Implementing a transportation management system (TMS) has become a well-used route to cutting the cost and improving the performance of outbound freight, so why do many shippers still shun the technology when managing inbound movements? TMS applications that have become routine for outbound managers can be applied just as effectively on the inbound side of freight operations.
Take, for example, the constraint-based bidding software that is used to bid for outbound freight. By including inbound in the procurement mix shippers can add density to the distribution network, which makes the business more attractive to carriers and brings lower costs within reach.
Standard outbound TMS tools such as the route guide are unaccountably left in the box when it comes to inbound movements. When shippers neglect to use this important tool they have no guarantee that their inbound procurement plans are being executed according to agreed upon price and service requirements. One audit of a very large CPG manufacturer found that only 8% of the inbound shipments complied with the routing guide.*
Similarly, by taking control of inbound freight processes shippers can optimize loads on these legs, something that suppliers may or may not do depending on their priorities and level of operational sophistication. In one deployment a TMS tool that scours orders for load consolidation opportunities has increased the number of consolidations achieved by 35%.*
A key benefit of TMS technology is that it brings clarity to freight processes by providing detailed information on transportation costs. Yet these benefits are often ignored when it comes to inbound shipments, even though there is a need for more transparent freight documentation. Inbound shippers can find it difficult to identify the true cost of moving materials when suppliers submit bundled invoices for their services. Charges such as a margin added to the delivered price to allow for unknown costs can be buried in the invoice details, obscuring the actual cost of moving each unit of material.
Another way in which TMS technology improves the accuracy and availability of information is by establishing standard, centralized sources of freight data. Business intelligence tools that come with most TMS packages automatically translate these data into tailored reports that improve the management of inbound freight traffic. Shippers can design electronic interfaces that provide critical intelligence such as the availability of product and ship dates. And they can leverage the value of this information by sharing it with trading partners across networks and using it to benchmark supplier performance.
Network visibility can be greatly improved by using web portals for supplier order entry and to provide status information for authenticated users. Other residual benefits include visibility to inbound inventory, improved asset utilization, and more streamlined labor planning and yard management.
The ability to analyze and compare the performance of inbound transportation service providers has important strategic benefits. For example, on time performance invariably improves when a core carrier program that is aligned with the shipper’s overarching transportation strategy is put in place.
Again, these methods are used widely to improve the productivity of outbound freight operations – why should the same benefits not be captured on the inbound side? There are a number of possible reasons. Some transportation departments might assign a lower management priority to inbound movements. Or perhaps the application of TMS technology has always been associated with outbound freight, and it is not easy to break with this tradition.
Regardless, in today’s intensely competitive markets shippers can no longer afford to leave savings and performance improvements on the table by taking a one-sided approach to TMS.
*Logistics Management, Logistics technology: Inbound management advances as TMS evolves, 3/25/2010.