TM Is an Imperative for
Return to Growth
Although transportation costs
were depressed and capacity
plentiful during the global
economic downturn, freight
costs and capacity are already
showing signs of looming
stress, even with a weak
recovery. Companies must
take immediate action to minimize the impact of increasing
—C. Dwight Klappich, research vice
president at Gartner
reight capacity currently remains favorable for shippers, but market indicators suggest capacity is becoming constrained and current transportation market conditions threaten to propel logistics
costs higher. These conditions, which include fuel price volatility,
a looming freight-capacity supply and demand imbalance and more stringent
operating rules, will permit an increase in transportation costs that will remain
high for several years. Gartner recommends that shippers consider the following capabilities to help minimize the impact of freight cost increases:
• Freight Sourcing and Procurement (Bid Optimization)—Shippers of all
sizes will benefit from automated freight-sourcing solutions, which include
sophisticated bid optimization.
• Strategic Network Design—The need for organizational agility is leading
organizations to tactically use network design tools to more frequently evaluate
fundamental or seasonal and cyclical changes in their business.
• Transportation Governance—Enforcing compliance with carrier-selection
rules can have a significant impact on freight costs. It can also ensure compliance with other obligations, such as meeting carrier load commitments.
• Transportation Planning and Optimization—Transportation planning
applications can help constrain costs by allowing companies to make better
mode selections, consolidating orders for shipment by lower costs modes, such
as moving from less-than-truckload to truckload, and selecting carriers with the
lowest total cost structure, considering all rules and costs.
• Transportation Analytics and Performance Management—
Transporta-tion-focused analytics applications with the appropriate level of data and cost
granularity are critical to identifying problems and opportunities to reduce
costs. Shippers must monitor carrier, logistics service provider, customer and
supplier performance to ensure their trading partners perform effectively.
• Evolving Transportation to a Global Shared Service—Innovative companies are beginning to structure transportation as a global shared service that
manages the ‘multis’— that is, the multiple modes, businesses, carriers, geographies and inbound, outbound and intra-company freight—on a common TMS
platform. Coordinating transportation activities across multiple dimensions will
further reduce costs and provide better overall service.
The bottom line is that freight cost increases will threaten company profitability
if companies fail to take immediate action to minimize their impact. Organizations must evaluate their supply chain application portfolios and look to
enhance or add supply chain solutions that target transportation costs.