Three Principles of Transportation Optimization

Companies are increasingly considering their transportation and logistics operations to be a competitive differentiator. As such, demand for advanced transportation management systems is on the rise. According to Gartner, Inc., the transportation management system market should see double-digit growth in 2011 and a five-year compound annual growth rate of 9.4 percent1. With mounting pressure on businesses to contain costs, address capacity constraints, lower their carbon footprints and streamline movements, a flexible, agile and functionally rich transportation management system can help support their service goals. Yet for some companies, pinpointing the optimal solution can be nearly as complex as getting the right products to the right places at the right time and at the lowest cost. One factor adding confusion to the search is the manner in which vendors use — or overuse —the term optimization.

For more than 15 years, transportation solution vendors have been touting the optimization power that their solutions deliver to support more sophisticated planning, execution and settlement processes. Indeed, optimization techniques are proven to drive the vast majority of the business value realized from the use of transportation management solutions. However, not all optimization strategies are created equal and that’s where the confusion lies.

Vendors too often focus on just one function to optimize, which can lead to more harm than good. A simplified optimization approach may prompt a shipper to pick one carrier over another simply based on cost. A comprehensive approach may reveal that the selected carrier doesn’t have enough trucks or docks available to support the load in the first place.