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Transforming Logistics: Don't Fall Behind on These Trends

Analyst Insight: The findings from the 25th Annual Trends and Issues in Transportation and Logistics suggest that three complex supply chain elements - transportation, technology, and organizational structure - have companies waiting before committing to transformation changes in these areas. However, waiting too long to make a decision will result in a competitive disadvantage that will be difficult to overcome in a global economy. Understanding the interplay and interconnectedness of the three elements is essential in determining the path forward. – Mary Collins Holcomb, SCM professor, University of Tennessee, and Karl Manrodt, logistics and SCM professor, Georgia College and State University

Transforming Logistics: Don't Fall Behind on These Trends

To say that business has undergone change over the past decade would be a simple understatement. These changes have impacted the way we view and manage our supply chains, and the technology that is necessary to support it.

Transportation

Even Nostradamus would have difficulty determining where transportation is headed, or what pricing and capacity will look like in 2017. Right now, capacity abounds, leading both shippers and carriers on a slippery slope of bad behavior. That is, shippers demanding lower rates and carriers accepting them. Leveraging power to determine price does little to create value for both parties. Instead of falling into a trap of short-term gains, both parties should consider what they can do together, and how to reduce costs — not just prices.

Technology

Technology purchases in transportation aren’t an “if” question as much as they are a “which” question. Here, choices abound; with that in mind, how can firms make the best decision? Probably the most important factor to consider is how the TMS will support the goals of the supply chain and consequently align with the firm’s strategy. Utilizing a TMS is no longer a tactical or functional decision. Being able to operate in an omnichannel business environment with all its inherent complex and dynamic issues requires more sophisticated tools and techniques.

Organizational structure

One of the biggest changes in transportation has been the growing role of procurement in transportation. This has taken the form of assisting in the preparation and solicitation of RFQs, carrier negotiations, operational planning and carrier performance. While some firms have these four areas as procurement’s sole responsibility, others have moved to working jointly with transportation in these areas. In fact, procurement’s increased involvement in these areas was significantly higher statistically in both carrier negotiations and operational planning.

Choosing a path forward

The “masters of logistics” are leveraging their transportation volumes to gain significant improvements in efficiency and effectiveness, elevating transportation to a value-added activity. They are investing in internal partnerships with procurement to co-manage transportation with their strategic carriers to ensure that short-term savings do not derail long-term strategic goals.

The masters are also using technology to implement an integrated supply-chain strategy. Developing this capability requires timeliness of data that’s only possible through end-to-end supply-chain visibility supported through supply-chain technology. Without a technological capability, firms will continue to manage discrete networks for their distribution channels.

Lastly, supply-chain management still has not been elevated to the “C-level” in many firms. The masters, however, have statistically significant more chief supply-chain officers than other-sized companies giving them an important voice at the strategic level.

The Outlook

Facing new challenges in a changing, dynamic business environment is not a new circumstance for supply-chain professionals. What is different this time is an explosion of available options in transportation, technology and organizational structure that make it difficult to determine the right approach. However, waiting is not an option for firms seeking to build a competitive advantage. The masters of logistics offer suggestions for a direction that will generate long-term value.

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