The secret of top performers: Transportation management is a competitive weapon
Editor's Note: The following is a guest post by Chris Jones, EVP of Marketing & Services for Descartes.
With an intensifying focus on e-commerce and home delivery in the marketplace, transportation management is on everyone’s mind — and for good reason. A well-executed transportation management strategy can help companies optimize shipments (freight and parcel), increase visibility across the supply chain, and consequently improve customer service.
Similarly, by proactively managing inbound transportation, businesses can reduce transportation costs, increase shipment and PO visibility, improve supplier delivery performance, and reduce inventory. But are companies putting transportation management into action to reap these rewards, or paying it more lip service than realizing its potential?
Top-performing, high-growth companies are taking action. According to a recent benchmark survey of logistics service providers (LSP) and shippers — across multiple industries, geographic areas of operation, and transportation modes — conducted by the Georgia Center of Innovation for Logistics, Descartes Systems Group and DC Velocity, top performers are successfully implementing transportation management strategies and technologies to hone a competitive edge and drive revenue.
A competitive weapon
The annual Transportation Management Benchmark Survey demonstrated a compelling link between the value that business leadership placed on transportation and the financial success and growth of the company. More than 90% of respondents who viewed transportation as a competitive weapon fell into the industry-leading, or better-than-average, financial performance categories.
By proactively managing inbound transportation, businesses can reduce transportation costs, increase shipment and PO visibility, improve supplier delivery performance, and reduce inventory.
Supply Chain Dive
By contrast, those companies who viewed transportation management as a basic necessity, or even a necessary evil, lagged behind in both growth and performance.
“Interestingly, the size of the transportation spend had little impact on growth; the significant factor was the strategic value placed on transportation,” said Chris Jones, EVP Marketing and Services at Descartes.
As driver capacity continues to be a significant concern and the logistics landscape looks to further optimize last mile service, effective transportation strategies, tactics, and technologies are separating the top performers from the rest of the pack. Leading companies have realized delivery is just as important as the product for competing in the market: Amazon has built an empire on this paradigm. And despite common perception, it’s not just about reducing delivery costs.
Customer service for the win
Although cost control may seem like an obvious tactic, the 2017 survey of shippers and LSPs found leading financial performers were more focused on their customers than on cost reduction. The most successful and competitive companies surveyed prioritized initiatives that supported growth and innovation as a way to differentiate themselves in the marketplace.
Interestingly, the size of the transportation spend had little impact on growth; the significant factor was the strategic value placed on transportation.
EVP of Marketing & Services at Descartes
Rather than focusing on trimming costs, leading companies implemented transportation management strategies to make themselves more flexible, agile, and faster to enhance customer service. Poor financial performers, on the other hand, focused on using transportation management first and foremost to reduce costs.
“In fact, the top performers were at least two times more likely to value investment in transportation technology to improve customer service over cost-cutting strategies. And the results speak for themselves,” Jones said.
How to understand value
Superior transportation management strategies, tactics and technologies can improve customer service, drive growth, reduce costs and ultimately enhance a company’s brand. So why do some shippers and LSPs — notably poorer financial performers and non-competitive companies — still consider transportation management an afterthought?
Despite the competitive differentiation an effective strategy delivers, today’s transportation management focus is often too narrow internally and too cost-driven, without supporting growth, customer service or competitive differentiation.
Rather than focusing on trimming costs, leading companies implemented transportation management strategies to make themselves more flexible, agile, and faster to enhance customer service.
Supply Chain Dive
The inability to understand the full value of transportation and its impact on business performance is a key inhibitor to transportation management system (TMS) adoption, according to the benchmark survey. 35% of companies surveyed identified a lack of clarity regarding payback as the top issue inhibiting TMS investment, while 32% noted that transportation was not a priority for their executive team — underscoring the lack of understanding of transportation management as a critical tool to improve customer service and boost the bottom line.
Until companies recognize that transportation management is a multi-party, multi-organizational activity that delivers benefits across the enterprise, a missed opportunity will persist. Transportation information is valuable to many internal departments (e.g., warehousing, distribution), trading partners, and carriers; data can be shared to inform decision-making, streamline administrative and operational processes, and improve overall supply chain management efficiency.
But too many companies still don’t use it widely or effectively. Notably, top performers in the benchmark survey were as much as two times more effective at sharing transportation management information with the revenue side of the business (e.g., sales, customers) than their lesser-performing counterparts.
32% of companies surveyed noted that transportation was not a priority for their executive team — underscoring the lack of understanding of transportation management as a critical tool to improve customer service and boost the bottom line.
Supply Chain Dive
Forward-thinking companies understand the value of a well-executed transportation management strategy and have jumped on the TMS train. Driven largely by top-performers, 53% of shippers and LSPs will increase transportation spend over the next two years — with a greater focus on speed and service — according to the benchmark survey.
Companies are looking to improve transportation value by automating for better customer service, combining inbound and outbound operations, and centralizing transportation management. Respondents further explained that they will gain the greatest value from a TMS in the next two years through rating and optimized planning, increased visibility, execution, and performance analysis.
The secret is out. Transportation management has the power to improve the customer experience and drive financial gain. Indeed, those companies not focused on transportation run the risk of creating a transportation capability gap that could significantly impact their competitiveness. What is your organization’s approach to transportation management? Take a page from the top performers’ book and use transportation as a competitive weapon to fuel growth and performance.
Chris Jones is Executive Vice President of Marketing and Services at Descartes Systems. He has spent more than 30 years working with manufacturers, retailers, distributors, and logistics providers to improve their supply chain operations. Jones has held senior positions at Kraft Foods, Descartes and Gartner, and earned a B.S. degree in Electrical Engineering from Lehigh University.