Study: Transportation Management Key to On-Time Delivery

Companies can improve their delivery times and save money by making the right changes to their transportation technologies and business processes, according to a new study by the Aberdeen Group.

These days, its a rare company that isnt worried about how to get its products delivered on time. According to a new study, business are finding it harder and harder to meet on-time delivery promises to customers because of obstacles ranging from truck-driver shortages to soaring fuel prices.

But businesses stand a much better chance of being on time if they adopt new approaches to transportation management, said Beth Enslow, author of the Aberdeen Group report, "New Strategies for Transportation Management: How Transportation Management Practices Are Changing to Meet Todays Market Pressures."

In fact, many businesses have already started making changes to their transportation strategies, according to the study, which was sponsored by supply chain vendors i2 Technologies Inc., Manugistics Group Inc., LeanLogistics Inc., and Manhattan Associates Inc.

Business leaders are responding to the delivery crunch by "rethinking the carrier relationship, revamping internal processes and extracting more value from technology," Enslow said during a recent Webcast.

For the most part, respondents to Aberdeens survey saw technology as "vital to changes in business processes." Those that are making the right kinds of changes to their technology and processes can also save money, according to the study.

Of the businesses surveyed, 29 percent expect to adopt new commercial transportation management applications over the next 18 months.

Another 36 percent are already using commercial transportation management systems (18 percent for more than three years, 12 percent for one to two years, and 6 percent for less than one year).

Moreover, most current users of transportation management applications plan to extend their existing TMS (transportation management systems).

At the other extreme, 35 percent of respondents have no current or planned use of commercial applications—18 percent are satisfied with "internally or custom-developed software," while 17 percent are content with "spreadsheets and manual processes."

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Aberdeens study divided participants into three main groups: Laggards, Industry Norm and Best in Class.

Among the Laggards, transportation costs and shipment status remain in the transportation department, with other company departments calling if they have any questions.

On the technology side, Laggards still use spreadsheets or homegrown transportation execution systems, with manual shipment aggregation.

But among Industry Norm businesses, data (for example, transportation costs and options, shipment status, scorecards and route guides) is available online for internal use throughout the company. Companies also use either homegrown software or commercial TMS to optimize and execute transportation orders.

Best in Class businesses go a step beyond simply making transportation data available online for internal use. They also provide a subset of this data to external users, such as customers, suppliers and transportation carriers.

Generally speaking, these Best in Class businesses use a commercial transportation optimization and execution system, with either commercial or homegrown extensions for procurement, shipment visibility, dock appointments and so forth.

Best in Class companies save money on shipping while also improving on-time delivery, according to the study. Forty-seven percent of Best in Class businesses have been able to use their transportation initiatives to reduce "freight spend as a percent of sales" by at least two percent. Thats true for just 26 percent of Industry Norm companies and 25 percent of Laggards.

Meanwhile, 32 percent of Best in Class businesses have increased on-time delivery by six percentage points or more, compared with only 20 percent for Industry Norm companies and 22 percent for Laggard firms.

Also according to the results, among all respondents currently using commercial TMS, 37 percent expect to buy a shipment tracking/event management system; 20 percent for transportation procurement systems; 19 percent for transportation network design tools; 15 percent for transportation carrier score-carding/analytics tools; and 13 percent for Web-based dock appointment scheduling tools.

Respondents to Aberdeens survey also cited a number of changes to internal business processes and transportation carrier relationships, either already instituted or planned over the next 18 months.

Already adopted and planned changes to carrier relationships include self-service; Web-based scheduling; self-billing/self-invoicing; electronic tendering; electronic status messages from carriers; automated late shipment alerts; monthly/weekly capacity forecast sharing with primary carriers; incentive-based contracts; and "elimination of accessorials from contracts where possible."

When it comes to internal processes, adopted and planned changes include internal collaborative shipping schedules; total delivered cost analysis; extended 360-degree score cards; near-real-time or continuous planning; multicompany collaborative shipping schedules; and reductions in dock loading and unloading times.

Aberdeens Enslow provides specific recommendations in the report for companies of various sizes and types. On the whole, however, companies can boost on-time delivery by "understanding the new challenges and opportunities in transportation management; qualifying the performance improvements companies can expect from re-engineering their transportation processes; and prioritizing (courses of action) for gaining the most benefit from transportation initiatives," the study said.

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