Transportation management: focus on last-mile or global systems?
Should you standardize your many business units on a new, globally-implemented transportation management system (TMS), or do you let each business unit or region control its own TMS technology decisions?
The best answer for software cost control as well as performance improvement could be to do both.
Divide and conquer
The ”supply chain” of old is now a complex, multi-node global supply network, and businesses are more likely to serve markets and customers in multiple geographies as well.
Outbound shipments from distribution centers, warehouses and final assembly plants must deal with final-mile complexities, higher shipment frequencies with smaller shipment sizes and increasing customer expectations for faster shipment speed, in-transit visibility, and low or no shipping charges.
Regional logistics environments can differ radically. Trucking or parcel networks in Australia, the United States, South America and China look and operate very differently from one another – even if the ocean carriers that service regional ports may have a great deal of overlap.
The good news? Expanding TMS options in the cloud are driving competitive pricing downwards, and ever closer to ”free.” The core functionality of a traditional TMS is widely available from many software providers today, to the point of being largely commoditized.
Additional offerings designed for more specialized shipping operations are increasingly recognized as better fits in segments like distribution or ecommerce fulfillment than a traditional TMS.
With many modern TMS solutions designed for vastly improved ease-of-use and focused, instead of comprehensive shipping capabilities, your company can change the way it thinks about local TMS investment.
Embrace the ability to change out your TMS solutions more frequently, at lower price points, as more business changes will continue to ripple through your outbound shipping practices to end customers. Your ”final mile” challenges won’t magically crystallize in the next year or two. Improve your ability to adapt and thrive amid this constant, disruptive change with a ”best-of-the-moment” software approach instead of a best-of-breed decision.
Critically, this agile, final-mile TMS approach must be complemented with a global transportation platform strategy to move your enterprise to the next level of logistics maturity and supply chain performance.
Defining the global TMS
A “global TMS” is often just another variety of the traditional TMS design that is suitable for deploying as a company standard in different countries. It often supports multiple languages, comes with worldwide software support, and can cover multiple (but never all) subsets of specialized transportation management categories.
This definition of a global TMS does not actually address managing international product flows with multi-leg, multi-modal planning, or even cross-regional and cross-functional visibility end-to-end.
Deploying these heavyweight TMS systems to span both very complex transportation needs as well as many simpler, more modest shipping operations can drive global implementation and license costs to prohibitive levels. Unfortunately, this high cost approach to a standard TMS system can deny large portions of the business access to the real cost-saving benefits from more modern transportation management technologies.
A truly global TMS should be able to plan and optimize routing and costs for end-to-end product journeys originating anywhere in the world. It should reflect and accommodate actual product flows moving over land, across oceans, by air, or seagoing vessel, and then over land once again by truck, rail, or parcel modes to destination. More accurately, we can define a “global TMS” as one that handles multi-leg, multi-mode, multi-stop and multi-party transport planning and execution for cross-ocean product flows in concert with locally implemented TMS systems.
Out of many, one
For companies reporting annual revenues of $9 billion, transportation spend aggregates to roughly 2-3% of revenue. For smaller firms, the proportional costs for transportation have been rising rapidly; and for companies around $250 million in sales, annual freight spend is trending in the range of 10-11%.
Visibility and control of freight spend is consequently a high priority for global supply chain operations.
Facing tight capacity and a higher frequency of smaller shipments, the enterprise has less ability to drive down carrier rates or total shipping expense in last mile operations. Control tower projects are often launched to find new cost reduction opportunities by looking upstream to international transportation. A global TMS is really a control tower, bringing diverse and fragmented transportation operations together under a single platform to monitor and manage complex supply chain flows spanning geographies, including inbound and outbound activity for efficiency and cost optimization.
No longer a tower, but a network
A global TMS should have a data architecture capable of modeling the multi-leg and multi-mode characteristics of complex international product flows. This offers the ability to plan and optimize shipment activity beginning at origin to maximize cost savings from consolidation, capacity utilization, modal flexibility, cycle compression and reduced deconsolidation and handling processes.
Disruption upstream in the product journey can automatically cascade changes to service providers responsible for later legs, or to destination sites to adjust receiving plans. Planned vs. actual comparisons for execution as well as costs can also highlight inefficiencies, root causes driving spend increases, bottlenecks in transportation flows, and excess dwell in multi-mode journeys.
With cost-effective, fit-for-purpose cloud TMS systems in use at the local level to streamline execution efficiency, a truly global TMS digitally monitors and manages real-world, end-to-end transportation complexity for comprehensive cost reduction, continuous improvement and enterprise-wide supply chain agility.
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- Transportation Management
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