When it comes to managing your freight expenses, there are a few options to consider. The three traditional methods are the use of a Transport Management System (TMS), a Transport Execution System (TES) and Managed Transport Services (MTS). Ultimately, it comes down to whether shippers want to manage their freight expenses in-house or outsource them.
A TMS provides optimization capabilities across multiple modes to improve service levels and reduce freight expenses. A TES is typically mode-specific and lacks optimization capabilities, but for shippers with simpler transportation needs, that’s often all they need. Large shippers with complex needs can look to MTS suppliers to plan and execute their loads.
For each of these options, software and service providers need to clearly define the path to success. Below are some effective transportation strategies for TMS, TES, and MTS providers.
Look to the cloud
SaaS solutions are becoming the industry standard, and this doesn’t just apply to small businesses targeting Tier 2 and Tier 3 customers. A robust SaaS solution offers the same features and functionality as an on-premises solution. , but can be deployed faster and generally more cost effectively. Companies need to integrate a SaaS offering into their short-term growth plan to stay competitive in a crowded market.
This is especially true during the coronavirus pandemic where more and more employees continue to work remotely. This includes professional functions that have historically been performed on site; a SaaS solution makes it possible to distribute rapid updates to all employees without the need for tedious upgrades and configurations.
Invest in the last mile
The last mile is the hardest and most expensive part of the supply chain journey. The growth of e-commerce and omnichannel should represent an opportunity for TMS providers. Currently, it only does this for a few fleet management providers. There are several reasons for this: Last mile routing is different from long distance routing. Many retailers will rely heavily on parcel solutions or a transport fulfillment solution rather than a multimodal TMS, and other retailers will consider crowdsourcing solutions rather than a TMS. The coronavirus has changed the outlook for direct-to-consumer commerce, and an MSD is now an essential part of that strategy. There is still room to compete on the last mile, but vendors need to be creative to take advantage of this opportunity.
For TES providers, the growth of e-commerce will only make the last mile more important. Better ETA and better visibility of when orders will arrive is a requirement.
Improve visibility in real time
Real-time visibility solutions are more important than ever. Electronic data interchange (EDI) solutions have proven insufficient to provide robust visibility. The new solutions use telematics and other solutions for better visibility. TMS providers should partner with transport visibility companies or create their own solution.
Turn to machine learning
Real-time visibility solutions increase the prospect that machine learning can be used to improve Estimated Times of Arrival (ETA). But unless a TMS provider has access to network transport data (public cloud providers do), the visibility provider will be in a better position than the TMS provider to use artificial intelligence to deliver these enhanced ETAs. .
But machine learning can also be used in innovative ways. For example, in last mile routing, the time it takes to complete a job depends not only on the kilometers to be traveled, but also on congestion, type of product delivered, type of residence and added value. services are provided at destination. Machine learning can be used to “learn” these constraints rather than having to time studies and hard code these constraints into the solution.
Invest in IoT
IoT and connected trucks and containers are gaining popularity in the market. Sensors in trucks can help provide better visibility and make predicted ETAs more accurate. In addition, connected trucks can provide information about the driving habits and specific driving habits of the driver, which improves safety and visibility.
For MTS providers, transportation strategies for success depend less on improving technology than improving service levels.
Demonstrate a higher degree of competence
MTS suppliers must be able to demonstrate a higher level of transportation competence than the potential customer and other MTS suppliers. Competence can be demonstrated in several ways.
First, MTS vendors can set service improvement or cost reduction goals, and then perform quarterly business reviews to track progress. Second, hire, train and retain the best talent available. And finally, have strong consulting capabilities in terms of network design, strategic sourcing and benchmarking of transmission tariffs.
Addressing outsourcing risks head-on
Two main risks need to be addressed. First, there are the technological risks. MTS providers must be willing to allow the customer to own the TMS. If the relationship ends, the MTS provider must have a method of transferring that TMS, configured to meet the needs of the sender, to its old customer.
Second, there is the risk of losing transportation expertise. The provider must be willing to operate in a hybrid model where some planning and execution tasks are controlled by the MTS provider and others are owned by the sender.
Improve price flexibility
MTS relationships generate fixed and variable costs. Fixed costs include salaries for planners and account managers, technology costs, and rent. Variable costs are based on the number of transactions and trips. Pricing must take into account both types of costs, but also meet the needs of the customer. Some customers want prices that reflect actual costs on an ongoing basis and some customers want consistent month-to-month prices despite seasonal peaks. The ability to turn fixed costs into variable costs can help provide pricing flexibility. An example of this is the movement of planners from one account to another to deal with seasonal peaks or shipping slowdowns.
Transportation strategies come in all shapes and sizes. For TMS and TES vendors, transportation strategies for success revolve around improved technology for optimization, visibility, and data aggregation. For SCM providers, transportation strategies are more focused on the service element, although technology remains a major differentiator. Whether a business manages its transportation expenses in-house or outsources them, these strategies should help suppliers be successful.