Everyone is trying to reduce transportation costs by optimizing business processes, but not all succeed. To understand why that happens, one need not look into the ‘what’, but the ‘how’.
The internet is dotted with scores of articles listing best practices and hacks to help shippers save on freight charges. However, what one must understand is that all such initiatives must be customized to address the context in which their organization is operating. And to do so effectively, one of the best ways is to leverage technology.
But I am using technology!
Sure. Every organization is using technology in some form or the other, whether it is Excel sheets, ERP, Cloud technology, or AI. But are you using the technology that serves your unique requirements? The answer is neither to jump on to the next-shiny-thing bandwagon, nor is it to be so smug about your organization’s technological prowess, that you don’t see any scope for improvement.
So what should I do?
Let’s start with basic questions.
- How much did you spend on transportation over the past five years?
- Is cost increasing?
- Is the RoI high enough to balance the cost?
- If it isn’t, what steps have you taken to control freight cost?
- Have those steps given you positive results?
- Do you feel you have sufficient insights to take informed decisions about freight bookings?
- How has your organization been performing against industry benchmarks?
- Are you prepared for the future?
Well, I admit the game’s getting tougher. What should I do?
Take heart – you are not alone.
According to the Wall Street Journal, companies spent a record USD1.5 Trillion on shipping in 2017. Freight rates increased after the storms in the US Gulf Coast and Puerto Rico strained the logistics network. Soon after a federal mandate made it compulsory for truck drivers to log hours by installing electronic devices on the trucks, effectively reducing the number of hours each driver can legally work. Rising interest rates, increasing fuel prices, and the new consumer culture that expects goods to be delivered the same/next day, has dramatically affected freight capacity. Moreover, this trend is not over yet, and shippers must prepare to deal with higher freight cost in near future as well.
Ensuring growth in such a restrictive environment can be possible only through innovation by leveraging technology. Only those organizations, that are able to align their digital strategy with their business strategy, will be able to make use of emerging technologies such as data analytics, automation, and artificial intelligence. A 2016 PwC study reiterates that technology is changing every aspect of how logistics companies operate, and that ‘digital fitness’ will be a prerequisite for success. It further states: “There is no other industry where so many industry experts ascribe a high importance to data and analytics in the next five years than transportation and logistics – 90% in T&L compared to an average of 83%”
This is complicated. Where should I begin?
Start small. Get the basics in place.
Get an Enterprise Resource Planning (ERP) solution if you don’t already have one, and integrate a Transportation Management System (TMS) to it. The American Shipper cites a study by the The Ohio State University, Fisher College of Business, led by Jim Hendrickson. It reported that while a majority of the respondents considered the ERP as the most critical system for their supply chain execution, 86% of the respondents claimed that an ERP alone was not capable of managing the supply chain and is best complemented by a TMS. And hey, don’t refer to the in-house patchwork of Excel sheets and good ‘ol paper documents as your Transport Management System. Let us reserve that term for commercial solutions that work seamlessly with other enterprise solutions.
If you are serious about shipping, a commercial TMS is non-negotiable.
A TMS can help you move freight throughout its lifecycle reliably, cost-effectively, and efficiently. Benefits include:
- Better customer service enabled by reporting and analytics
- Better warehouse management enabled by accurate and fast data entry
- Better delivery capabilities enabled by insights that allow you to, say, create bills of lading easily, figure out more economical routes, and put together a more effective supply chain network by accessing a larger carrier pool.
- Better security and insights through real time point to point monitoring.
- Better inventory management enabled by shipping on time and gauging customer demands
- Better evaluation of carrier performance enabled through data driven past reports
- Better freight accounting through automated audits, payments, etc.
- Better access to freight providers despite tight capacity
As per ARC Advisory Group, a commercial TMS can help you save as much as 8% on your shipping cost. Of these savings, less than 10% of net savings are absorbed by the TMS.
Keep Moving Forward with Aptude
Aptude is your own personal IT professional services firm. We provide our clients with first class resources in a continuous, cost-containment fashion.
Our support services will free up your senior IT staff from the overwhelming burden of day-to-day maintenance issues. Now they’ll have time to launch those new projects and applications you’ve been waiting for. Simply put, we can free up your resources and contain your costs. Let’s have a quick chat to discuss our exclusive services.
Still, these are expensive investments!
Not as expensive as the cost of NOT using them. Minimize these costs by utilizing Cloud based services.
Oracle Transportation Management is a great example of cloud based TMS. Combined with other cloud based offerings selectively chosen from Microsoft Azure, Amazon Web Services, and Google Cloud, your cost and risk could dramatically reduce.
Monica Rathbun, a Microsoft MVP with Denny Cherry & Associates describes the advantages of cloud technology in an article in the American Shipper: “The beauty of an IaaS and SaaS solution is twofold. First, the budget is far more digestible as a monthly fee rather than a hefty capital expenditure. Second, your IT environment remains the latest and greatest long term because you no longer pay to upgrade aging hardware and software.”
You could modernize your B2B EDI technology
If you use EDI technology, you have an opportunity to tap into greater efficiency and savings just by modernizing the setup. You could mix APIs with EDI, upgrade to modern EDI standards, or get a partner to implement best practices. You can explore this aspect in detail in this blog post that I posted some time back.
Are you making the most of Business Intelligence?
Business Intelligence (BI), in some ways, is the tip of the iceberg that Big Data analytics represents. It would be a great idea to leverage BI to improve your operations, if you aren’t already doing so, and simultaneously explore the transformative power of data. By improving your EDI technology (see above) you open the gates to better data. You could use BI to interpret that data to your benefit. Read more about this aspect of technology in this post that I had written sometime back.
Explore blockchain for smart bills of lading
Traditionally, shippers use paper bills to represent the cargo they forward to truckers and freight forwarders. Sent via express parcel delivery services such as UPS, DHL, or FedX, this process consumes time and money. Moreover, a bill of lading in this form can be stolen or get lost.
A segment of the market has opted for electronically transferred bills of lading. While efficient, it does entail bringing in another third party that would, by default, be privy to the information in the bills. That’s why, forward thinking companies are now exploring the blockchain technology, which renders bills of lading impervious to edits. In an article in the American Shipper, Stefan Kukman, CEO of CargoX states, “Blockchain has made possible, for the first time in history, to connect all the parties in the logistics industry in an open, trusted ecosystem with transparently defined rules of operation. Application of this technology to the bill of lading has resulted in the creation of a so-called “smart” bill of lading.”
So, technological innovation and adoption is the way forward?
Certainly! You see, technology enables you to make better decisions – whether it is the mode of transportation, or developing your supply chain based on real time rates, or consolidating your shipments to get you the best bargain. Technology is revolutionizing the way people live, work, and conduct business. For instance, currently AI is being used to study trends and predict future scenarios. However, the time isn’t far when AI will make decisions based on those insights. Christy Pettey shares in a blog on Gartner: “The ability to apply AI to enhance, and even automate, decision making, reinvent business models and ecosystems, and remake the customer experience could make many other emerging technology trends redundant.”
In other words, we are living in a rapidly evolving and connected world, where we can either ride the wave of technological change or be swept off by it. What’s your call? Do you now think you can start exploring technological innovations to be better prepared for the future? Join the conversation by commenting below!
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