The successful use of a transport management system (TMS) requires an operations model – one that takes a global approach to establishing and controlling global activities in the area of transport management and includes the organization, processes and IT. Without an operations concept like this, any savings resulting from network optimization projects, the introduction of a TMS or the retendering of freight contracts quickly evaporate.
Many corporate groups have recognized the potential to improve their transport systems and have launched projects and programs devoted to optimizing networks and introducing transport management systems.
These companies consolidate transports, realizing costs reductions through one-time effects arising from network optimization and retendering of freight relationships. However, a more long-term approach to reducing costs involves automating the transport commissioning process. Introducing a TMS usually achieves this.
The goal here is for the corporation to assume full responsibility and control for all transports across the entire group without having to manually optimize each individual transport: inbound from suppliers, outbound to customers and the traffic between the group locations and plants.
Important elements of a solution for transport management
If a company introduces TMS with the intention of taking over the TMS operation, the company’s own organization and processes must have the tools to handle the tasks associated with integrated transport management. These tasks are usually new to the organization, in particular in the area of inbound transports from suppliers to plants, and include:
- Purchase, tendering and contract management for freights
- Regular strategic and tactical transport planning
- Master data management
- Dynamic and day-to-day transport planning as well as operation of the TMS
- Freight billing and checking
- KPI management and reporting
Because the tasks are new, a corporate group must create an organizational and operations concept that structures and integrates them into the group’s existing global organization. An operations concept like this must address key issues about the group’s organizational structure as well as reflect cooperation with existing areas like purchasing, logistics and supply chain management.
- What transport management tasks already exist in the organization and which ones have to be established?
- What knowledge and experience is required to carry out these tasks? Does this exist in the organization?
- Who will carry out the tasks?
- What responsibilities will be handled centrally and which decentrally?
- What activities will be carried out at the local level, the regional level and the global level?
- What activities will the company carry out itself and which ones will it outsource to a service provider?
- Where does the greatest leverage for cutting costs exist, and where can the company realize the greatest cost effects—in which processes and in which regions with which freights?
- What area is responsible for purchasing freight services: purchasing, logistics, or transport management?
Not surprisingly, the structure of a global transport management organization is always particular to the company: it is tailored to transport flows and volumes, to existing organizational units and competencies, and to the relevant leverage point for cutting costs.
Success factors in building an efficient transport management organization
This means no standardized organizational model exists for all companies. But: companies can and should take into consideration proven principles, success factors and design criteria when establishing an efficient transport organization.
These might seem generic or self-evident at first glance, however experience shows that successful companies apply them in developing their organization. Ignoring these criteria will quickly result in problems during the day-to-day handling of transport operations as well as efficiency losses that can quickly nullify the desired savings. Taking these steps help companies realize success.
- Bundle expertise and experience
Establishing competency centers at local, regional and global levels ensures that all company areas and regions can access the expertise of the transport organization without having to recruit the relevant personnel at each location.Specialize
- Specialize jobs
Transport management demands different specialized knowledge that not every employee in the organization possesses: language skills, country or region-specific knowledge, special understanding of individual transport modes (sea, air, road), knowledge of products, experience with particular customers, and so on.Standardize
A global foundation that supports binding processes, responsibilities, reporting and control mechanisms facilitates standardized transport management and ensures the target cost reduction can be achieved. At the same time, regional distinctions must be taken into consideration and integrated in the global standards.Make decisions quickly
- Ensure efficient decision-making
Flat hierarchies permit fast, flexible decision-making during daily control of transport operations. To avoid obstructing the flow of materials, key decisions must be made without delay at all times and in all time zones.Take an automated and exception-based approach
- Automate and work exception-based
The TMS can automate and process standard cases without the need for human monitoring. This allows employees in the transport management organization to focus on solving more complex exceptions and problems (exception management).
SupplyOn Consulting takes a specific approach to providing support to companies wanting to introduce a transport management system: SupplyOn first conducts a series of workshops with its customers in order to define an integrated operations model.
The content of these workshops includes presentations of case studies and best practices from companies with existing transport management organizations. These presentations illustrate how each company established an appropriate balance to meet its specific needs in the areas of global standardization, consideration of regional requirements, centralization, and delegation of tasks to local and regional units. Following the presentations, SupplyOn Consulting reviews how companies can adapt and apply these case studies to their own organization.
This approach results in an integrated operations model that considers the company’s organization, processes and systems, which then forms the basis for the smooth operation of a globally standardized transport management system.
By working with the customer in this way, SupplyOn can ensure its customers achieve their long-term goals of transport optimization and TMS implementation as well as realize the milestones of their underlying business cases.