Companies are looking at Transportation Management differently, says Aberdeen benchmark report

By Sarah Bowling, Web Editor -- Logistics Management, 10/6/2006

BOSTON—Transportation management practices are changing dramatically, says a new Aberdeen Group report, and 91 percent of surveyed companies are concerned that their current transportation management technology will not meet their future needs.

In the new Transportation Management Benchmark Report, the Boston-based industry research group found that more than 75 percent of the 173 manufacturing, distribution, and retail organizations surveyed have recommended transportation process improvements in just the past six months. Nearly two-thirds have recommended improving their transportation management technology.

Further, the majority of respondents have made suggestions on reorganizing their transportation department, typically to increase centralized planning or break down the barriers between international, domestic common carrier, and private fleet operations.

Key drivers
The Aberdeen study found that the usual suspects—rising freight rates, higher fuel costs, and constrained capacity—are not the top reasons driving companies to improve transportation management. Rather, 83 percent of companies noted an awareness of the cost and service impact of transportation on overall supply chain performance. Further, 75 percent said drivers were internal and customer demand for accurate delivery status and transportation cost information.

“Given the fact that companies on average have seen their freight budgets rise by 10 percent since 2004, this was a surprising finding,” said Beth Enslow, Aberdeen’s senior vice president of enterprise research and report author.

“It demonstrates that companies view the information about transportation activities to be of strategic importance to their companies in helping streamline cross-functional processes, reduce labor and inventory costs, and improve customer retention. While cost control is an important objective, information access is even more important,” she said.

Measuring success
When selecting the top three most important actions for achieving transportation management success at their companies, respondents answered with these key areas:

online information sharing,
connectivity, and
collaboration.

Other study findings include:

Best in Class companies are more than twice as likely to do daily scorecarding and share tactical capacity forecast with carriers; and they control a greater percentage of inbound freight and use more commercial TMS technology.

“Best in Class are those companies that have been able to reduce their freight budgets since 2004 (discounting changes in sales volume),” said Enslow. “Industry average companies experienced flat or slightly increasing freight budgets.”

54 percent of respondents now provide other departments with online transportation cost and status information—up from 31 percent in Aberdeen’s 2004 transportation benchmark report.
Nine out of 10 companies are concerned that their current transportation technology will not meet their future needs. Four times more firms plan to adopt commercial transportation management applications versus build systems in-house.
39 percent of participants said they plan to seek out or adopt a commercial international transportation management system—up from 12 percent in the 2004 benchmark report.

When asked what the most important takeaway was for shippers, Enslow said it is noting that companies that have been successful in reducing freight budgets are taking different actions and using technology differently than their peers do.

“Companies need to rethink processes and supporting technology to achieve cost reductions, and there is a clear roadmap for how the Best in Class companies are doing this,” she said.