Executive Briefings

Transportation & Distribution: Moving Beyond Recessionary Tactics with Four Winning Strategies for Your Supply Chain

Analyst Insight: The economy and reductions in demand have focused priority on tactical initiatives within the supply chain. In 2010 there will be renewed focus beyond securing distribution efficiencies and renegotiating transportation rates (2009's top actions). As we exit the recession, companies are encouraged to embrace a 4-step strategy for transformational change.

Based on recent Aberdeen research (Integrated Transportation Management: Improve Responsiveness with Real-Time Control of Execution, in October 2009, and On-Time and Under Budget: Maximizing Profits with Efficient Warehouse Management, in December), the top pressures in transportation and distribution and the corresponding top specific actions of 2009 were:

• In Distribution - Over 70 percent of executives cited the need to reduce operating expenses as their top pressure. The top action was introducing more efficient order-fulfilling processes within the four walls of their distribution centers.

• In transportation - Over 65 percent of executives cited the increasing cost and service impact of transportation to overall supply chain costs as their top pressure. In response many have renegotiated contracts with their carriers during the last year.(some large companies slashed freight rates by 36 percent).

Companies with superior performance in on-time delivery, frequency of out-of-stocks and landed-cost metrics (the "Best-in-Class" performers in these recent studies) are differentiated by:

Visibility to internal distribution processes/cost.  Within the warehouse, efficiencies are under review and initiatives are under way to expand visibility by extending connectivity to transportation, customer service, manufacturing and finance departments.

Advanced visibility capabilities( both internal and external) at the SKU and inventory level and advanced dynamic optimization capabilities in transportation

Increased levels of interest in outsourcing execution processes. The past aversion to releasing control of execution-related areas is beginning to subside, as SaaS-hosted sites, B2B data exchange platforms and providers become more robust and secure, and 3PL options for managed systems and execution become more commonplace and comprehensive.

The Outlook

Tactical initiatives have been the primary focus of the supply chain executive in 2009. Going forward, four strategic priorities are recommended:

1. Examine overall network-wide distribution realignment based on cost of service.
2. Look beyond freight rate renegotiation to transformational changes such as increased inbound and outbound continuous moves, prepaid to collect conversion opportunities, etc.
3. Acquire supply chain visibility into item-level inventory and shipment landed-cost, and add the dynamic optimization capability.

Enhance collaboration with internal groups and external customers and trading partners.

Based on recent Aberdeen research (Integrated Transportation Management: Improve Responsiveness with Real-Time Control of Execution, in October 2009, and On-Time and Under Budget: Maximizing Profits with Efficient Warehouse Management, in December), the top pressures in transportation and distribution and the corresponding top specific actions of 2009 were:

• In Distribution - Over 70 percent of executives cited the need to reduce operating expenses as their top pressure. The top action was introducing more efficient order-fulfilling processes within the four walls of their distribution centers.

• In transportation - Over 65 percent of executives cited the increasing cost and service impact of transportation to overall supply chain costs as their top pressure. In response many have renegotiated contracts with their carriers during the last year.(some large companies slashed freight rates by 36 percent).

Companies with superior performance in on-time delivery, frequency of out-of-stocks and landed-cost metrics (the "Best-in-Class" performers in these recent studies) are differentiated by:

Visibility to internal distribution processes/cost.  Within the warehouse, efficiencies are under review and initiatives are under way to expand visibility by extending connectivity to transportation, customer service, manufacturing and finance departments.

Advanced visibility capabilities( both internal and external) at the SKU and inventory level and advanced dynamic optimization capabilities in transportation

Increased levels of interest in outsourcing execution processes. The past aversion to releasing control of execution-related areas is beginning to subside, as SaaS-hosted sites, B2B data exchange platforms and providers become more robust and secure, and 3PL options for managed systems and execution become more commonplace and comprehensive.

The Outlook

Tactical initiatives have been the primary focus of the supply chain executive in 2009. Going forward, four strategic priorities are recommended:

1. Examine overall network-wide distribution realignment based on cost of service.
2. Look beyond freight rate renegotiation to transformational changes such as increased inbound and outbound continuous moves, prepaid to collect conversion opportunities, etc.
3. Acquire supply chain visibility into item-level inventory and shipment landed-cost, and add the dynamic optimization capability.

Enhance collaboration with internal groups and external customers and trading partners.