The Analyst Corner: Fulfillment/Logistics

Freight capacity and transportation budget pressures continue to hound transportation managers. But savvy companies have discovered how to fight back


Based on benchmarks and discussions with approximately 400 transportation and logistics managers over the past year, Aberdeen Group has identified transportation practices that consistently result in performance improvements for companies.

Re-examine that Roadmap

For most companies, now is the appropriate time to re-examine the existing transportation roadmap. Rising rates, capacity constraints, new customer mandates and a more globalized supply chain have intensified demands on the transportation organization. Combine this with the new generation of Web-enabled transportation management systems and on-demand, software-as-a service alternatives, and the scene is set for rethinking transportation processes and supporting technology.

Upset the Organizational Applecart

When asked what their main objectives are for transportation transformation initiatives, most supply chain directors reply, "Centralized control and collaboration." In many cases, this will mean upsetting the organizational apple cart to create more efficient transportation operations and more opportunities for shipment consolidation. Best practice leaders often gradually centralize more and more of the transportation process across locations and divisions, including outbound, intra-company and inbound moves across for-hire carriers and dedicated fleets.

Aberdeen has seen companies succeed with a variety of approaches to centralization, including:

1. Full centralization of all transportation activities by forming a central load control center. This is the route taken by PPG Industries, a $10 billion diversified manufacturer of paints, coatings, glass and specialty chemicals. PPG is powering its load control center with an on-demand system from Manhattan Associates.

2. Centralized planning via a load planning center while retaining local transportation execution. The Goodyear Tire & Rubber Co. is using this approach, leveraging planning expertise from its lead logistics provider, Exel, and transportation management technology from Manugistics.

3. Centralized transportation information with local planning and execution. Unilever Foods uses this approach to enable activity synchronization across its local transportation groups and with other parts of the organization. The local transportation groups all use the same transportation management system, an on-demand solution from LeanLogistics, enabling all carrier appointments, shipment statuses, costs and transportation plans to be accessed online by any stakeholder in the organization. Moreover, the shared platform contains tracking and resolution capabilities, enabling collaborative resolution externally with carriers and internally across departments.

The other big cost-savings opportunity is changing ordering behavior. "Under our previous process, customer service didn't understand the cost of order changes or how or why they should take orders that would balance fulfillment workload," said a transportation director for a consumer goods company. Best practice leaders forge closer relationships with sales and customer service organizations to help these groups better understand the cost to serve the customer and alternatives for reducing costs.

Ways to drive down costs include switching the customer order date, enlarging the delivery window, changing the frequency of delivery, minimizing last-minute order changes and combining orders (e.g., replenishment and promotional orders) into the same delivery date. Likewise, internal replenishment orders can be tagged with a lower priority to allow acceptance of more last-minute customer orders. Companies can use this same cost-to-serve analysis to create improved pricing structures for customers to ensure orders are profitable.

Play Nice With Carriers

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