Moore On Pricing: The business case for transportation management

In more than 40 years in the transportation profession as a shipper, a third-party logistics (3PL) provider and then as a consultant and mentor, I’ve prepared justifications for investments in people, processes and technologies to drive better performance in cost and service.

In digitizing some old files, I found several “business case” proposals for companies to step up their game in transportation management. Spoiler alert: The highest return is in people, not in technology.

What follows is a synthesis of the “top seven impacts from better transport management” as I’ve come to see them over the course of my career. I offer these as a checklist for managers who are seeking ways to convince C-Level executives of your ideas.

Alternatively, as a buyer of services, I consider these to be areas to explore when you’re offered solutions in outsourcing, insourcing or new TMS products.

1. The cost saving argument gets everyone’s attention. And in optimizing routes, consolidation and fleet utilization, detailed analysis will consistently support investment. Key measure: cost per pound sold spent on transport.
2. The increased visibility from electronically connecting to carriers is a well-proven area to improve service and avoid errors. Key measure: service and loss claim reduction.
3. Automating advanced ship notices (ASN), tracking and proof of delivery contributes to much happier customers and a bit of “stickiness” that keeps customers choosing your firm. Key measures: customer satisfaction, on-time delivery.
4. The integration of TMS with a warehouse management system (WMS) has boosted efficiency and labor productivity in distribution. Key measures: available to promise (ATP); labor cost per order; square footage required.
5. Collaboration and reduced contracting costs are an often-overlooked savings area when buyer and seller integrate and have transparency on costs and investments. Key measures: longer contract periods; evergreen contracts; fewer costly bidding sessions; capital savings in shared innovation investment.
6. Administrative costs are reduced if there is outsourcing or automation of order processing, tendering, dispatch, freight bill auditing and record retention. One area on which not to scrimp is analysis. I have demonstrated to many CEOs the cost and revenue enhancements a great transport analyst delivers—think 250%. Key measure: logistician cost versus value delivered monthly.
7. Many company stakeholders are now monitoring sustainability. How we choose to deliver products and bring in raw materials directly affects our carbon footprint. Intercompany innovation teams will have an impact. In addition to environmental sustainability there’s financial sustainability. Coordination through data sharing and collaboration means sharing sustainability projects along the supply chain. Key measures: demonstrable, quantitative project success with partners as well as engaged stakeholders.

The new Cloud-based TMS products and 3PL service contracts are a revolution in the area of logistics. The first thing I stress is not to lose your rights to the intellectual property created in commerce. You’re not only buying the delivery of goods, but also all of the information generated too.

Second, I can’t stress enough the importance of gathering and using the transactional information that enhanced transportation management produces. Optimization and re-engineering require detailed knowledge of the supply chain in question. The most successful transportation managers have learned to leverage intelligence: artificial and human