A recent white-paper by Management Dynamics Inc. on Current Trends and the Potential for Automation in Transportation Management noted that better informed decision-making on freight route planning, carrier selection, shipping scheduling and costing, load planning, guidelines compliance and auditing, invoicing, and reporting results in greater logistics operational efficiencies yields significant cost savings. No surprises here. We’ve known that for a while.
The research further shows that many shippers have yet to automate these critical freight management and transportation procedures. No surprises here either. That’s why we have leaders and laggards. Leaders have automated many of these procedures, or are at least working on automating these procedures, and laggards are, sometimes, still using phone and fax, like they did BC*.
The research also found that one fourth of survey participants claims their company spends more than 15% of their overall revenues on freight transportation shipping efforts and the percent paid out on international freight services is also considerable. This is to be expected considering how many companies decided to outsource half a world a way and the recent spike in oil prices (as well as piracy off the Somali coast). Similarly, only one fourth of respondents automates mission critical applications for calculating rates and selecting routes and carriers. The leaders do it, the laggards still do three-bids-and-a-buy. Finally those [shippers] that do [use a contract management solution] are lowering their transportation spend through improved carrier selection, fewer errors and risks, and greater compliance with approved shippers.
So what’s the problem? Especially when solutions have existed for most of the functions for almost a decade? Simply put, the logistics managers are overwhelmed. In order to manage a shipment, as alluded to in the first paragraph, a logistics manager needs to be aware of the contract (in the Contract Management System, CMS), the spirit of the bid (included in the bid package contained in the Request for Proposal, RFX), the rationale behind the selection of new lanes (which stems from the optimal model, stored in the Strategic Sourcing Decision Optimization solution, SSDO); get the current rates (from the Transportation Management System, TMS), calculate the number of LTL or FTL loads needed (based on product weight and volume, contained in the Product Life-cycle Management solution, PLM), gather the necessary data for the manifests, import, and export documentation (contained in the Global Trade Management solution, GTM); generate the shipping order and goods (in a customized e-Procurement solution, eProc), receive status updates (through a Logistics Management solution, LM), accept the invoice and make a payment (through a Procure-to-Pay solution, P2P), and insure the goods are recorded as current inventory (through the Inventory Management System or Warehouse Management System). Let’s recap, they need to be fluent with CMS, RFX, SSDO, TMS, PLM, GTM, eProc, LM, and P2P solutions, at a minimum, plus any systems that their 3PL and freight providers use to provide data, any enterprise resource planning (ERP) or manufacturing resource planning (MRP) solutions that contain data they need or capture data their internal customers want, and any visibility and risk management solutions used by the Supply Management group as a whole. For an average logistics manager with an Associate’s Degree, at best, who started his career where it was just a matter of getting a truck to the loading bay on time, this is overwhelming. Instead of making his life easier, modern supply management technology has overwhelmed him.
He needs a solution that not only tells him what he needs to focus on today, but that identifies where the data, and only the data, he needs is in these various systems — with wizards or workflows that take him through what he needs to do. And until he gets it, he’s going to defend that fax machine with his dying breath.
So if you really want your TMS, WMS, LMS, or 3PL system to gain widespread adoption, remember to throw the old-school logistics manager a few SCRAPS. If you do, you might find that the state of the industry changes seemingly overnight.