Estimated duration: 1hr
Introduction
TMS (or transportation management system) technology is absolutely necessary for any logistics operation. This software will measure and report detailed shipping records for inbound and outbound freight, monitor vendor and carrier performance, optimize routing and mode choice, and most importantly, help give you end-to-end visibility of freight movement. Not to mention, a TMS can reduce overall transportation costs by 30%. If implemented and used properly, a TMS is invaluable to your logistics operations.
However, companies must take great care to choose the right TMS for their needs. When purchasing a TMS, or evaluating the success of your current system, the first thing to consider is what your specific needs are. Consider how it will be used, what benefits it should provide and how well it will grow with your company.
There are many options to choose from and choosing the wrong TMS software will lead to unnecessary costs and limited value gained from the data-generating system. To get full value from a TMS system, there are 6 must-have features:
1. Carrier Contract Management:
Dealing with multiple carrier relationships at once, all with different contracts, is challenging. A TMS will alert you when a contract is up, display total shipping costs, help establish pricing, and track terms and agreements in real-time. You will always be sure you and your carriers are following the terms of your contract, as well as any special location-based regulations.
2. Partial Shipping Support:
In recent years, demand forecasting has become more and more accurate. This triggered lower inventories, with many businesses using a ‘Just in Time’ approach where items are received only as needed. In general, there is a demand for smaller, more frequent shipments. In turn, this has caused a universal need for partial shipping.
3. Item Visibility:
Due to rising customer demands and the need for efficient logistics operations, shipment visibility is now mandatory, even down to the item level. This is very important, as 65% of companies implement a TMS to improve customer service in the first place. A TMS provides frequent notifications, expectation alerts and some form of integration with carrier software. By tracking your items while they’re in transit, you’ll reduce cycle times, gain more control over logistics costs, and improve the customer experience.
4. Business Intelligence:
A TMS will track and analyse shipping trends. This helps you find the best lanes, vendors, carriers and modes. You will be able to develop performance metrics and help identify key performance indicators (KPIs). TMS analysis will help prevent future supply chain interruptions, reduce transportation costs and shorten delivery times. Again, significantly boosting customer service.
5. Back Office Duties:
A TMS with fully integrated accounting saves time doing paperwork, cuts administrative costs, improves cash flow and fills out the Bill of Lading (BOL) correctly every time. You’ll spend more time assuring customer satisfaction and gain time to focus on your core business operations.
6. Scalability:
Not all versions of TMS are scalable. If your company plans to expand at any point in the future, you need to get scalable software. That way you won’t have to purchase, implement and learn how to operate a new one in the future. A highly scalable TMS will grow with your business and increase the likelihood of success when dealing with highly complex routing solutions.
Since every TMS is different, it is important to assess the particular needs of your company and the capabilities of the technology. Do you focus on inbound freight? Outbound freight? Shipment-tracking? Or do you want one that’s all inclusive? Selecting a TMS is a critical point in a logistics operation and a best practice that will provide continued benefits.
Issues to consider when implementing a Transportation Management System
Implementing a TMS is difficult. These systems are expensive, complicated and can be discarded or misused very easily. To get the software’s full value, it must be implemented properly. This is risky, but necessary, and the results are numerous. You can’t just buy an expensive TMS and expect to start seeing results right away. It takes serious work to implement a TMS. You need full company support, and sometimes even a significant culture change within the organisation to start effectively using the software. Many companies fail at implementation for one reason or another. However, there are some areas that can easily produce a return on investment (ROI) when your TMS is still gathering data and employees are still learning how to use it.
Here are three things you will use your TMS for to start seeing savings right away.
1. Increase Usage of Preferred Carriers
2. Lower Cost Mode Selections
3. Better Routing
These areas are where most TMS programs excel, and historically, they are the safest target areas during implementation. This is because they are the easiest cost-saving methods to achieve with a TMS, even when it is brand new. An initial focus on these areas can help assure implementation is successful.
Implementation can be a risky period. Implement a TMS with the features most relevant to your business needs, do the necessary work upfront during implementation and setup, and you should have no problem seeing a return on investment (ROI) and added value to logistics management.
Visibility into logistics processes
Visibility into logistics functions is hands-down the most important benefit of a TMS. Visibility allows organizations to identify opportunities and challenges, so they can adapt their logistics management and make better decisions. Begin by asking the following question – “If you didn’t know what was wrong with your process, how would you change it?”
Organisations need to have visibility into their existing processes before they can develop a comprehensive transportation and logistics strategy. Having visibility is the basis of optimisation. It’s what allows you to plan, monitor and implement any and all changes within your logistics operations.
The benefits from gaining end-to-end visibility into logistics functions are plentiful. Below is a list of just a few of them:
- Find less expensive transportation modes
- Reduce unexpected shipping charges
- Avoid logistics disruptions
- Reduce safety stock
- Optimise inventory levels
- Improve cash flow
- Enhance customer service
- Quicker, more accurate reporting
- Easy regulatory compliance
- Correct Bill of Lading (BOL) every time
- Negotiate better contracts
- Analytics on business partner performance
- Smaller transportation department
- Better understanding of the cost to serve customers
Exercise
Take 15 minutes
Consider your company’s Transportation Management System (TMS). Significant emphasis has been placed on the need to implement a TMS carefully and with consideration for the “must-have features” discussed earlier within the module.
Does your company’s TMS have the 6 “must-have features”?
Outbound Logistics
Outbound logistics is an easy target for cost savings and improved speed of delivery. All companies have some form of optimisation process for outbound freight management. Although logistics management is complicated, the idea of outbound logistics is fairly simple: store as little product as possible and move it as quickly and accurately as possible while maintaining safety. Despite its simplicity, there are some common pain points.
