Supply chain management is a balancing act. Similarly, quarter after quarter or year over year, no matter how you look at it, macro trends in the US economy and their impact on freight transportation are also always changing. We’ve compiled wisdom from freight transportation industry stakeholders to explore how a transportation management system (TMS) can help you navigate these impacts, with TMS software enabling improved performance and proactive decision making across the supply chain.
While economic factors drive freight volumes, motor carriers, brokers and logistics operations also have to consider the other side of the scale. In particular are the numerous cost factors that impact their operations and profitability. In its Operational Costs of Trucking 2019 Update released last fall, the American Transportation Research Institute (ATRI) focused on the direct and indirect relationships between trucking costs.
Driver wages and benefits are the number one cost for motor carriers at 43% of cost per mile (CPM). The ATRI report pointed out that labor costs shift up or down based on driver experience, safety performance and different compensation models. Similarly, insurance is another highly variable cost center due to rate structures that vary between industry segments and different risk models. Fuel—another of the highest cost centers—also continues to exert pressure on overall CPM.
Using Technology to Focus on Productivity
With many economic factors and costs out of your control, the key to success in any market is to focus on efficiency and productivity. Addressing that topic and offering valuable advice recently were the presenters at a recent webinar on Making the Supply Chain Smarter & Faster. The event was hosted by Heavy Duty Trucking magazine and Truckinginfo.com; it was moderated by Deborah Lockridge, editor-in-chief.
Technology is driving every aspect of trucking and logistics operations, Lockridge noted. New solutions have given companies a vast array of tools to significantly improve efficiency, productivity, and accuracy and reduce costs while enhancing customer service.
Providing a view into how digital technology is transforming the supply chain and how transportation operations can take advantage of those solutions, was Michael Kukiela, senior vice president, Supply Chain Management at Schneider Logistics.
“Order management and greater visibility are top demands,” Kukiela said. “It’s surprising that a PricewaterhouseCoopers survey revealed that 65% of North American shippers are not using a Transportation Management System (TMS) in an environment where having greater visibility is a key to customer experience. Many shippers operate blind and don’t know where their shipments are located.”
What is generally unknown, according to Kukiela, is the impact that not using a TMS has across the supply chain. “It leads to poor forecasting, tight lead times for carriers, and a lack of understanding of costs and network performance,” he said. “It causes a more reactive state across the supply chain.”
Avoiding Differentiated Experiences
Transportation companies simply cannot compete in tomorrow’s supply chain without technology, Kukiela noted. “A digital footprint on every critical supply chain action enables continuous improvement and relaxes tensions,” he stated. “It is the key to assessing performance and the foundation of opportunities and differentiated experiences.”
“At Schneider we see a trend where many shipper executives are focused on enabling greater digitalization to standardize processes and reduce waste,” Kukiela continued. “We have already witnessed networks rapidly evolving to increase responsiveness.
“And the digital revolution is not confined to shippers,” Kukiela added. “Many carriers are making the right investments to digitize planning, and driver and equipment management, to improve margin decisions and to drive insights back to customers on inefficiencies.”
What remains, though, is a gap in understanding about how to start implementing visibility tools, TMS solutions and other capabilities, Kukiela noted, adding “A TMS built for freight transportation can be a central hub of all this activity. It does the heavy lifting and saves time and eliminates headaches. From harvesting electronic orders for planning and using automated forecasting tools, to pushing in transit status updates to shippers proactively and to holding a digital transaction record, it transforms fundamental parts of this business and cuts out redundancy and needless activity.”
“A prescriptive deployment of technology also leads to a redeployment of human resources to core activities and critical tasks,” Kukiela said. “Human talent needs to be focused on getting ahead for tomorrow and not on solving yesterday’s problems.”
Investing in TMS Solutions Deliver Impressive ROI
The return on investment in a TMS is impressive for both shippers and carriers, Kukiela pointed out. For example, each can realize savings by using information to consolidate loads, expand lead times, better manage fleets for improved utilization, and generally increase velocity so trucks and drivers keep moving. A mutual value proposition in increased shipment visibility for both shippers and carriers as well is lower claims rates.
“Transportation management technology will relieve inefficiencies,” said Kukiela. “Harvesting a digital footprint is a win-win because once the foundation is set you can pursue more capabilities.”
Still, there is also a need to balance innovation and price so technology initiatives should begin by addressing the low hanging fruit where there is tactical and immediate value. “Determine foundational needs, such as processes that liberate the talent pool, and then move to more advanced aspects of TMS use,” Kukiela advised. “Focus on what you want to gain and lock in available capabilities to drive the return on investment.
“A natural starting point is to discuss those issues with peers and leverage experienced TMS providers and external expertise to diagnose needs,” Kukiela continued. “Do your homework about current processes. You have to know where you’re at before you can know where to go.”
Pay Now or Pay Later
Patrick Tucker, transportation & logistics solutions manager at Panasonic, noted that while complexity and cost issues are top challenges, low hanging ROI fruit takes priority. “The pay now or pay later concept applies,” he said. “It’s a question of knowing what you don’t know so you can have the right investment priorities and make sure you have the right tools up front.
“Your grand vision should include an understanding of the overall architecture of your solution and how to future-proof your investment,” Tucker added. “You wouldn’t build a house without a plan.”
In the next ten years, Michael Kukiela noted, the supply chain will be larger and faster. “Transparent supply chains are more efficient, resilient and predictive,” he said. “Transportation companies that are not using technology to make more informed decisions and get ahead of tomorrow’s needs will have difficulty finding capacity and creating strategic partnerships, and will not evolve.”
Interested in learning more about how to leverage technology to improve performance across the supply chain? Contact us today to see how Trimble’s TMS solutions can help you increase visibility and enhance decision making throughout your operations.