By Mike Hane | Senior Director, Transportation | Chainalytics
The end of the 2016-2017 bid season is in sight for many U.S. shippers, who are locking in contracts and updating routing guides. But in the always-changing world of transportation rates and capacity, 2017 promises to be very different from 2016:
- Shippers now face rising transportation rates and dwindling capacity, while they simultaneously look to implement bids that secure carrier capacity, match their customers’ service level demands and address executive pressure for lower costs.
- While transportation rates declined last year and fuel costs stayed relatively low — meaning shippers didn’t need to try so hard to hit their numbers — shippers can no longer hide behind 2016’s excess truckload capacity to hide flaws in their execution systems or processes.
There’s a lot of pressure. And since 2017 market conditions can’t cover subpar systems and processes, shippers need a plan in place to make sure things are running smoothly and that lost bid savings (aka “bid leakage”) are minimized.
Why Good Processes & Systems Are Especially Important Now
Times of rising rates highlight the weaknesses of legacy systems. Held together through workarounds and tribal knowledge, these systems can not help shippers achieve all possible savings, or to hold people accountable.
Now is a great time to take stock of your transportation approaches, processes and systems. To get ahead of bid leakage and system inefficiencies, ask yourself:
- Are We Tracking Bid Compliance? Having good processes and systems in place to track routing guide compliance is key to turning identified bid savings into realized savings that flow to the bottom line. But plenty of shippers do annual bids only to leave bid execution to decentralized transportation teams. Without ongoing oversight to determine if carriers are keeping to their commitments or whether planners and dispatchers are shipping via the right mode, giving freight to the right carrier, paying the right price, etc., shippers’ transportation spend can get skewed–a problem that often isn’t readily apparent as the issues arise. Better oversight means having systems and processes in place to catch deviations from the bid plan and resolve them before they get out of control as the market tightens.
- Is Our TMS Doing All It Can for the Business? Many early adopters of a transportation management system (TMS) are using old, outdated systems. If you’re thinking about how to use your existing TMS to its full capacity, or even moving to a completely new technology, consider that you may simply need to upgrade to a newer TMS version or take advantage of a different system module. Likewise, if your TMS is somewhat dated, the employees who implemented it or were trained as “super-users” might have moved on to new roles, thus reducing your internal expertise over time. A TMS is a living, breathing thing that takes a lot of maintenance and care to keep it tuned as your network and service requirements change. If your customers are ordering differently–for example, necessitating fewer, more-frequent shipments–you may need to change your TMS to adjust to those changes to ensure you’re operating at peak efficiency
- Just How Effective is Your 3PL? If you hired a 3PL to manage your shipping, is the 3PL providing the value you originally expected? If your company or product portfolio has grown or changed significantly–or you outsourced your business to your 3PL when cloud TMS had some limitations to avoid making a large, traditional TMS investment–consider that online cloud TMSs have added a great deal of functionality over the past several years. And software-as-a-service (SaaS) TMS is not as big an initial investment compared with a more traditional TMS.
This year–more than in years past–there are many technological aspects to consider in ensuring your bid gets implemented as expected and creating a more-efficient, more reliable supply chain in the process. Chainalytics is a neutral supply chain consulting partner that can help you find the best strategy for your company. Please reach out if you’d like to learn more.
Chainalytics Transportation Senior Director Mike Hane has worked in the transportation software and consulting services field for over 20 years, 11 of those with Chainalytics. His main focus is helping companies take costs out of transportation networks while improving customer service. He has worked on over 100 projects across many industries in North America and Europe, primarily in sourcing, fleet/mode analysis, TMS improvements, and strategic network design.
Read more about the underlying role a TMS plays in successful transportation management:
- (BLOG) What to Do If It’s Really Time to Migrate Off Your TMS
- (BLOG) Investing in a New TMS? Here’s How to Prioritize Your Business Requirements