Rising Transportation Costs Raise Stakes for Transportation Management

There is more pressure to control transport costs as carrier costs exploded due to a chronic driver shortage

Managing the transportation of goods in the food and beverage supply chain has always been a moving target, no pun intended. What’s changed in a big way recently is there is more pressure to control transport costs as carrier costs have exploded due to a chronic driver shortage, while government regulations keep adding new costs and headaches. The Food Logistics 2013 reader survey revealed that rising fuel and transportation costs are the industry’s fourth biggest concern, following improving customer service, food safety and security, and reducing supply chain costs.

Fortunately, new technology, such as the Internet cloud and evolving software and hardware, gives supply chain managers more tools to better manage transport costs. Industry surveys indicate that food and beverage logistics decision-makers view transportation management systems (TMS) as delivering among the best returns on investment. No doubt, investment in TMS will prove worthwhile given the rising cost of transportation. For this to happen, decision-makers must understand the capabilities of rapidly evolving TMS software.

While carrier costs are rising, shippers are encountering a greater need for flexibility in their TMS systems as the food and beverage market becomes increasingly fragmented. Retailers are adding shelf-keeping units (SKUs) to meet a more diverse customer base. In addition, the growing omnichannel calls for less predictable orders and more single-item purchases. These factors increase the complexity of transportation management.

TMS automates planning and decision-making (defining the most efficient routes), transportation execution (carrier rate acceptance and dispatching), transportation follow-up (tracing shipments, collecting documents and sending alerts for delays) and reviewing and measuring performance. By measuring and monitoring arrival and departure times, idling time and miles per gallon, fleet managers can make proactive and informed decisions.

The advent of software-as-a-service (SaaS) delivery and the Internet cloud created a surge of TMS providers in recent years. TMS providers claim TMS is more feasible for smaller food and beverage manufacturers and wholesalers that were trailing their larger competitors in using TMS.

TMS providers say newer systems are especially helpful for mid-size food and beverage manufacturers and wholesalers that don’t have their own fleets. Companies that outsource transportation need automated systems that track openings on carrier routes as they become available, analyze the economics of shipments, review the carrier ratings, schedule the shipment and keep track of it. 

“It’s difficult to make educated decisions using Excel spreadsheets,” says John Riske, vice president of business development at Next Generation Logistics Inc. (NGL), a Chicago-based TMS SaaS solutions provider.

Route modeling has become a highly specialized field. Modeling is based on lanes, modal options, rates, service levels, carrier and fleet capacity, as well as a multitude of other decision variables and rules that must work in concert to create optimal decisions.

Companies continue to seek the efficiency of combining outbound and inbound deliveries.

“Grocery chains are starting to do a better job of tying their outbound and inbound together,” notes Mike Mulqueen, senior director of product management for Atlanta, Ga.-based Manhattan Associates, which provides a TMS offering. “We believe there is an opportunity for wholesalers—especially those with fleets—to do the same. This would enable them to bring more inbound freight under management.”

Riske at NGL agrees that many food and beverage players are looking to combine outbound and inbound shipments, but he doesn’t think it will make fast strides. “You need systems in place to provide visibility for better planning. In some cases, you don’t necessarily want to or can manage all of your inbound freight. There is risk on the inbound side; shippers assume ownership of the load, and more often than not, companies are not asking for the right information before converting to a customer pickup. They need to negotiate the correct pickup allowances, and a lot of times they don’t do this and leave money on the table. Companies don’t have the systems and tools in place to manage that.”