Users of transportation management systems (TMS) should not overlook the power of the technology to take risk out of supply chains. A TMS solution can support your risk management strategy and make freight operations more resilient to damaging disruptions.
The likelihood of supply chain breakdowns has increased as business operations have grown in complexity. More frequent business disruptions alienate customers, depress sales, and increase costs. A recent study by Vinod Singhal of Georgia Tech and Yossi Sheffi of MIT shows that companies experiencing a supply chain disruption suffered between a 33% and 40% decline in stock price, compared with industry peers over a three-year period*.
When deployed as a risk management tool a TMS can help companies avoid and mitigate these outcomes. Here are five ways to apply the technology in this way.
Create a clearer audit trail. As part of their efforts to reduce the chances of being hit by a disruption, companies are undergoing more rigorous assessments of their supply chain vulnerabilities. For instance, insurers may assess the impact of losing certain tier-one suppliers to unforeseen failures, and assign a risk level to these vendors. The evaluations require a great deal of data since they usually cover end-to-end operations and delve deeply into each segment of the supply chain. TMS solutions are a rich source of data and analyses on freight flows. Marshalling these facts and figures for investigators can save time and make risk audits more effective.
Focus on the weak links. Risk levels are particularly high when goods are in transit. Use TMS technology to analyze and track the security of freight that is on the move, and to keep all relevant personnel in the loop so they can react quickly should a problem arise. TMS analytics can pinpoint potential weaknesses such as locations where waiting times are long – in addition to incurring delays parked trucks are prone to theft – and carriers that have security issues.
Expedite a quick recovery. Incorporating TMS outputs in business continuity plans helps the organization to resume normal service as speedily as possible when a disruption occurs. This is crucial if the enterprise is to avoid losing ground to competitors. For example, a TMS can identify alternative carriers and routes if needed, and evaluate the impact on distribution networks of supply chain reconfigurations. Make sure that business continuity managers are aware of these capabilities and build them into recovery plans.
Collaborate with suppliers.Central to any top lineTMS solution is robust working relationships between shippers and carriers. Use these relationships to strengthen risk mitigation programs by making sure that these trading partners address resilience issues and that respective mitigation strategies are aligned.
Develop a global vision.Transportation management is becoming more international. TMC recently opened a control tower center in Mumbai, India, as part of a worldwide roll out of centers (see Freight Transportation Catches the Global Train blog, December, 2010). Extending the geographic reach of TMS solutions also enriches the data on freight flows available to risk managers and adds a global dimension to disruption avoidance programs.
Reinforce supply chain resilience. A robust disaster recovery plan is an important element of any risk management strategy. A TMS solution that incorporates infrastructure designed to maintain the operational integrity of the freight management function when a crisis hits makes a major contribution to the organization’s disaster recovery programs. For example, TMC supports its TMS solutions with data center in Minneapolis, MN with a redundant, state-of-the-art facility in Chicago, IL. In the case of a catastrophic failure, all of TMC’s core applications are supported by the fail over data center in Chicago. Even in the worst case scenario, systems will be online and running within two hours with close to no loss of data. This disaster recovery strategy is well-documented on a per-system basis, and is tested multiple times each year to ensure that everything will perform as expected in a real disaster scenario.
Managing the movement of freight as efficiently as possible is the primary mission of any TMS solution. But companies that neglect the technology’s risk management potential are almost certainly missing out on some significant paybacks.
*Scaling Back on Supply During Recession Could Leave Companies Stranded During Recovery, Industry Week.com, September 22, 2010.