Transport management is one of the most obvious areas in a distribution business for cutting costs. This is going to become more important than ever, given the expected surge in fuel prices, toll road levies, carbon taxes and more.
Simply stated, managing a supply chain just got a lot harder, and it’s never to get easier again.
To keep all areas of your business in sync, you need a transport management system (TMS).
The right TMS helps you:
- Reduce transport costs by up to 25% to optimize and automate transport planning and execution.
- This is made up of optimized less-than-truckload (LTL) to multi-stop truckload or pool carrier consolidation (up to 20% savings).
- Enhanced operational efficiency (up to 30% overhead reduction).
- Improved freight settlement and audit (savings of up to 5%).
- Real-time insight into inventory and shipment (reduction in safety stock of up to 15%).
- Optimal mode and carrier selection (savings of up to 5%).
All of these figures are as reported by the ARC Advisory Group and are viewed by and large as industry norms.
The right TMS can assist you in optimizing your daily, weekly, monthly and annual processes, along with regulatory compliance. A TMS automatically finds the best mode, route and carrier for each shipment.
Optimisation algorithms embedded in the software deliver the most cost-effective overall solution, in line with customer needs.
As with many other forms of software, such as ERP, building in the business rules unleashes a great deal of efficiency and savings.
Business rules are embedded in the software’s logic, so if a retailer only wants goods delivered on a specific number of days, each week, that’s the way it will happen, without fail. This can help drive just-in-time shelf replenishment.
Then you get to multi-modal optimization. This is where you plan any number of shipments into an optimal mix of pooled loads, shipments, back hauls and continuous moves – always ensuring that the transport mechanism is operating at its peak.
LTL is a cost killer, so ensuring that routes and loads are optimized to enhance the chances of a full truckload leads to direct bottom-line benefits.
Obtaining direct and sustained tracking and visibility into shipments also drops directly to the bottom line.
There are two ways to monitor and manage the sequence of events in the supply chain: one is physical (fax, confirmation, order, picking slips), and it is time-consuming. The other is digital and automated, and this approach always leads to significant improvements in efficiency and cost savings.
Then there is the issue of billing and reconciliation. Many companies lack the ability to track and trace individual line items on invoices. So they simply settle the overall amount, when there could be very significant discrepancies which add up over the course of a year, ultimately resulting in millions lost.
Many companies hold off investing in a TMS because they fear the capital investment, but today’s software as a service (SaaS) model of software delivery holds the promise to make a TMS available to any company of any size, with no capital investment. The embedded logic will allow any company to obtain the advantage of best practices without having to motivate for budget, and to defer ongoing costs off balance sheet.
Finally, there is the little issue of carbon footprint. Reducing this has gone from nice-to-have to business imperative. Simply stated, companies of substance are going to be taxed heavily in the future for the carbon they emit.
As an average, transport fleets are responsible for 10% of any country’s carbon emissions, and this is an inevitable byproduct of transport. Optimising routes, mode selection, loads, selection of carriers and reducing LTLs will have a direct impact on companies’ carbon footprints.
Modernizing transport fleets will play a significant role in reducing any company’s carbon footprint, which again is money straight to the bottom line.
As recently as five years ago, over 90% of companies said existing TMS’s did not satisfy their requirements. The time has come to re-look at new-generation TMS’s, and to reap the benefits, year in and year out.