Sept. 22 2010 09:21 AM

Most shippers use WMS/TMS technology in managing their supply chain activities. Most modern WMS/TMS technologies include mode optimization, service level optimization, and even carrier optimization logic. However, some shippers view these options as a set-it-and-forget-it proposition. Not so fast. Pricing logic is not homogenous across modes (parcel, LTL, Dedicated, Intermodal, etc.). Neither is pricing for any of these modes static. With some minor exceptions pricing logic changes over time. On the parcel side fuel surcharges change every month. List rates for transportation, accessorials, and surcharges typically change annually (though they are subject to change at any time). This means that the logic you loaded when you implemented your WMS two years ago may not be making the most of you current transportation agreements.

This is not an exercise in shaving a few basis points off of your transportation budget. The savings potential can in some cases be quite large. I have personally seen these projects result in savings as high as 6%; not an insubstantial amount.
One popular WMS solution allows you to specify the carrier (and therefore the mode) based on a range of destination zip codes and shipment weight. While this is not the most efficient logic possible, it is fairly representative of the capabilities of most WMS/TMS solutions. Even if we look at a relatively simple model of potential parcel and LTL modes there are still enough moving parts to make most logisticians throw up their hands. Breaking the process down into its component parts makes the job more manageable:

• Update your pricing in your WMS
o Incorporate new agreements, amendments, and addenda
o Make sure the pricing reflects any updates to list rate schedules, accessorials, surcharges, rate bases, etc.
o Update any changes to fuel surcharges
• Set up the zip code range based on the rating logic of the relevant modes
• Set the weight breaks based on the mode/carrier-specific rating logic
• Test the logic prior to implementation
• Monitor performance on the routing logic
• Update the logic any time there is a change in your rating; annual general rate increases, changes in fuel surcharges (It may be time prohibitive to do this monthly. Quarterly updates will normally suffice.), any time new agreements are signed, etc.

The specific process will differ slightly depending on the WMS/TMS your organization uses. However, the general concepts will still apply.

While performing a project like this with your internal resources may be an option, it may be cost-effective to engage a consultant to handle this project. Good supply chain consultancies will have processes and tools to make the process simpler and more effective and the cost can be less than the investment of time and talent to develop your own logic