Subscribe to our free, weekly email newsletter!


Transportation Best Practices: Solving the transportation network puzzle

There’s a better way to configure complex transportation networks and fill them with the right sort of hauling capacity. The caveat, however, is that the sheer size and complexity of these networks means technology is required to perform the analytics that enable harvesting the value. Here’s how to get it done.
image

This historical chart shows resurgent cost increases in transportation. Deregulation (price-based costing) provided a once-in-an-eternity benefit from regulation (cost-based pricing); it took a generation, but we have now “eaten all the seed corn.”

By Brooks Bentz
April 01, 2011

Re-engineering the process
Interestingly, a relatively small percentage of transportation consumers use this approach. In a recently conducted Accenture survey, only 30 percent of the respondents said they employed some sort of procurement application. That means that 70 percent still conduct this part of their business in a less-than-efficient manner and will inevitably sub-optimize results. Clearly, opportunities for substantive improvement abound.

There are many reasons organizations focus on simply trying to get better rates or forestall increasing them. They do not view transportation as a network or portfolio of services that, more often than not, are interconnected and interdependent. For some, it’s simply not a priority. Freight is too small a percentage of cost of goods sold (COGS) or is viewed as a necessary evil rather than something to be managed strategically. Also, freight services are often locally or regionally managed, which makes a holistic approach difficult from both a cultural and data management standpoint.

Empirically, it makes sense to buy transportation services centrally so as to aggregate volume, market power, and influence. But, this only works if the organizational structure and systems exist to support such a strategy.

The way we approach this type of activity can be characterized more as business process re-engineering, of which freight sourcing is a key part, rather than simply running a bid to get better rates.

We suggest re-engineering the contracting process so it more fully encompasses commercial terms, in addition to the typical legal and risk mitigation provisions.

Our team also prescribes standardizing and simplifying basic elements of transportation services. Many companies are dealing with complicated and arcane practices that frequently bear the residue of the regulatory era. This make them difficult to manage effectively and too often exposes the buyer to unforeseen charges relating to obscure rules and provisions. We seek to put a standard, preferably modular contract in place that is flexible enough to cover multiple modes. The overall goal is to embed all of the applicable commercial terms in the agreement and avoid obscure “omnibus” provisions, which invoke tariff references that may not be easily or readily discovered.

We do that by clearly stating common-sense and fair business rules and requirements that all can abide by; establishing a commonly agreed set of accessorial charges so that it’s clear when they apply and what they are for;  developing a fair, equitable and standardize fuel surcharge mechanism, so that all carriers can clearly see what the deal is before they submit pricing; and finally setting forth clear and standard payment terms and conditions, with an eye toward simplifying and standardizing the process so payment can be made accurately and timely the first time.

We execute this process through an advanced, web-enabled, automated RFI/RFP process that is less about exhausting a carrier’s patience­—filling out reams of useless and unused information­—and more about providing a complete picture of the buyer’s business and what is being sought. This new process offers specific, detailed information to enable potential serving carriers to present an informed and accurate response and avoid having to go back an re-work the process a few months into the new network operation.

This is done by conducting a holistic, multi-modal, web-enabled sourcing event using leading-edge optimization technology for Expressive Competition. From that, we work jointly with our clients in developing an optimal solution that aims to be a solution of right freight, right carriers, right service, right price and focusing on a solution set that can be implemented and sustained.

Putting all of this together into a seamless, well-orchestrated program-approach to transportation management yields effective service networks that are profitable for buyers and sellers, which are then sustainable when they are operationalized. In the final analysis, this becomes a much less disruptive, much more systemic way of efficiently operating complex transportation networks.

About the Author

Brooks Bentz

Brooks Bentz is a Partner with Accenture, Scott Fata and Margaret Tedlie are Senior Managers in the North American Fulfillment Practice in Supply Chain Management


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Flags of Convenience are a fact of life in the commercial maritime trade, but several European political action groups are worried that they will pose a threat to the Continent’s air cargo industry.

For May, which is the most recent month for which data is available, the SCI is -7.5, following April’s -7.5. FTR said this reading represents a still-tight capacity environment, as utilization rates hover between 98 percent and 99 percent.

With a 1.1 cent drop to $3.858 per gallon, this follows declines of 2.5 cents, 1.9 cents, and 0.7 cents over the previous three weeks, with the cumulative four-week decline at 6.2 cents.

Second quarter revenue for transportation and logistics titan UPS headed up 5.6 percent annually at $14.3 billion, while operating profit sank 57.1 percent to $747 million. Quarterly net income fell 57.6 percent to $454 million.

Panjiva, an online search engine with detailed information on global suppliers and manufacturers, recently said it is opening up the “vault,” so to speak. The vault in this case is making its copious amount of trade data accessible through an Application Programming Interface (API), which enables customers to extract Panjiva’s trade data into their own database.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA