Transportation management systems have traditionally been used to slash freight costs. But shippers are now finding the software can do much more than that.
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
For decades, transportation management system (TMS) software has been an effective tool for helping shippers and third-party logistics service providers (3PLs) cut freight costs, plan routes, and select and manage carriers. But these days, many companies are discovering new uses for their TMS applications. They're turning to the software to handle a wide variety of tasks, such as managing capacity in a constrained market and making cost/service tradeoffs, all with the end goal of improving customer service.
As for what's behind the trend, it's partly because the economic sands keep shifting under the users' feet. Changing economic conditions can alter a company's concerns and priorities from year to year, said Frank McGuigan, CEO of Frisco, Texas-based 3PL Transplace.
Sephora sees the beauty in TMS
When a company buys or leases a TMS, it's usually because it's looking to slash freight costs. But for some, it's all about the service improvements. That was the case with French cosmetics retailer Sephora, which turned to a TMS to boost service levels as measured by on-time deliveries at its DCs and stores.
As a player in the fickle and fast-changing fashion market, Sephora, a subsidiary of the luxury products conglomerate LVMH Moët Hennessy Louis Vuitton, must keep its store shelves stocked with the very latest goods, from skin care to makeup to hair products. To do that, company relies on a smooth flow of goods into and through its own DCs and on to its more than 700 retail locations, according to report released in January by Dedham, Mass.-based ARC Advisory Group. Delays in the delivery of merchandise could cost the company sales and jeopardize customer loyalty, according to the paper, "Using a Transportation Management System to Drive Service Excellence." The report was written by ARC on behalf of MercuryGate International Inc., a Cary, N.C.-based TMS vendor.
A big factor in avoiding such delays is selecting the right carriers—ones that can be relied on to deliver merchandise to the retailer's DCs on time for outbound shipment to stores. But that requires the shipper to monitor and track the performance of all the carriers it uses. As Sephora's volumes grew, that process became increasingly difficult to manage. With little prospect of relief in sight, the company decided its best option was to automate the process.
Today, Sephora uses the MercuryGate cloud-based TMS to manage inbound shipments from suppliers all over the world. Among other benefits, the system provides full visibility into carriers' on-time performance records, which helps the team pick the best carriers for specific lanes. In addition to streamlining the carrier selection process, the TMS "is saving the company thousands of dollars by selecting carriers that are more efficient and provide greater value," according to the ARC paper. The net result is an improvement in customer service by ensuring that Sephora's brands are always on store shelves when promised, ARC said.
For example, in 2017, the shipper community's top priority was timely delivery, as suppliers sought to avoid penalties levied by Wal-Mart Stores Inc. as part of its "on time in full" delivery requirement, McGuigan said. But in 2018, one of the most capacity-constrained markets in years, companies are more worried about ensuring that their freight moves under contract, rather than via a carrier found through the spot market, where rates can soar to unpredictable levels, he said.
That trend means that TMS users are shifting their focus from metrics like on-time delivery to ones like primary tender acceptance, which is a measure of how often shippers are able to book loads with their intended carrier. "Otherwise, you'll be looking on the spot market, where the service level is not as managed because you're not used to doing business with them or because you've gone through a broker," McGuigan said. At a time when companies are struggling to meet rising service demands, that's a risk few shippers are willing to take.
TMS BALANCES COMPETING DEMANDS
When it comes to ways users are leveraging their TMS to boost service, there's more to the story than simply securing contract capacity. A number are also using their TMS to make cost/service tradeoffs. One market segment that has proved particularly adept at that is the third-party logistics community.
Today's 3PLs often find themselves caught between the conflicting transportation needs of different customers. To solve that conflict, they're increasingly likely to use a TMS to prioritize the variables that matter most to each client, instead of simply picking the lowest-cost option on the market, said Duncan Hopwood, director of engineering at Redstone Logistics, an Overland Park, Kan.-based 3PL that uses a TMS platform from Shelton, Conn.-based software vendor 3Gtms Inc. "If all you're offering is a rate play [to compare and minimize costs], you're not creating any value for the customer. You also need to provide planning and process automation" that offers the flexibility required to balance partners' needs, Hopwood said.
For one client, Redstone used its TMS to balance two competing demands—reducing labor costs and improving trucking efficiency—by tweaking the truck loading schedule to match the company's warehouse labor capacity, he said. While that may not have optimized the route from a purely transportation perspective, the strategy allowed the customer to avoid expensive overtime shifts, he said. "We adjusted the dates based on the availability [of goods]," he said. "So now the warehouse crew doesn't have to run overtime to match some crazy transportation plan that says they have to ship everything by Monday."
In another example, Redstone used its TMS to balance a customer's demand for low freight costs with its stipulation that it avoid working with a certain carrier partner. "When you use a rate engine, you can select the least-cost provider," Hopwood said. "But say some customer never wants to see Carrier XYZ? We can 'de-conflict that' and keep the customer's business by choosing a different carrier, even if it's slightly more expensive."
In a third example, Redstone used its TMS for balancing the demand for an efficient route with the need to minimize dwell time. With the aid of its TMS, the 3PL identified certain warehouses that frequently have long delays—even when a driver has an appointment—with the end goal of positioning those facilities as the last stop on the route, where they wouldn't disrupt other deliveries.
The ability to make these kinds of tradeoffs is becoming more critical as customers at every stage of the supply chain increasingly expect a seamless, near-perfect experience, said Karen Sage, chief marketing officer of Cary, N.C.-based TMS vendor MercuryGate International Inc. Providing that level of service can be a headache and a half, she acknowledges, but the rewards of meeting—or exceeding—service expectations can be great. "Customer service is one area in which shippers must meet a high bar that has been set, but if they excel beyond the expected minimum, it presents an opportunity to leverage it as a competitive differentiator," Sage said.
MANAGING THE LAST MILE
These days, TMS are even playing a role—albeit an indirect one—in ensuring that the all-important last-mile delivery is executed to plan, according to one consultant. In a June 21 research brief, "TMS and the Current State of Last-Mile Deliveries," ARC Advisory Group analyst Chris Cunnane argued that even if shippers don't actually use their own TMS to manage these moves, the software can nonetheless contribute to the process by keeping things on track during the run-up to the last mile.
"One of the most overlooked aspects of last-mile delivery is the journey to get there," Cunnane wrote in the brief, which was prepared by ARC on behalf of MercuryGate. "Last mile is a small component of the overall supply chain strategy. Technologies like a transportation management system have proven effective in managing the first and middle miles, which are a critical part of ensuring effective and efficient last-mile deliveries."
TMS technology helps make that happen by bridging the visibility gap on both inbound and outbound shipments. Without such tools, many companies have only a murky picture of their inventory as it moves between suppliers, warehouses, stores, and customers, according to ARC.
EXPANDING SPHERE OF INFLUENCE
The role of a TMS in supporting last-mile delivery is just one example of how the well-established software tool is expanding its sphere of influence throughout the supply chain. As TMS software touches more and more aspects of the modern retail ecosystem, it will play an increasingly essential role in monitoring and managing transportation operations.
"A TMS gives you visibility into how your freight is going to move, and it lets you measure deviations," said Transplace's McGuigan. "Without that system, you'll have your CFO knocking on your door 45 days later, asking why your freight costs went up, and you won't have an answer."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.