February 28, 2007, 12:00 AM

Fast Mode

Web-based transportation management turns truck traffic into a driver of cost efficiency.

By Paul Demery

Along with high fuel prices, retail executives charged with keeping the flow of product-loaded trucks into distribution centers, stores and homes face plenty of other challenges. Amid pressure from the CEO to trim operating costs while keeping up with the competition for popular retail products, transportation managers must steer through the tricky task of matching available trucks with fluctuating needs to supply distribution centers and stores.

But retailers like Rite Aid Corp., a chain of about 3,400 drug stores in 28 states, are using web-based transportation management systems to get better control over available carrier capacity to turn time on the road into a more efficient way to deliver goods and maintain better revenue and cost ratios.

The challenges

One of the biggest challenges facing transportation managers, for example, is to receive shipments in fully loaded trucks, resulting in lower costs per delivered goods. Another challenge is to arrange for trucks to also carry goods on return or backhaul trips, avoiding the cost of running empty vehicles.

To overcome such challenges, transportation managers like Rob Shovel, vice president of transportation at Rite Aid, are deploying web-based transportation management technology that provides insights into and real-time views of truck movements as well as overall availability of carriers. By accessing such information, retailers can choose online from carriers offering the best rates, consolidate shipments on fewer trucks, re-route trucks as necessary to meet changing demand for particular distribution centers or stores, and capitalize on opportunities to load trucks on backhaul trips.

“Retailers now are being much more active in saying, ‘Tell me what you’re planning to ship, and I’ll tell you what carrier to use, and what time I need to have the truck arrive at my distribution center,” says Beth Enslow, vice president of enterprise research at research and advisory firm Aberdeen Group Inc.

After deploying the Internet-based, on-demand Transportation Planning and Execution system from Manhattan Associates, Rite Aid realized a 5%-8% decrease in the amount of money it spent on less-than-truckload shipments.

The web-based transportation system, by presenting a universal view of trucking capacity available within its private fleet as well as outside carriers, also enables Rite Aid to dynamically tender more loads to its own trucks. One of the resulting benefits is it can reload its own vehicles on return trips, such as carrying products returned by customers back to suppliers or excess capacity from one distribution center to another. “The Transportation Planning and Execution system allows us to better manage fluctuation in inbound capacity requirements and proactively manage delivery status,” Shovel says.

Controlling carriers

Getting greater control over carriers, both outside companies and private fleets, is the most important step transportation managers can take to improve operations, experts say.

“Carrier performance is key now,” says Steve Poplawski, director of retail industry marketing for Sterling Commerce, which provides a web-enabled transportation management system among a suite of supply chain management applications. “Otherwise, there are missed opportunities in creating efficiency throughout the entire supply chain, when retailers aren’t looking at backhaul opportunities, or if there are lane performance problems with shortages of trucks serving particular routes. In such cases, transportation managers are still caught up checking freight bills and using faxes to communicate with suppliers and carriers.”

Until recently, transportation management experts considered flexibility in choosing and routing truckloads an ability limited to licensed software applications tightly integrated-at extensive cost and development time-with a retailer’s other software, such as warehouse management and supply chain management systems, which feed necessary data into transportation management systems about what goods need to be delivered where. But advancements in XML-based and other forms of web-enabled application integration in recent years are providing for more options in deploying and accessing integrated transportation management systems.

One of the most noticeable changes, experts say, is in the availability of more robust on-demand transportation management applications that can be accessed as needed over the Internet, as Rite Aid does with Manhattan Associates, instead of installed at more upfront cost on a company’s own infrastructure.

“One of the great myths is that you can’t do the same level of application integration with an on-demand system as with licensed software, but we have seen integration with on-demand as good as with licensed,” Enslow says. “The whole rise of web services and XML has made it possible to get great integration benefits regardless of which way you go.”

At the same time, she adds, use of on-demand transportation applications is growing among retailers and suppliers of all sizes, making it more likely that retailers will be able to connect with more transportation partners online.

“On-demand systems are now easier and faster to deploy, and now we’re seeing the same systems used by major shippers like Unilever and P&G; down to companies doing $50 million a year in revenue,” she says. On-demand systems, which are typically deployed within three months, are becoming common among retailers that spend anywhere from $3 million to $100 million a year on freight management, Enslow adds.

On-demand, long-term

On-demand transportation management systems that fit that profile are available from vendors like Manhattan Associates, Sterling Commerce, RedPrairie and HighJump Software, a unit of 3M. In RedPrairie’s case, its on-demand system is offered through Shippers Commonwealth, which hosts RedPrairie’s web-based transportation management system and makes it available on-demand to clients including Stage Stores, Boscov’s Department Stores and Bon-Ton Stores Inc.

“We’re seeing more retailers go with on-demand for lower total cost of ownership of long-term solutions,” says Chad Collins, director of product strategy for HighJump Software, which gained an on-demand transportation application last year through its acquisition of Pinnacle Distribution Concepts. “In the past, many people thought that on-demand was only for small or mid-tier companies, but we’re seeing more tier-one retailers looking at on-demand as a viable long-term option.”

Compared to the older application service provider, or ASP, business model, which is dedicated to one company user at a time, on-demand applications are actually shared by multiple companies under what is also known as the software-as-a-service model, where users log onto their own secured version of shared software. And because each user connects its own suppliers and carriers to the system, the on-demand models have developed built-in networks of carriers shared among multiple users.

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