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Many transportation executives 10 years or so ago were focused very largely on the domestic scene when it came to shipping. At least that was the case for many consumer goods, retail and high-tech companies. Retail, for example, was sourcing a great deal from within the United States. Certainly, there was trade with other countries, particularly Mexico and Canada, but the explosion of trade with Asia and other areas had yet to take place. Those companies that had an in-house transportation management system, more than likely had one that was as inwardly focused as those execs were. Those systems generally weren't concerned with international movements.
Is it totally different now? Does every shipper have an in-house TMS? And are all these systems managing freight both on the domestic and global fronts? No, no and no, say the experts. It may be difficult to imagine this in the age of globalization, but some companies don't source internationally, at least not directly. Other companies, no matter how involved they are with shipments overseas, don't have their own systems. There could be several reasons for that, but aside from expense many simply aren't interested in actually managing the movements. And many of those that have their own TMS, either have separate systems for each arena, or more likely, have a domestic-specific system and outsource the international transportation piece.
Given the continuing growth in global trade-not to mention the pressures from ever-demanding customers, rising fuel costs and freight capacity that is strained to put it mildly-transportation executives are being squeezed. Does that mean there's a TMS in every company's future? Probably not, but a recent report from Aberdeen suggests that technology in some form or other will play a part in responsible companies' efforts to deal with transportation challenges.
"Best-in-class companies now treat transportation management as a critical platform for information sharing and activity synchronization within the company and across suppliers and customers," writes Beth Enslow, author of the report, New Strategies for Transportation Management: How TM Practices Are Changing to Meet Today's Market Pressures. "These leaders achieve better performance results and get bigger bang for their transportation improvement initiatives. The reason for their success is clear: These companies have implemented different processes and technology enablers than their competitors."
Process changes include incentive-based contracts, capacity forecast sharing, self-service carrier appointment scheduling, and continuous planning. "Technology is seen by respondents as vital to enabling these process changes," she says. "Nearly 30 percent of companies plan to adopt commercial transportation applications in the next 18 months, and the majority of current users plan to extend their solutions as well."
Good news for developers and vendors who specialize in transportation management software and solutions. From his standpoint as solution executive at Dallas-based i2 Technologies, Razat Gaurav says that the "variabilities" associated with any shipment, inside or outside a given country, are so great that a reliable TMS solution has become indispensable. What affects one side of the domestic-international shipping continuum affects the other: witness the problems spawned by port and rail congestion in the U.S.
"I don't see the rationale for maintaining two different transportation management systems, one for domestic, one for international," says Gaurav. Existing and potential i2 customers concern themselves with both international and domestic shipping, as well as with how much of their transportation strategy will be handled in-house versus handed off to a 3PL. Ultimately, Gaurav says, much of the actual control of the shipping is in the hands of freight forwarders anyway, and their importance is not going to be diminished any time soon. "That's a pattern of reality, and that industry continues to consolidate and grow. Personally, I don't see that changing, unless companies are willing to invest in building a competency and a business organization on their own that has the resources to really deal with international movement of goods."
In the meantime, as far as international trade goes, increased visibility is perhaps the chief benefit to be arrived from a TMS, whether operated in-house or by a third-party.
"When it comes to international movement of goods, customers are looking for visibility into the movement of freight because there is a lot of risk in it," Gaurav says. In a shipment from China, for example, the chain of custody may extend through a dozen "hands" between a supplier's docks to final destination. "But every company needs visibility because it has an impact on their inventory levels, it has an impact on stockouts. Sourcing goods internationally is not just something that happens from a transportation perspective. It has very close linkages to other supply-chain planning functions, like the way they manage their replenishment plans. If you have a lot of variability in the movement of goods those other functions that are also very strategic to the company get impacted."
Visibility and capacity are the biggest issues in transportation management now, says Rod Strata, vice president and general manager of transportation and logistics solutions at Rockville, Md.-based Manugistics. But they don't seem to hold equal weight in both international and domestic shipping.
On the domestic side, capacity is perhaps the bigger issue. In that market, rate procurement needs to be collaborative, benefiting not just the shipper or consignee but the transportation provider as well. But building truckloads, and LTL, rail and intermodal movements turn on availability of the means to actually move shipments. Throw today's driver shortages and high fuel costs into the mix, and capacity is a serious hurdle for shippers.
"Domestic transportation solutions must handle large volumes of different types of freight mixes and lanes and modes and be able to optimize those and give the customer a very good plan to execute against," Strata says. "But without the capacity, it doesn't matter what the plan comes up with, if they can't get it delivered."
Perhaps visibility into capacity would be a better way to sum up the concern on the international side. Strata says shippers need to be aware that lead times are starting to grow in Asia because of demand and poor infrastructure. He says it can take as long to move something from a manufacturer's plant in inland China to the port of origin as it can take subsequently to get the boat from China to a U.S. port. Without track-and-trace capability from purchase order level on, uncertainty builds over meeting delivery times. He says some companies are starting to build safety stock inventory to guard against the risk of not meeting a deadline. But clearly that threatens to erase the advantage of sourcing in lower-cost countries in the first place.
Such visibility really is a concern as well for those who primarily ship domestically, Strata says. A hub-and-spoke DC in Cleveland, for example, may have rail connections and trucks running to any number of destinations in the U.S. But the international dimension is never absent since so many of the goods being carried are manufactured overseas.
There doesn't seem to be a magic number in, say, volume or number of shipments per day that dictates moving from a manual operation to an automated transportation management system, Strata says. "Let's say you have 200 orders coming in, and they're moving along, and you feel pretty good about that. Then, one was shipped short, or delayed, or another shipment was added-how do you go and recalibrate the mix on a manual basis? You can't. That's why I would suggest that companies adopt methodologies around packaged solutions in-house to manage that. The packaged solutions can also give them more than just rating and routing. It gives them the visibility piece tied in with the load management. It allows them to have much better controls with their transportation, regardless of the modes, across the supply chain."
