Blog Cash Management Applications Best practice
January 9, 2018
Are Transportation Management System (TMS) buyers biased when it comes to the planning and execution aspects of a TMS? Andreas Grundsell thinks so. In this article, he explains why and suggests a whole new approach to what a transportation department actually is.
Do TMS buyers have the right perspective?
In my experience, most TMS (Transport Management System) buyers are biased when it comes to the planning and execution aspects of a TMS, propelled by the assumption that if they plan correctly, the execution will proceed at highest possible level of efficiency.
In reality, most TMS buyers will never even reach the starting block of that assumption and should focus instead on what they really can do to increase efficiency.
Prerequisites for planning
Planning requires that three conditions be met: the buyer should have direct control of assets, relative freedom to plan and a very detailed model of the complete transport network. Let me explain:
Control of assets
If you are a buyer of transport services and not a carrier yourself, at best you can achieve a limited tactical planning capability as your control is indirect. Of course, you could directly control a procured carrier, but then it’s a pure financial question – a cost in your income statement rather than an asset in your balance sheet.
Relative freedom to plan
If you have a customer order point that is situated in production or a DC (Distribution Centre), transport “planning” is to a very large extent a consequence rather than a planning exercise.
A very detailed model
You need the capability to run simulations and what-if scenarios. If you don’t, in a best-case scenario your planning will be little more than a washed-out assumption based on averages. A human operator will outperform any planning system if you don’t have a detailed model customised to your specific reality.
“When you don’t control the assets, you basically use the limited options you have to become the hero of the day.”
Let’s put this into context: a buyer of a TMS that
buys transport services externally (that means most of them!),
executes carrier tenders in their respective networks in two-to-three-year increments (that means most of them!),
has not procured a large variety of redundant transport lanes from various service providers in order to create a high degree of planning freedom (that means most of them!) and
has its customer order point anywhere but in the transportation department (that means almost everybody!)
will do better to significantly downplay or even remove the planning requirements of the next TMS RFQ.
Top motivators vs promoted features
Leading analysts regularly publish top motivators for TMS buyers, with “visibility”, “process automation and operational efficiency” and “cost management” usually topping the rankings. Aspects such as “decision support” and “agility” – terms typically associated with planning – are found further down the list.
Yet, when scrolling through most vendors’ websites or walking through any event or supply chain professionals conference where TMS vendors promote themselves and TMS buyers swarm, planning is one of the most promoted features. That’s odd, and yet it raises very few eyebrows.
A paradox, it seems – or is it just the effect of well-spent marketing budgets?
Thriving on the daily glitches
Most of the people working in your transportation and logistics department are hands-on, operationally focused professionals, and usually, they’re experts at managing deviations. Despite what they may claim, they thrive on the daily glitches.
But when you don’t control the assets, you basically use the limited options you have (your procured network) or else you do something totally out of the box and become the “hero of the day” (which you can’t plan for anyway, as you don’t control the assets in real time).
That’s what “visibility” is all about, preferably real-time visibility. Alas, however useful it may be, it’s not planning – it’s a way to effectively present live data from your (sourced) network so you can act on it.
“I suggest you view your transportation department for a procurement, purchasing and sourcing operation.”
Changing shipment routes within your network isn’t planning either (there are a few exceptions, but let’s ignore them for now) – the changes are limited by your procured services.
Given a short span of operations, you will have explored close to 100% of your available, viable options based on historical data – not a new simulation or what-if scenario every time, but just a reminder of how you did it the last time you had a similar problem (again, remember that you don’t directly control the assets).
If your TMS can help you find those old patterns or suggest them to you automatically, then you can achieve “process automation and operational efficiency” – something predictive analytics and AI can help you with but which requires a lot of transactional data – not something that typically resides within an in-memory planning application.
How about a new approach?
So, what should you do if you are considering a TMS investment? Well, I suggest you view your transportation department for what it is: a procurement, purchasing and – every now and then – sourcing operation.
That means you have a P2P (purchase-to-pay) process and an order execution process in an external, one-to-many or, preferably, many-to-many business network that should use a standardised messaging exchange. Let’s start there and see where that takes you.
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