In an outsourced solution that combines a transportation management system (TMS) with the expertise of a third-party team, the provider takes on much of the tactical burden associated with running the freight network. This frees up the client company to concentrate on strategic initiatives.
Shippers must decide what to do with their newfound freedom. Which strategic challenges should be tackled?
It’s an exciting prospect, particularly for in-house logistics teams that for various reasons have had relatively few opportunities to think strategically about the operations they manage.
Perhaps their view of the network was limited in the past because of the organization’s fragmented corporate structure, and they lacked the technology to give them the visibility needed to make high-level decisions. In addition, new technology opens up many analytical options that were not available previously. As shippers learn to wield these tools, they become more knowledgeable about the network and more creative in developing ways to improve its performance.
There are several areas shippers can evaluate as they shift their focus from tactical operations to strategic improvements. By leveraging their own internal expertise and that of the third-party provider, as well as applying TMS analytics, shippers can achieve efficiencies and capture cost savings that may have been previously out of reach.
1. Accessorial Management
Look to reduce accessorial charges in the network. Find root causes, and execute process improvement initiatives at the network, region, lane, and shipper or consignee levels.
2. Accounting, Accruals, Reconcilement
Pinpoint areas of opportunity in accounting data and practices that can cause headaches such as inaccurate billing. Problems like these can strain relationships with service providers and customers.
3. Carrier Management
Use on-time performance statistics – and root cause analysis – to raise the efficiency of carriers and streamline the route guide. These facts and figures change conversations with customers and service provider from anecdotal to factual.
4. Demand Forecasting
Deploy the system to analyze demand patterns. Analyses like these give shippers a clearer view of the network by, for example, providing a more precise picture of variations in shipment volumes by lane.
5. Exception Management
Scrutinize operational patterns to identify exceptions and introduce measures to mitigate these anomalies. This can be done by, for example, reviewing challenging lanes where route guide depth is higher and accessorial charges are inflated. By reviewing lane difficulties like these with the carriers, they can adjust freight awards, rates, and even speak with suppliers/customers to improve the process. Such actions result in fewer exceptions, a decrease in route guide depth, and improved service.
6. Just-in-Time/Six Sigma Projects
Develop better ways to manage rigorous JIT delivery schedules. If the teams are focusing on fewer exceptions, they will have more time to identify improvement opportunities and to design and implement larger, more formal, projects and initiatives.
7. Network Placement.
Examine freight network configuration to single out areas where the distribution of assets can be improved. Consider your order patterns, for instance, and look for exceptions. As the analysis becomes more detailed, the locations of cross-docks, distribution centers, and other assets can be reviewed.
8. Order Fulfillment
Reduce transportation costs by managing and fulfilling orders more effectively. With the benefit of improved visibility into warehouse operations, for example, identify fulfillment issues and develop solutions using root cause analyses
9. Supplier Management
Create KPIs geared to the supplier network and your customers. This involves the use of supplier performance data to create scorecards – similar to those that may already be established for carriers – to improve relationships and processes.
10. Warehouse, Dock, and Yard Management
Investigate performance and processes within your own facilities. Take a look at carrier in and out times versus loading times, ordered versus loaded quantities, or track drop trailer cycle times.
There are many more ways in which shippers can step up network performance, but this menu covers some of the most common areas.
We’ll cover many of these areas in greater detail in future posts. Stay tuned!