The last couple of years have dealt several severe shocks to supply chain operations for companies across nearly all sectors. New research explores the key issues and potential solutions in transportation management.

The recession that began in December 2007 created a number of unique challenges relative to transportation planning and strategies. Many functional areas within organizations have been affected by the global economic crisis, not to mention by several shorter-term but highly disruptive supply chain shocks.

This is especially true with transportation management. Companies in the downturn have sought to cut costs any way they can, and as is frequently the case, transportation is one of the first functional areas where companies have looked for cost cutting. Moreover, “the dynamics between balancing inventory and transportation costs with customer service has never been greater,” The Supply Chain Digest Letter noted last year. “That means it’s very difficult to set a consistent course in managing transportation.”

Recent findings from AMR Research illuminate how the major disruptions of the past two years have factored into firms’ transportation efforts

Based on feedback from 154 supply chain and transportation and logistics decision makers across three vertical industries in the United States, AMR Research’s report, Transportation Management: Lessons from a Difficult Two Years, highlights the “larger, more sustained disruption” wrought by the recession, as well as two temporary but nonetheless intense “supply chain shocks” (major natural catastrophes and the period of oil price volatility).

“These shocks added yet another layer of complexity to the transportation picture, resulting in declining orders, disruptions in supply and delivery routes, and skyrocketing fuel costs,” according to the report.

The research and advisory firm’s findings, released last month, explore gaps between 1) respondents’ focus on key processes related to transportation and 2) their performance (or, how successful they have been at those processes), and shows where companies are clearly struggling.

The areas with the widest gaps: improving inventory carrying costs (24 percent), reducing transportation costs (19 percent) and improving the performance of the carrier base (17 percent). Gaps over 10 percent are considered notable, and gaps nearing 20 percent are considered problematic.

In addition to improving inventory carrying costs, the process where all three industries — food and beverage, consumer products and chemicals manufacturing — showed gaps is in “supply chain visibility,” indicating how closely linked transportation and larger, more overriding supply chain management capabilities are, and how struggles in one area bleed into others.

Visibility — the ability to obtain relevant data on purchased materials within a transportation network and on outbound goods as they are manufactured, stored or shipped — is quickly becoming a critical aspect of controlling supply chain flow, especially as global sourcing grows more complex.

Yet many companies, on both the supplier side and the receiver side, are struggling to implement visibility improvements, as noted in a December 2009 survey from E2open and Gatepoint Research. (See: Supply Chains Prioritize Visibility)

AMR’s findings indicate that companies have been trying to manage the complexities and challenges in transportation management through a variety of ways, at both the business process and technology levels.

The research shows respondents using many different variations of these approaches, with some more successful than others. However, the results highlight three major “levers” that organizations have been using to optimize their transportation management efforts successfully:

• Tactical and strategic transportation adjustments, particularly consolidating orders for full truckloads (pooling) and collaborative planning with vendors for inbound freight;
• Tight integration between supply chain management and transportation strategies, most notably around the frequency with which companies analyze their supply chain network design, and how often they act on that analysis; and
• Centrally organized transportation functions within the company, specifically, viewing all transportation activities in a rationalized, coordinated manner.

“As transportation management itself becomes more strategic to companies and their supply chains, it only makes sense that logistics and transportation managers have to get more strategic about how they want to organize and execute those functions within the broader supply chain,” The Supply Chain Digest Letter says. “The cost and service pressures on transportation are so great that moving to a proactive, strategic model really is a competitive necessity today. For most, that will also involve an increased level of ‘centralization,’ though the level that makes the most sense will be different for every company.”

As for the key transportation strategy relevant to virtually all companies, AMR Research determined that 2010 will see firms focusing most on customer satisfaction and on-time service, “reiterating their focus on keeping their customers happy and making sure they have come through the downturn with their customer relationships intact.”

Earlier: Supply Chains Prioritize Visibility

Resources

Transportation Management: Lessons from a Difficult Two Years
AMR Research, March 2010

Transportation Management for the Next 10 Years
The Supply Chain Digest Letter, April 2009

Supply Chain Visibility Excellence
by Bob Heaney and Viktoriya Sadlovska
Aberdeen Group, December 2009

Survey of Critical Supply Chain Trends
E2open and Gatepoint Research, December 2009