By Clifford F. Lynch
DC Velocity, April 2005
Should you still need convincing that Corporate
America’s transportation productivity has shot up over the years, all you need
to consider is this: Back when transportation was deregulated in 1980, U.S.
transportation expenditures totaled $228 billion, or a whopping 16.2 percent of
gross domestic product (GDP). By 2003, U.S. transportation expenditures had
dropped to a mere 8.5 percent of GDP.
What happened? Part of it, of course, was shippers’ newfound ability to
negotiate freely with carriers once the regulatory shackles had been removed.
But another part was shippers’ success managing these costs more effectively
– more often than not with the help of automation, specifically that breed of
software known as the transportation management system, or TMS.
Transportation management systems first hit the market in the early 1980s.
Though the early versions many seem primitive today, they literally transformed
many a logistics operation: Users began achieving both efficiencies and cost
reductions from day one. And in the intervening years, as both software and
analysts grew ever more sophisticated, companies found they could kick their
savings into high gear by integrating the TMS with other systems.
Today, it’s been estimated that a company implementing its first TMS can
expect to cut transportation expenditures by anywhere from 10 to 40 percent.
Given that transportation expenses typically account for more than 60 percent of
a company’s total logistics expenses, that’s not exactly chump change.
At no time in history have those savings been so essential. It’s no secret
that trucking costs are soaring. A recent survey by Georgia Southern University,
the University of Tennessee and others revealed that respondents spent a
whopping 55.7 percent more on truckload freight during this past year than they
did in the previous year, and there’s every reason to expect this trend to
continue. That only increases the pressure on logistics and supply chain
managers to do whatever they can to hold down these expenses without
compromising customer service. It’s also putting pressure on them to automate.
These days, a reliable and efficient transportation management system (TMS) is
no longer a luxury; it’s a necessity.
But what if you can’t afford it? Traditionally, transportation management
systems have come with a high price tag, sometimes costing upwards of $750,000.
For managers who don’t have a lot of spare cash lying around, there’s
good news on the horizon. The more creative TMS vendors have
"modularized" their systems, making it possible for customers to buy
only what they need or can afford, rather than sinking a lot of money into a
full cradle-to-grave system. If all you need is a routing guide or an order and
shipment visibility module, now you can buy just that.
These Web-based cafeteria plans can put good, workable TMS modules into the
hands of practically any company. And they’re expected to have broad appeal.
Virtually all of the research indicates that managers with responsibility for
transportation want a TMS whose operations they can understand, that they can
install quickly and easily, and that they can add onto easily.
We’re not suggesting radical change here. The basic blocking and tackling
hasn’t changed much over the years. A company still has to pick an order,
stage it and find a carrier to move it from point A to point B. Today’s
shippers are still doing pretty much what they’ve always done. They’re just
doing it differently. And it’s the TMS that is making the difference.