Executive Briefings

Four Major Trends in Transportation Management to Keep Close Tabs On

Analyst Insight: In 2013, four trends will become hot topics for transportation operations in companies large and small: transportation continuity planning, fuel efficiency and the move to alternative fuels, driver shortages, and transportation category management. - Mario Hegewald and Jim Osborne, Senior Managers in Ernst & Young LLP's Supply Chain Advisory Practice

Transportation continuity planning: Sandy, and the storm that followed, has focused shippers on the need for transportation continuity planning.  Most organizations don't have a formalized plan - instead, they rely on talented people to respond to a difficult situation.  We suggest three basic actions:

1. Develop a well-articulated, realistic continuity plan with your core carriers. Take a collaborative approach:  extend operating hours, work with core carriers to leverage available capacity, and establish emergency plans with all carriers before the need arises.

2. Put in place a plan for proactively managing distribution planning levels by moving material inland or by increasing safety stock ahead of time.

3. Understand private-fleet capacity and your organization's ability to redeploy this capability to your most vital lanes.

Fuel efficiency: Many operators are grappling for the right approach to mitigate fuel and equipment costs.  Smart companies address this issue by:

1. Launching an internal alternative fuels pilot program or ensuring core carriers have a program in place, and joining the EPA's SmartWay program.

2. Measuring the total cost of ownership of alternative fuel vehicles, and considering the implications of high acquisition costs, fueling infrastructure limitations, and maintenance, repair and overhaul.

3. Tracking diesel pricing and incorporating hedging strategies into long-term plans.

4. Utilizing the latest route optimization modeling software and engine-monitoring systems to optimize fuel efficiencies.

Driver shortages: analysts believe the trucking industry is more than 40,000 drivers short of meeting current demand.  Scarcity will increase in the near term.  Shippers need to improve the level of collaboration with their core carriers, balance the utilization of private fleet versus purchased transportation, and evaluate creative outsourcing solutions.

Transportation category management: more than 75 percent of companies still procure their transportation services on the spot market. This practice is usually a source of increased cost and decreased service quality. Forward-looking companies are leveraging transportation spend by turning transportation into another strategic sourcing category, investing in strategic partnerships with carriers, and proactively asking themselves about the possibility of outsourcing transportation functions.

"¢ Assess the current state of your transportation function in terms of people, processes and technology. The Supply Chain Operations Reference (SCOR) provides a solid benchmark for doing this.

"¢ Develop a clear understanding of the role that transportation functions play in helping your company achieve its overall vision.

"¢ Create a road map that lays out how the transportation organization will need to change in terms of people, process and technology in order to meet that vision.

                                        The Outlook

Transportation will continue to grow in importance across all industries and have a direct impact on the bottom line.  It's vital for companies to stay ahead of the aforementioned trends.  Remember that the time for continuity planning is when there isn't a disaster looming. Be ever-watchful for ways to improve fuel efficiency. Anticipate driver shortages - strategize and collaborate with core carriers to find creative solutions. Optimize transportation organization within your company to remain consistent with your vision.


Keywords: supply chain, supply chain management, transportation management, inventory management, EPA SmartWay, driver shortage, fuel price volatility

Transportation continuity planning: Sandy, and the storm that followed, has focused shippers on the need for transportation continuity planning.  Most organizations don't have a formalized plan - instead, they rely on talented people to respond to a difficult situation.  We suggest three basic actions:

1. Develop a well-articulated, realistic continuity plan with your core carriers. Take a collaborative approach:  extend operating hours, work with core carriers to leverage available capacity, and establish emergency plans with all carriers before the need arises.

2. Put in place a plan for proactively managing distribution planning levels by moving material inland or by increasing safety stock ahead of time.

3. Understand private-fleet capacity and your organization's ability to redeploy this capability to your most vital lanes.

Fuel efficiency: Many operators are grappling for the right approach to mitigate fuel and equipment costs.  Smart companies address this issue by:

1. Launching an internal alternative fuels pilot program or ensuring core carriers have a program in place, and joining the EPA's SmartWay program.

2. Measuring the total cost of ownership of alternative fuel vehicles, and considering the implications of high acquisition costs, fueling infrastructure limitations, and maintenance, repair and overhaul.

3. Tracking diesel pricing and incorporating hedging strategies into long-term plans.

4. Utilizing the latest route optimization modeling software and engine-monitoring systems to optimize fuel efficiencies.

Driver shortages: analysts believe the trucking industry is more than 40,000 drivers short of meeting current demand.  Scarcity will increase in the near term.  Shippers need to improve the level of collaboration with their core carriers, balance the utilization of private fleet versus purchased transportation, and evaluate creative outsourcing solutions.

Transportation category management: more than 75 percent of companies still procure their transportation services on the spot market. This practice is usually a source of increased cost and decreased service quality. Forward-looking companies are leveraging transportation spend by turning transportation into another strategic sourcing category, investing in strategic partnerships with carriers, and proactively asking themselves about the possibility of outsourcing transportation functions.

"¢ Assess the current state of your transportation function in terms of people, processes and technology. The Supply Chain Operations Reference (SCOR) provides a solid benchmark for doing this.

"¢ Develop a clear understanding of the role that transportation functions play in helping your company achieve its overall vision.

"¢ Create a road map that lays out how the transportation organization will need to change in terms of people, process and technology in order to meet that vision.

                                        The Outlook

Transportation will continue to grow in importance across all industries and have a direct impact on the bottom line.  It's vital for companies to stay ahead of the aforementioned trends.  Remember that the time for continuity planning is when there isn't a disaster looming. Be ever-watchful for ways to improve fuel efficiency. Anticipate driver shortages - strategize and collaborate with core carriers to find creative solutions. Optimize transportation organization within your company to remain consistent with your vision.


Keywords: supply chain, supply chain management, transportation management, inventory management, EPA SmartWay, driver shortage, fuel price volatility