Companies committed to reducing transportation spend should get their year started off right by assessing their company's transportation in order to identify changes that make an appreciable difference and then decide which are worth the effort. There are five steps in a transportation self-assessment that can put your company on the right track.
Step 1: Engage Stakeholders Broadly
Much like a fever can be a symptom caused by many different illnesses, transportation spend can be caused by many “improvable” upstream processes or better understood downstream requirements. So, the first step in an assessment is to understand and communicate how transportation supports corporate objectives and broaden the scope of conversations with upstream internal suppliers and downstream internal customers beyond just today’s loads. These may not be easy conversations, and they need to be driven by data and reflect an openness to the other party’s point of view, but we have seen important transportation improvement efforts tied to broader inbound product sourcing and outbound “customer experience” initiatives that the transportation was not tightly integrated with before making a structured effort to engage.
Step 2: Build a Spend Diagram
Unlike a distribution center that sits still and is always “there,” transportation largely happens out of sight. And, transportation spend data may be broken up into different budget buckets (e.g., IB to Procurement and/or OB to Distribution). The net effect is often poor understanding of the scope and scale of transportation and “where the money goes.” A spend diagram – a one-page, high-level depiction of a company’s moves and money as well as other key logistically relevant information – is a good way to bring together the information and present it visually. These are often eye-opening for business leaders who are not in transportation. Even for those who do fully understand a company’s transportation scope and scale, the spend Diagram helps focus efforts on change that can make an appreciable difference.
Steps 3 and 4: Document Key Processes and the Integration Flow
While the spend diagram identifies “where the calories are,” so to speak, the process and integration documentation can show the behaviors that need to change, like going to sleep early enough to wake up and make breakfast rather than grabbing fast food on the way to the office.
Many corporate processes evolved from habit or were taken over in an acquisition rather than being truly engineered. To really know what is being done, it's imperative you follow information through your processes, particularly the planning process, and document it using a horizontal swim lane for each group of actors in the process. Eventually, the document should reflect physical, information, and financial flows.
Good transportation management is so integration-intensive that the integration (including e-mailed spreadsheets) should not just be buried in a process flow document but be shown in a high-level integration flow diagram. Many non-transportation colleagues may not realize that with rating APIs, tenders, tender responses, many status messages per move, ASNs, yard arrival or warehouse receipt messages, carrier invoices, claims, credit memos, balance dues, etc., good transportation management may well be the leading user of integration capability in a company. And bad transportation management that is not well-integrated… well, a TMS that is not tightly connected with carriers is every bit a useful as an ATM that is NOT connected to the banks.
Step 5: Business Case for Change
Achievable change that makes an appreciable difference is almost always at the intersection of process or integration weakness and the moves/money. The particular point-solution savings analyses forming the basis of a business case may differ significantly from situation to situation and range from relatively simple “top down” spreadsheet analysis all the way to complex “bottom up” routing models, but if they are targeted properly and if stakeholder organizations are aware of and supportive of the effort, there is a strong likelihood of success.
Just as personal resolutions to “lose weight” next year are unlikely to be realized at the scale if there has been no real self-assessment, a corporate goal to cut transportation cost is unlikely to be realized in the P&L without a solid assessment of where the improvement opportunities and money are as well as engagement with stakeholders critical to the implementation. A good transportation assessment enables one to move past a frustrating annual cycle of empty goals and to identify the change required as well as communicate it and the underlying reasons to those in charge.
Stephen Craig is a Partner in enVista’s Supply Chain Services business unit and runs its Transportation Consulting practice. Stephen has more than 24 years of experience developing and implementing business, functional, and systems strategies that exploit advances in transportation-related technology.