Logistics technology: Transportation Management Systems (TMS) — made to measure
The TMS market broke through the $1 billion mark in 2006 and will continue to plow past that milestone and grow about 7 percent annually—and we’re not surprised. Here’s how three shippers have recently yielded positive results after upgrading an existing package or finding a perfect fit with a third-party vendor.
By Bridget McCrea, Contributing Editor -- Logistics Management, 5/1/2008
When asked what their most strategically important supply chain technology investment would be in 2008, only 7 percent of responding shippers singled out Transportation Management Systems (TMS), according to a recent report from Boston-based AMR Research.
However, the report also found that 52 percent of respondents have already deployed TMS, and 33 percent are planning to put it to work in the near future. The numbers are telling, says John Fontanella, AMR’s vice president of research, and prove what a prominent role TMS has played—and continues to play—in the overall supply chain technology landscape. TMS has not only arrived, it’s helping shippers perfectlly trim their logistics operations to the perfect size.
Adrian Gonzalez, director of Dedham, Mass.-based ARC Advisory’s Logistics Executive Council, says the TMS market broke through the $1 billion mark in 2006 and continues to plow past that milestone to grow at about 7 percent annually. Driving the growth, says Gonzalez, are factors like the high price of fuel, the need for improved fleet management systems—for shippers with private fleets—and the fact that third-party logistics (3PL) providers are replacing proprietary solutions with a more flexible TMS to allow for quick on-boarding of new customers.
“In many cases, that means either upgrading an existing TMS solution or moving away from a proprietary platform and embracing a third-party solution,” says Gonzalez. Other key trends within the TMS space include growing interest in on-demand/software as a service (SaaS) solutions, and mergers within the industry such as the recent $45 million acquisition of LeanLogistics by CHEP USA, Inc. “The fact that LeanLogistics was bought by CHEP,” says Gonzalez, “and the fact that the company—which was a leader in the on-demand TMS space—got a nice valuation adds validity to the on-demand model.”
Looking back on his nine years of covering the TMS space, Gonzalez says that even though the market has seen new growth, the drivers remain pretty much the same: shippers need to meet customer service levels at the lowest possible cost. And with fuel prices at record highs, hitting that mark is getting more and more difficult, making the need for a solid TMS that much more important. Add in the growing global economy, the need to handle transportation operations across multiple modes, and the fact that customers are demanding tighter delivery windows, and the case becomes even stronger.
“These elements continue to make the transportation manager’s job more challenging, day in and day out,” says Gonzalez, “and helps justify the need for a TMS for any company that doesn’t already have one in place.” So, slow adaptors take note: Here are three shippers that are using TMS to manage today’s mounting transportation challenges in three separate industries.
Perry Ellis moves in style
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| Marvin Leto, vice president of corporate logistics, Perry Ellis |
As a designer, distributor, and licensor of a broad line of men’s and women’s apparel, accessories, and fragrances, Perry Ellis International, Inc., of Doral, Fla., has a sophisticated transportation system that spans the globe. But when the company recently completed an evaluation of its global transportation processes, it realized that the technology it was using was not adequate to meet its current needs—nor would it be able to scale to keep pace with its anticipated growth.
As the firm continued to see the volume and complexity of its service contracts grow, the company realized that its current system, which was comprised of text-based documents and spreadsheets, was no longer adequate. After a thorough analysis of its current processes, Perry Ellis defined several key requirements for a new transportation management solution: precise calculations of bottom-line shipment costs and multiple routing and service options for its 14 service contracts; sophisticated audit controls over carrier billing; a quick and user-friendly system implementation; and the ability to seamlessly add new functionality as the company’s needs grew.
According to Marvin Leto, vice president of corporate logistics, the firm evaluated several TMS options before choosing Management Dynamics and its on-demand Rate Explorer Transportation Management solution. In place for just over a year, the solution manages the TMS, calculates full bottom-line freight costs, evaluates rating and service options, and improves freight audit accuracy. As bills of lading are received, the freight audit tool conducts a rate search of each shipment to verify that the proper version of the contract is used, along with any contract amendments and assessorial charges. This ensures that overcharges are promptly acknowledged and resolved with the carrier.
“Previously we were using a third party vendor to audit all of our freight bills,” says Leto. “It took a long time for us to get refunds and we found the process to be very inconsistent. We were losing literally thousands of dollars per month in carrier overcharges and this was just not acceptable.” By bringing the freight audit process in-house and implementing the freight auditing feature, Perry Ellis was able to identify and resolve $220,000 in bill-of-lading overcharges.
As a result of its TMS implementation, the company is now better equipped to manage the increased sophistication of its contracts and to confidently calculate accurate bottom line rates. Using the system’s search engine, for example, Perry Ellis can search across multiple service contracts in real-time, identify all routes and service options based on specific criteria, and select the best price/service combination within just a few seconds.
By automatically comparing multiple carrier rate and service options side by side, the company can make faster, better informed carrier decisions that result in both time and cost savings. The TMS also helps Perry Ellis keep an eye on carrier activities—something its previous system didn’t allow for. “What we’ve found is that carriers will generally be sloppy with you if you’re sloppy in your dealings with them,” says Leto. “They become very well behaved when they know you’re watching them.”
