What defines a successful transportation program in your company? Do you manage transportation with real information, or do you just get by with a couple of data elements? The difference is subtle yet important: data is comprised of single measures of activity, such as the number of small packages you ship per month. Information, however, is created when the unique data elements for each of those shipments (origin, destination, date, actual weight, dim weight, service level, etc.) are woven into a tapestry that describes your complete (and now truly manageable) transportation picture. If you’re part of a large supply chain organization, the odds are you already have access to solid, complete information from a Transportation Management System. But if you’re in a small or medium-sized company, you may not have sufficient data, let alone detailed information from or access to a TMS.
Where do you start if you don’t have a TMS, but want to manage transportation? The easiest answer: use an outside freight audit and payment company. This entity can collect detailed information streams from all of your carriers as they audit and pay your carrier invoices, and integrate those streams into the unified management tools you need. But what if your employer does not (or will not) use an outside freight payment service? In most companies you’ll still have at least two sources: your own Accounts Payable records, and your carriers. You’ll also have an excellent first choice option if you use a 3PL or a 4PL, since managing transportation is by definition one of their core competencies. But if you only have A/P records and no outside payment, a post audit company might be able to integrate carrier data for you.
With only A/P and carriers as your information sources, you should use both in parallel, to cross-verify what you get from each. On the carrier side it’s common practice to give shippers detailed electronic reports with shipment specifics, along with all of the charges, surcharges, and other fees you’ve paid. And by extracting from A/P the dollars sent to each carrier in a specific time period, you can test whether carriers are providing complete reports. In a few small companies, however, there can be complications because their A/P functions might not differentiate freight dollars from money spent on other services, and you’ll need to cull out the dollars important to you from the A/P database. Amazingly, one company I worked for some years ago didn’t record the difference between money spent on passenger airline travel from payments for air freight moving with the same carrier! And even if expenditures are correctly categorized as freight, they could still be unsuitable for your purposes. For example, if everything shipped via a UPS (or FedEx) sister company is coded as activity with a single overall supplier, how do you identify the essential differences between LTL shipments, truckloads, small parcels, and other services? In some companies, therefore, you might need to manually establish separate vendor identities to produce meaningful results. I did this once when working for a small employer, where I had to examine over 3,000 separate vendor records and manually code which were freight (by type of service), which were under contract, and which were separate sister companies – as well as which were misspellings to be consolidated with correct spellings. If this is your world, remember to have A/P regularly advise you of all new vendors, to keep that data stream current.
Whether you’re at the most basic information gathering level described above, or using a high-powered TMS, your goals are the same: get the best service you can from your carriers at the lowest reasonable cost which meets the needs of your external and internal customers. And if you have contracts, you’ll want to police the use of those carriers vs. shipments moved by noncontract carriers. As we saw above, your tracking need not be rocket science – it can be done with simple spreadsheets populated from relatively primitive sources. However you decide to manage transportation, the old business maxim applies: You can’t manage what you can’t measure, and to measure you need information.
This article is part of the monthly series authored by the Institute for Supply Management’s Logistics & Transportation Group Board Members, who are current practitioners, consultants, trainers, and educators. In future columns, they will continue sharing their views on a number of Supply Chain and Professional Development topics.
George Yarusavage, CTL, C.P.M., CICSM, is a principal in Fortress Consulting, LLC, specializing in Transportation, Logistics, and Sourcing issues and training. He is also the Treasurer of ISM’s Logistics & Transportation Group and can be reached at gyarusavage@yahoo.com, or (203) 984-4957. Membership in the L&T Group is open to all current ISM members who are responsible for or have an interest in Logistics & Transportation.
Where do you start if you don’t have a TMS, but want to manage transportation? The easiest answer: use an outside freight audit and payment company. This entity can collect detailed information streams from all of your carriers as they audit and pay your carrier invoices, and integrate those streams into the unified management tools you need. But what if your employer does not (or will not) use an outside freight payment service? In most companies you’ll still have at least two sources: your own Accounts Payable records, and your carriers. You’ll also have an excellent first choice option if you use a 3PL or a 4PL, since managing transportation is by definition one of their core competencies. But if you only have A/P records and no outside payment, a post audit company might be able to integrate carrier data for you.
With only A/P and carriers as your information sources, you should use both in parallel, to cross-verify what you get from each. On the carrier side it’s common practice to give shippers detailed electronic reports with shipment specifics, along with all of the charges, surcharges, and other fees you’ve paid. And by extracting from A/P the dollars sent to each carrier in a specific time period, you can test whether carriers are providing complete reports. In a few small companies, however, there can be complications because their A/P functions might not differentiate freight dollars from money spent on other services, and you’ll need to cull out the dollars important to you from the A/P database. Amazingly, one company I worked for some years ago didn’t record the difference between money spent on passenger airline travel from payments for air freight moving with the same carrier! And even if expenditures are correctly categorized as freight, they could still be unsuitable for your purposes. For example, if everything shipped via a UPS (or FedEx) sister company is coded as activity with a single overall supplier, how do you identify the essential differences between LTL shipments, truckloads, small parcels, and other services? In some companies, therefore, you might need to manually establish separate vendor identities to produce meaningful results. I did this once when working for a small employer, where I had to examine over 3,000 separate vendor records and manually code which were freight (by type of service), which were under contract, and which were separate sister companies – as well as which were misspellings to be consolidated with correct spellings. If this is your world, remember to have A/P regularly advise you of all new vendors, to keep that data stream current.
Whether you’re at the most basic information gathering level described above, or using a high-powered TMS, your goals are the same: get the best service you can from your carriers at the lowest reasonable cost which meets the needs of your external and internal customers. And if you have contracts, you’ll want to police the use of those carriers vs. shipments moved by noncontract carriers. As we saw above, your tracking need not be rocket science – it can be done with simple spreadsheets populated from relatively primitive sources. However you decide to manage transportation, the old business maxim applies: You can’t manage what you can’t measure, and to measure you need information.
This article is part of the monthly series authored by the Institute for Supply Management’s Logistics & Transportation Group Board Members, who are current practitioners, consultants, trainers, and educators. In future columns, they will continue sharing their views on a number of Supply Chain and Professional Development topics.
George Yarusavage, CTL, C.P.M., CICSM, is a principal in Fortress Consulting, LLC, specializing in Transportation, Logistics, and Sourcing issues and training. He is also the Treasurer of ISM’s Logistics & Transportation Group and can be reached at gyarusavage@yahoo.com, or (203) 984-4957. Membership in the L&T Group is open to all current ISM members who are responsible for or have an interest in Logistics & Transportation.
