Transportation is one of the essential functions of the logistics platform. Adopting robust transport management strategies, right from suppliers and carriers to end-users, will enhance customer service and decrease total freight costs significantly.
What is Transportation Management?
Transportation management system (TMS) is an essential function of supply chain management (SCM), which enables companies and brands to plan, manage, perform, and optimize the movement of goods every day. It constitutes the shipment of products, service, and transit times involved, the efficient transfer of information and the cost of shipping the products to suppliers, carriers, and customers.
The bottom line is, effective transport management solutions are designed to streamline transport operations to increase revenue and realize a better return on investment (ROI).
Principles of Transport Management
- Economies of scale – The larger the size of the shipment, the less the transportation cost per unit of weight. In other words, it costs less per pound to ship goods that occupy the entire capacity of a vehicle as compared to shipping goods that employ only a percentage of the vehicle’s capacity. Plus, the bigger the transportation capacity, the less expensive it will be. For example, smaller capacity vehicles like air and motor vehicles are more expensive than larger capacity vehicles like rail or water.
- Economies of distance – As distance increases, the more the transportation cost per unit will decrease.
Transport Management Strategies
In order to facilitate an efficient strategy, companies must take into cognizance the business dynamics by optimizing responsiveness to operations, customers, and suppliers. Here are five of the most effective transport management strategies that will help you enhance the logistics platform of your supply chain, irrespective of whether you are involved with international or domestic transport.
Selecting the Best Transportation Mode
When selecting a specific transportation mode, take into account delivery times and type of service because they are important in developing a well-oiled transportation strategy. There are several factors that play a crucial role in determining how efficient and at the same time cost-effective your transport management system will be. Among them are:
- How will the products be transported, by rail, water, land or air?
- Which modes will be utilized?
- How will transit times impact supply chain?
- What weight will be applied to freight charges, inventory, and service?
- Which career/s will be feasible in the future as well?
Shipments have varying priorities. Several factors influence the urgency of some shipments over others, such as the time of the year, product type, and supplier demands. So for a strategy to efficient, it cannot be one-dimensional. An optimized transport management strategy is one that includes segments that cater to urgent shipments, and this might involve a change in the mode of transport or taking on additional or alternative carriers.
In order to keep track of the efficiency of carriers, it is vital to measure their performance. By comparing actuals against contract standards, you can estimate the value of your transportation costs. A macro measure might not expose all the problems, which is why it is essential to conduct a more in-depth analysis of performance based on primary customers, delivery locations, and carriers.
- Calculate costs to ensure they are well managed. Where are your transportation amounts being spent – how much and how well?
- Compare freight costs with sales and shipping data to render better budgets and cost management solutions.
By measuring performance, you will be able to calculate how efficiently your transport costs are being allocated and utilized, which in turn will help you determine the transport management system benefits of those costs.
Develop Good Carrier Relationship
Often, especially in the case of high volume shipments, there is a considerable amount of forwarder or carrier competition involved. The best approach will be to stick to one or just a few carriers.
- It will help you improve your carrier relationships, which is vital in meeting supply chain challenges.
- Furthermore, it will also help you leverage your position to better your chances of negotiations as well.
- Creating supply chain responsive initiatives will be that much easier as these programs are a combined effort of carriers and shippers. For transportation to be responsive, a focused forwarder is essential, and that can be achieved by fostering good carrier relationships.
Flexibility and Changing Customer Needs
Supply chain constitutes the uninterrupted and efficient shipments of goods from vendors to the manufacturer and finally the end-user. So transportation programs must take into cognizance customer requirements. Today’s consumers are increasingly becoming more demanding. They want their products packaged in a certain way, on a specific date and delivered through a preferred carrier. Being able to align strategy with changing demands will give your enterprise the cutting edge it needs, not just to survive but to thrive. Besides, your transportation management system should be flexible enough to add on new customers, locations, product deliveries, lines of business, and new suppliers if needs be as well.
A comprehensive and dynamic transport management strategy is one that amalgamates management, technology, information, processes, and locations. It will help you to streamline your business operations, bolster supply chain, reduce costs, increase revenue, and will help you climb up that ladder of success that much faster.