Planning it forward
It used to be just about selecting carriers and managing shipments. Now, transportation software is moving into forward capacity planning.
Earlier this year, one of the truckers in Kimberly-Clark's carrier base went out of business. But the personal and health-care products giant wasn't caught flat-footed.
Kimberly-Clark was able to swiftly analyze the ramifications for its distribution network by using special software. "We modeled the impact [of the carrier's exit,] including how much incremental capacity we needed to acquire from our other carriers," says Tim Zoppa, transportation center of excellence manager at Kimberly-Clark.
Kimberly-Clark is a pioneer in the use of a new type of forward-looking transportation software that helps shippers plan for their future truck capacity needs. Historically, transportation management systems (TMS) have focused on shipment execution, handling tasks like carrier selection, load tendering, and freight management. But they haven't been much use in helping shippers project their capacity needs out into the future.
"TMS applications are very good at optimizing within the order-delivery planning horizon," says Gartner analyst Dwight Klappich. "But they are not good at forward planning—weeks, months, quarters in advance."
Although companies have tried using other demand forecasting and procurement applications to determine how many and what type of carriers they'll need, Klappich says they haven't had much success. In his view, so-called "product-centric planning tools" are not suited to transportation planning because they can't get down to the required level of detail. In other words, they can't look at future capacity needs by lane, carrier, or piece of equipment.
Gary Girotti, a vice president at the supply chain consulting firm Chainalytics, agrees that traditional demand planning software isn't suited for the job of forecasting transportation needs. "People have tried to apply forecasting systems from products to transportation, and it just doesn't work. Demand plans do not care about modes," says Girotti. "That's why we need special tools."
THE NEW ARRIVALS
The good news for shippers is that in the past few years, a number of software developers have stepped forward to provide these special tools.
One such vendor is JDA Software Inc., which developed the application used by Kimberly-Clark. Called Transportation Modeler, the software is designed to draw data from the vendor's own TMS but can also be used on a stand-alone basis.
Kimberly-Clark (KC) has been using the software since 2006 to optimize shipments from more than 100 distribution centers in North America, using about 100 carriers. (Although KC has an extensive carrier base, it should be noted that most of the company's shipment volume is concentrated with fewer than 10 carriers.)
Zoppa of Kimberly-Clark says his company uses the tool to analyze the effect of shipping network changes on load planning. For example, if the company gets a lower price quote from a carrier, it might use the software to model how shifting freight to the new carrier would affect overall load tendering patterns.
"We can run changes through the model to figure out how it will impact freight expense or how it will affect participation [in shipping movements] by each carrier," says Zoppa. He adds that one of the biggest pluses from his company's perspective is that the optimization engine in the modeling tool is the same engine used in the TMS that manages K-C's day-to-day transportation operations.
JDA isn't the only software developer selling this type of application. A German TMS provider, inet-logistics GmbH, also offers a strategic planning module as part of its solution.
Inet-logistics' strategic planning module uses both forecasts and historical data on freight movements to run a simulation to provide a "picture of prospective transportation activity," says Werle Oswald, the company's chief executive officer. He adds that the module helps shippers optimize costs and capacity requirements within a network.
Another vendor offering software for transportation planning is Terra Technology, a supply chain planning software specialist. Terra has an application called Transportation Forecasting that's designed to assist with capacity planning. The software uses historical shipment data drawn from the manufacturer's enterprise resource planning (ERP) system to produce a daily forecast of shipping needs by lane and mode.
The forecasting application also allows users to plan ahead for special shipping requirements. For example, it can take marketing plans for product promotions weeks in advance and use the data to help determine how much freight capacity the company should reserve from its carriers, says Robert F. Byrne, Terra Technology's president and CEO. "Shifts in sourcing and volumes due to changes in manufacturing capabilities are also reflected in the logistics forecast," says Byrne, "so contracts and budgets can be more effectively managed."
PREPARING FOR A CRUNCH
For all its potential as an advanced planning tool, transportation forecasting software has yet to see widespread adoption by shippers. Klappich attributes that to the relative ease with which shippers can find a carrier willing to move a load for a reasonable rate these days.
"When capacity is plentiful, you figure anytime you want a carrier, you can get a carrier," Klappich says.
But that could well change if the predicted trucking capacity shortage materializes, Klappich warns. As shippers find themselves going farther down their carrier lists to locate a trucker willing to haul a load, their attitude will change, he predicts. "We'll see more interest in transportation forecasting over the next few years as capacity dries up."More articles by James A. Cooke
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