John Criswell, director of global business processes and solutions for BDP International, a Philadelphia-based transportation and logistics services provider, says few companies are not involved in international shipping. But that doesn't mean they use an application that handles both domestic and global movements. While he thinks there is an advantage to one that performs both, a lot of customers tend to insource domestic shipping and source out the international transportation piece, depending on how much business they can attribute to overseas. "For them, if their business is perhaps greater than 60 percent domestic market, they may choose to outsource the pieces that are not their primary business," Criswell says.
Executives at BDP and other forwarding companies expect to see even more business as companies continue their own globalization process, and as they see the need to wring expense out of these extended supply chains. Freight forwarders also are likely to see business from companies reluctant to make another sizeable systems investment only a few years after implementing a TMS on the domestic side.
Those turning to BDP may use its Xpedion business process and information technology platform. Designed to enable decision-support communications among all parties to a logistics process, Xpedion "powers" a number of areas, including purchase order management, logistics planning, shipment execution and international regulatory compliance. Criswell says, "Xpedion is one of many components that manage the full picture of the global transportation process."
Two Into One
Regardless of the differing requirements of domestic and international shipping, Criswell says, you can leverage the two. "We see clients who want a complete end-to-end solution. They want to see what their domestic transportation costs are, and they want to see the international, and they are more apt to want to go to one place to see that than to many places."
In short, shippers are looking for the transparency and ease that requires fewer steps, not more, when it comes to transportation management.
G-Log's GC3 transportation management product is comprehensive in scope and can be used both domestically and globally. John Murphy, company product marketing director, thinks that is an advantage over modal-specific systems or geographic solutions. He says you lose "some aspect of business intelligence and value" by pre-determining the mode of transportation. "Also, from a geographic perspective, for all international shipments, there is a domestic component. There is always a final country that that freight arrives in. At some point they have a movement or drayage that typically will occur at a port that is a domestic U.S. move from the port to the final destination. So an international system or global system, by definition, has to be able to manage and execute domestic shipments by definition."
That final leg, from the port to final destination, is fertile ground for efficiencies if a comprehensive TMS is employed, Murphy says. "You will find backhaul opportunities, often there will be freight consolidation opportunities, your rates and carriers will be in one system-so when it comes time to procure rates and negotiate with carriers, all of your freight volume globally is leveraged in one system. Reporting can come from one system. There is an enormous amount of efficiency that happens when dealing with one system for all your transportation and logistics versus having several."
So much for the sales pitch. The reality, Murphy says, is quite different. Most companies still have separate systems for domestic and international, though he feels that is changing as the marketplace become more global.
He believes many potential customers with domestic or modally specific systems would like to change, or at least to expand their functionality. One obstacle to that is the archaic nature of the architecture of their existing systems, Murphy says. "A lot of those modal or geographic-specific systems were built on technology back when client-server was the best technology. There's nothing wrong with that, because that was the best then. But the reality is, the organizations that built those systems haven't fared very well with technology that they used, and financially they haven't been able to invest as much money as they'd like to upgrade those systems from an architecture standpoint. So you lose a lot in terms of collaboration because of the nature of client-server versus a web architecture."
He says flexibility in how user interfaces perform and look is often lost as well. "That is really important when you're talking about different cultures, currencies and geographies, and a lot of different people looking at the system."
Configurability is another issue with client-server architecture, according to Murphy. "It's just not one of its strengths. Client-server is not configurable and is not distributable from a collaboration standpoint."
An equally hard truth for some developers is that many companies are not going to invest in internationally capable systems if global sourcing is more a dream than a reality.
A stepped approach may be necessary-for the shippers and the developers that would like to sign them up as customers, Murphy notes. "Shippers might say, 'I don't know if I want to manage that yet, but I certainly want to know what's going on.'" Those shippers might be advised to partner with a forwarder like BDP, which incidentally has incorporated G-Log's GC3 product into its Xpedion platform. With the forwarder integrated into their own system, at a minimum they can know where their own merchandise or material is.
"Then I think a lot of their vision is, 'Once I have visibility I can start determining what segments of freight I 'd like to then manage myself.' That capability is very valuable for a global organization."
The decision whether to manage transportation needs in-house does not necessarily depend on the sophistication or size of a company. It's not as if companies start managing their own movements once they grow large, though clearly that can happen. Murphy cites DuPont as an example. It had as many as a dozen transportation systems in force when it installed a single instance of GC3 to give it a view into its shipments worldwide, as well as some planning and optimization capability. "Now in doing that, they didn't want to manage it all, so they gave forwarders and 3PLs like BDP, Exel and others access to GC3 to input the statuses and events associated with their shipments from a forwarding and shipping perspective."
Regardless of their size, most companies probably realize that managing transportation processes can deliver value to other parts of the company, such as customer service, replenishment and procurement. The question is how to properly attain that management? Murphy, Gaurav and others clearly feel a single system is best.
The complexities of a global logistics network are just too great to pass information around to multiple systems, in Murphy's view. "Bolting visibility and event management products and their databases onto existing domestic transportation systems risks losing efficiencies and synergies from a business process perspective that you would expect to get," he says. "Such a system actually limits you because you're trying to synchronize data across four or five databases. One platform is critical to the success of a global logistics network."
International and domestic shipping and trade are so intertwined today, Gaurav says, only a single system provides the needed visibility, planning and execution functionality. "If you don't have that capability, you're going to be sidelined into a very small niche and a very small market opportunity."
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