The Benefits of Establishing a Centralized Transportation Department

By Kirk Graves | Senior Manager, Transportation | Chainalytics |

Don’t know where your product is? Having trouble estimating your transportation spend? Using carriers that are not authorized or contracted? Is your company growing and your transportation organization cannot keep up? Have you thought about taking control of your inbound transportation, but the task seems daunting in your current environment? Perhaps your decentralized transportation organization contributes to these problems.

Maybe you have thought about centralizing your transportation team, but you aren’t sure of the benefits or how to begin. Centralized transportation offers many benefits to organizations large and small and can lead to reduced spend and increased operational efficiency. It can also help elevate the profile of a key component of the company’s supply chain. Let’s take a look at some areas that can benefit from centralization.

Carrier Management and Sourcing – Centralizing transportation allows a company to have one voice with the carriers during bids and negotiations. Bringing all the company’s transportation operations together can increase your buying power and bring reduced rates. It can establish national account status, which can increase your visibility within the carrier organizations and enhance service levels. When you are centralized, you have your transportation experts working to secure the best rates for the company as a whole. Decentralized procurement can lead to local operations focusing on what is best for them and not the entire company.

Reporting and KPIs – Centralizing transportation simplifies capturing a holistic picture of key transportation measurements. You no longer have multiple entities trying to pull numbers together on a weekly or monthly basis only to realize the numbers are reported differently. When you no longer have to focus on “creating” reports, you can spend that time actually analyzing them and looking for trends. This will allow you to start looking towards the future and make strategic decisions that benefit the bottom line.

Operations – Having a centralized transportation operations team provides a consolidated headcount often unavailable through a decentralized team, thereby allowing for reassignment of resources to other areas of need. Also, resources are better utilized in a centralized environment, and transportation coordinators can manage multiple locations, depending on the size, vs. having individual coordinators at each location. Furthermore, centralized employees can cross train and perform multiple functions within the transportation operations.

Establishing an entity with clear advancement opportunities allows organizations to retain key operational staff members within their supply chain. By creating an environment that provides carriers with a single point of contact to resolve issues, transportation becomes a core competency and not an afterthought at the warehouse or plant.

Transportation Management System (TMS) – While a TMS is helpful in bringing decentralized operations together, using them efficiently can be difficult when coordinators are scattered across locations. Best practices start to slip, new employees don’t receive proper training, and super user support can be non-existent. Having a centralized operation helps facilitate “best practice” management within the system and allows for easy access to a TMS super user within the team. Keeping rates and the system up to date is simplified and more manageable with a centralized team.

Acquisitions and Expansion – Integrating new operations into a company is never a simple task, but having a centralized transportation team allows for a smoother transition. While you may have to hire new personnel to help with the new business, you will already have users who are experienced in the TMS. Their knowledge of the system and operational processes allows you to integrate new acquisitions more efficiently. Bringing new shipping lanes into the network also requires less effort. You will already have your central contacts with all the carriers you currently use to simply acquire rates for the new lanes, or if the volume is large enough, you can use the bid process that you already have in place with the centralized procurement team.

Spend Control – Centralization can help you get control of your spend. A team dedicated to transportation is more likely to select the proper carrier for a lane rather than simply give the load to whoever is the most convenient. Monitoring premium freight spend and a carrier’s acceptance performance are two key components to battling spend creep, and centralization makes keeping tabs on them easier. Centralization is also s great enabler to take over your inbound freight moves, which almost always leads to savings.

These are just a few of the many benefits of centralized transportation. Consider having seasoned transportation experts evaluate your current operations, management systems and carrier management to see if centralization is right for you. Having an outside perspective provide a detailed assessment of the financial and operational benefits available will help your organization develop a transition plan to a centralized transportation organization.

Kirk Graves is a senior manager in Chainalytics’ Transportation competency,  where he helps clients select the best TMS solution to meet their current goals and future growth. His experience includes evaluating transportation operations and systems to access current practices and providing recommendations on process and system improvements in addition to ‘best practice” recommendations.

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