Lean logistics
As mentioned, companies want to hold as little inventory as possible. For the most part, the longer an item stays in transit or in storage, the more value is lost. Using data gained from a Transportation Management System (TMS) is the only way to start implementing lean logistic practices.
In order to have small amounts of inventory on hand, you need very accurate demand forecasts. This is where all the information you collect from a TMS comes in handy. By tracking yearly cycles of shipment quantities, number of returned products and other statistics, you’ll get an idea of future demand. The more information you collect, the more accurate the demand forecasts will be. These predictions are what allow you to receive shipments just in time and have just enough products on hand to meet demand. In this way, reducing safety stock and overall inventory levels saves money without harming customer service. In order to apply lean logistics, you need to be efficient with inventory management. When inventory spends little time in the warehouse, and there’s almost none to spare, it must be quickly transported where it needs to be, when it needs to be there.
Last mile logistics
Last mile logistics is where a company actually makes contact with a customer. Many shipments are stalled in last mile logistics because of its complexity. Most companies don’t worry about the shorter routes of the trip and only focus on long routes, which are easier to manage than the final leg of the trip. Last mile logistics can account for up to 30% of a company’s transportation costs. It’s a difficult process to handle and most companies do a poor job managing it.
Here are the best practices of successful companies leveraging last mile logistics management:
Have a plan in place.
- Create a customer-focused plan. Satisfying the customer is the number one goal in last mile logistics, but every customer has different expectations for the incoming shipment. Businesses can only receive shipments at certain times and at specific locations; some businesses may prefer to have consistent deliveries at the same time; some customers need an exact delivery time so they’re not stuck waiting for a package.
- This last mile logistics plan should take into consideration the constraints and obstacles in the delivery process. For example, will weather disrupt transportation during certain times of the year? Is the destination difficult to get to on time? Will the trip be subject to unexpected delays? The answers to these questions need to be taken into account so that you will be ready for any interruption and deliver on the customer’s anticipated date and time.
Track, Analyse and Act on Information:
- Technology should support your individual last mile logistics needs. With Transportation Management System (TMS) technology, you can collect and analyse historic performance to find better solutions. You can find the best possible combinations of carriers, modes, routes, drivers and freight that best suit the company. In this way, you will improve operational performance and customer service.
- Track the progress of a truck while it is in transit, not just for data but to ensure the delivery is on time. Manoeuvring a 28-foot trailer on residential streets can be more difficult than it seems on paper. A driver may have questions about the freight and problems could occur. It is always best to have quick, accurate assistance for a vehicle in transit.
- Once you have historical data and are able to assist freight in progress, you can begin measuring client performance. You can see if they consistently miss their delivery time, aren’t there to sign for their package or if there are always delays at the dock. This information can be very valuable, as most customers don’t realise their own inefficiencies are a major source of delays in delivery.
Get Help from a Third-party logistics (3PL):
Most 3PLs have their own proprietary Transportation Management System TMS with detailed reporting capabilities. This ensures constant tracking of a delivery’s progress, provides accurate tracking of customer and carrier performance, and help with any possible problem. A 3PL can also contact a customer if the delivery will be late, explain why, and give an updated, approximate time of delivery in order to improve customer service.
Most importantly, a 3PL can work with a carrier who has had poor past performance. 3PLs have intimate industry knowledge and, depending on the 3PL, offer carrier coaching for almost any safety or performance problems. The point of this is to allow you to secure more reliable capacity in the future, because the availability of trucks is dwindling and you don’t want your customer service to falter because of capacity issues. Last mile logistics is difficult to navigate. Whether you outsource this to a 3PL or try to tough it out yourself, you will need a plan, the right technology, useful data and a customer-centric mind-set.
Everything in logistics management is done in the name of customer service. It’s a fast moving world with high demands and you need to keep up and provide respectable service or fall behind the competition. Approximately 70% of consumers are willing to spend more money for good customer service, so it may be the most important part of your business. Providing superior customer service can be a difficult task. You’ll need to add value to logistics processes, develop beneficial collaborations, and strive to offer service not just to customers, but your customer’s customers.
Adding value vs. cutting costs
It is predicted that within 5 years, customer experience will be more important than price, product or brand choice as a differentiator in purchasing decisions. The customer experience is highly important, particularly as customers have access to more product options and shopping choices than ever before. This makes competition between businesses more intense, and those who provide the customer with the best experience will have the upper hand.
A business will assure a profitable future by creating rapport with customers. 95% of people share their bad customer service experiences on social media, adding even more importance to the level of service you provide to your customers. In addition to that, over a third of customers stay away from a company for at least two years after a bad experience.
So, there’s a lesson here: a bad customer experience turns customers away and they tell their network about it, leading to lost sales and poor brand reputation.
What do you do with all of this information? Add value to your logistics processes instead of simply just cutting costs. The idea that cutting costs is more important than adding value is no longer a sustainable business practice. Cutting costs often leads to poor performance. The way to add value is to get serious about implementing logistics management best practices and create a company-wide mind-set of providing superior service. One of the easiest ways to add value to business operations is to partner with a 3PL.
3PLs gain end-to-end visibility of a shipper’s performance through the analysis of historical data and detailed reports. They are able to identify inefficiencies and improve functions throughout logistics operations that result in a more streamlined and efficient transportation process. More data means more metrics are available to recognise techniques to meet and exceed customer expectations.
The ultimate goal of logistics is to satisfy the customer by selecting the best transportation options. Shippers gain numerous benefits from 3PLs who are able to generate and analyse big data to find opportunities that drive success and improve the customer experience.