Sunny Delight’s recipe for success
Bottling sunshine since 1964, Sunny Delight is one of those brands that gets into your head when you’re a kid, sticks with you well into adulthood, and is then passed on to your offspring as soon as they’re old enough to drink from a cup. Based in Cincinnati, Sunny Delight Beverages Co. makes its beverages in four U.S. locations, each of which includes its own manufacturing, warehousing, and distribution operations.
Sold by Proctor and Gamble (P&G) to a private investment banker in 2004, Sunny Delight found itself on its own and in need of a good transportation management process. “We were a $550 million company with no system of our own,” says Jim Glendon, the company’s supply chain director. “We had one year to develop our own systems, including a TMS.”
The first step, according to Glendon, was to figure out if it would be wiser to build a proprietary system or purchase and install an established system. Glendon says his team looked at various solutions’ cost, technology infrastructure, and scalability, and then decided to go with Transplace’s on-demand TMS because of its promise of a quick deployment.
A key challenge for the newly-independent Sunny Delight was to get its system up and running quickly in order to meet a mandate that the firm be off P&G’s transportation system within six months. “P&G was going through a major transportation rebid,” says Glendon, who turned to the TMS vendor’s project management team for help in meeting that deadline.
A similar time constraint surfaced last year, when Sunny Delight purchased the Very Fine and FruitH2O brands from Kraft. “Within four months we brought all of that business into our existing system,” says Glendon, “and developed a new carrier package with the support of our TMS vendor.”
Since the original TMS implementation in 2004, Sunny Delight has updated the system several times, none of which created any major challenges for the company. “It’s been pretty seamless from a user’s standpoint,” says Glendon, whose department benefits from the TMS’ ability to manage the firm’s entire outbound transportation setup—from negotiating and selecting carriers by lane, to paying those carriers and handling the day-to-day scheduling of transportation.
“It’s beneficial for us to be working with a company that has that technology ready to go, instead of trying to develop, maintain, and grow it ourselves in-house,” says Glendon. The system proved particularly useful during a recent rebid of the refrigerated business of the four plants, from which Glendon says the company achieved a 6 percent savings in transportation costs.
“That helped the company’s bottom line,” says Glendon, who advises other shippers to look carefully at their own requirements before purchasing or upgrading a TMS, paying particular attention to which capabilities can be integrated without much customization. “It’s one thing for a vendor to say its system can perform a particular task through customization,” says Glendon, “but it’s something else entirely when it can deliver these benefits off the shelf, starting tomorrow.”
Crate & Barrel brings it home
Since Crate and Barrel first opened its doors in 1962, the housewares and furniture retailer has expanded its operations to over 160 stores and more than 7,000 associates serving customers in 29 markets. The company, which has grown by six to eight stores annually, has three primary distribution centers located in New Jersey, Chicago, and San Francisco. Deliveries are shipped out of these 300,000 square foot facilities to 21 cross-docks where goods are sorted and loaded onto trucks for delivery to customers within a 50 to 100 mile radius.
That calls for a robust TMS that can handle the 80 delivery trucks—most of which are managed by 3PLs—that make 16 stops daily for the company. Up until recently, that process had been handled manually using online and in-store sales transaction data that dispatchers used to assign deliveries to the company’s fixed routes. Those manual processes were inefficient, but the biggest challenge was the lack of visibility into deliveries on the road.
“It would take five or more phone calls to figure out if our customers were going to get their deliveries on time,” says Pat Gottmann, Crate & Barrel’s home delivery manager. “There was no easy way for us to know what deliveries a driver had already made and which ones were still to follow. We were not happy with the impact on our customer service.”
The company also needed more accountability from its 3PLs—a mission that was unattainable without real-time visibility and reporting capabilities. For relief, the company turned to Descartes’ On-Demand Routing and Visibility solution after putting out a bid to four companies that offered TMS products. According to Gottmann, the goal was to find an affordable system that was flexible enough to address the different delivery needs of each market, and that offered the scalability to support the retailer’s aggressive growth plans.
The on-demand option eliminated the need to install software at every site, and meant new maps were always available as the retailer expanded to new markets. “We simply plug into the service as we opened new locations and gain immediate access to the information we require to deliver effective service,” explains Gottmann, who adds that the company selected Boston as its first deployment site. “By starting in Boston we could ensure streamlined communications between our in-house point of sale system and Descartes, and establish best practices that could be easily adopted by our third party logistics providers.”
The solution took just a couple of weeks to get up and running, with implementations in the company’s other locations following in its footsteps. Crate & Barrel now processes about 80 percent of its delivery volume through the system, which has allowed it to consolidate its smaller routes into larger routes covering greater areas, optimize its routes for efficiency, and use fewer trucks to handle a growing number of deliveries.
Other benefits include narrower delivery windows and real-time visibility into the status of deliveries nationwide. “At any time during the day we know exactly how each route is progressing,” says Gottman, “how many drivers are on the road, how many deliveries each driver is doing, where their last stop was, and more.”
More on Transporation Management Systems:
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Which Transportation Management System (TMS) Is Right for You? (Supply Chain Management Review)
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6th Annual Supply Chain Software Survey: Purchase intentions slow
Logistics Roundtable: Straight talk on green
07/31/2009Supply Chain Technology:TMS: Still Growing
01/31/2009The Next Generation Supply Chain
10/11/2009
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