Web-based transportation management turns truck traffic into a driver of 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.
“A unique value proposition of multi-tenant on-demand transportation management systems is their network of already connected transportation carrier and freight forwarders,” Enslow says.
Modern web technology-based transportation management systems are also providing advanced visibility into truck movements and greater opportunities for collaboration between retailers and carriers. The systems provide improved visibility through alerts sent from carriers about the status of truck movements, including any disruptions. If a truck loaded with blue jeans breaks down on its way to a distribution center in Iowa, for example, a manager would receive an alert via e-mail or cell phone, then could log on to a web-based transportation management application to arrange for an alternate carrier. On the other hand, if the retailer realized that demand for products already en route were needed by a different group of stores than originally planned, the transportation manager could log into the system to redirect the shipment to a different distribution center.
“There are a number of major advantages that may be gained by using automated transportation planning software, such as visibility to inbound volume, fleet capacity management and cost efficiencies,” Rite Aid’s Shovel says.
Before using the Manhattan Associates system, Rite Aid’s suppliers controlled most of its inbound transportation, the trucks headed to its distribution centers. That left Rite Aid’s transportation department with limited visibility into which purchase orders suppliers were filling, as well as limited awareness of shipment status of orders being filled.
Shippers generally alerted Rite Aid only when a shipment became delayed in transit, leaving the retailer little time to react and arrange for an alternate carrier or replacement products to fill store shelves. While transportation managers scrambled to make alternate plans, the disruptions forced Rite Aid’s inventory managers to process emergency orders from stores instead of spending time on their usual inventory planning.
With the Manhattan Associates Transportation Planning and Execution system, Rite Aid’s transportation management team logs onto the web to match submitted purchase orders with shipment readiness at suppliers. After viewing and analyzing the intended point of delivery, volume, expected transit time and available carriers, Rite Aid then chooses a carrier based on its available capacity, expected delivery time and costs. After it chooses a carrier (or truck from its own fleet) it receives status reports in alerts sent by drivers and carrier partners to the Transportation Planning and Execution application as well as to cell phones and e-mail inboxes.
More options
Several recent acquisitions and product introductions in the transportation management market have produced more options for retailers.
While RedPrairie’s domestic transportation management software is offered in an on-demand version by Shippers Commonwealth, RedPrairie also recently introduced on-demand versions of its international and internal fleet transportation management applications, says Dan Vertachnik, senior vice president of the Global Transportation Group at RedPrairie.
Among other providers, Sterling Commerce last year acquired Nistevo, a provider of on-demand transportation management software that provides access to about 6,400 carriers. Infor recently introduced an application, Infor Supply Chain Visibility, that provides visibility across supply chain and inventory management applications, says Eric Nilsson, vice president of product management.
Holistic logistics
Thanks to the expansion of web technology integration connecting transportation management to related applications, on-demand transportation management can create new efficiencies in preparing loads for trucks. Integrated with a warehouse management system, for example, the on-demand transportation application can be configured to automatically determine when an order, based on the number and dimensions of products, should be sent via small-parcel, less-than-truckload or full-truckload, then print out the pertinent shipping labels for the appropriate carrier.
The improved integration among transportation and other applications is making it easier for retailers to take a more comprehensive look at their logistics operations, experts say. “A lot of people have traditionally talked about inbound and outbound (from distribution centers to stores) as different silos,” says Prashant Bhatia, senior director of product management for Manhattan Associates. “But really transportation management should look at the transportation network as a whole to optimize the network from suppliers through DCs to stores.”
paul@verticalwebmedia.com
