s business world. 9
Research Methodology This research was conducted by Peerless Research Group on behalf of Logistics Management for MercuryGate International, Inc. This study was executed in March of 2015, and was administered over the Internet among subscribers to Logistics Management magazine. Respondents were pre-qualified for being involved in decisions regarding the evaluation, implementation and usage of transportation management software and solutions. The findings are based on information collected among 204 top logistics and supply chain managers. Respondents are predominantly executive management (31 percent), logistics, distribution or operations management (21 percent) transportation management (18 percent), and supply chain management (7 percent). Slightly more than one-half (58 percent) work at manufacturing facilities while others (42 percent) are employed in wholesale distribution, retail or transportation and warehousing services. All size companies are well-represented with one out of four respondents being employed with organizations reporting $1 billion or more in annual revenues. About MercuryGate MercuryGate International, Inc. offers the industry s only cloud-based, single-platform, omni-modal transportation management software. Companies of all sizes quickly locate capacity, select carriers & rates and significantly reduce their transportation spend. Using any mode of transportation, including parcel, shippers and logistics companies optimize 100% of their domestic and international shipments. The single platform TMS supports organizations with rapid deployment of an easy-to-use and configurable system in any language, currency or unit of measure. Services companies leverage the TMS to support their 3PL, brokerage, or freight forwarding business or all three! When it comes to the challenges of managing transportation costs, turn to the TMS that delivers. Contact Information: MercuryGate International, Inc. 200 Regency Forest Drive, Suite 400 Cary, NC 27518 www.mercurygate.com sales@mercurygate.com (919) 469-8057