Part of the challenge in managing the modern supply-chain is due to its sheer size and complexity. There are many working parts, network partners, and opportunities for things to go wrong that some are often overlooked. Rather than hoping everything runs as smoothly, shippers today need to apply technology to ensure high customer experience levels are achieved and all shipments are delivered on time and in full. Additional opportunities can be reached through transportation optimization whether using a 3PL or 4PL. It's important to understand how transportation optimization can work well with managed transportation service providers to attain that goal.
Defining Transportation Optimization
An optimized supply chain is one that is as efficient as possible; it is more likely to reduce costs, increase customer satisfaction rates, and add value for stakeholders. True optimization applies data to ensure all decisions and processes are carried out to their fullest potential. That means identifying areas of waste, overlap and large volumes and enabling continuous improvement through the use of transportation metrics to track performance. Leveraging data for continuous improvement makes transportation optimization more synonymous with managed transportation.
How Managed Transportation Enables Ongoing Optimization Across Your Network
While managed transportation and transportation optimization may go hand-in-hand, they are not necessarily identical. Managed transportation is about streamlining and centralizing the whole process of both inbound and outbound logistics, ranging from warehousing through delivery. These processes are intrinsically linked and require shared data and collaboration across all network partners.
For instance, managed transportation includes value-added logistics capabilities, including:
- Logistics consulting and analysis to understand current needs, costs, savings opportunities by mode, benchmarking and implementation or training of new systems.
- Shipment planning and execution capabilities that can be used to optimize shipments in real time, route freight, track carrier rates, manage the inbound flow of goods and integrate with the dozens, if not hundreds, of possible vendor platforms.
- Carrier procurement and management processes to handle initial vetting and qualification through ongoing management with carrier scorecards to ensure freight cost reductions occur, which are key benefits to working with a company like GlobalTranz that has 50,000+ carriers active within its system.
- Dedicated account management to track overarching goals and value of managed transportation, using scorecards, quarterly business reviews, and continuous assessments to ensure promised results live up to the hype in reality.
Transportation optimization is part of enabling proactive supply chain management. Outsourcing —the root of managed transportation—is also involved.
As reported by Supply Chain Dive, “First is monitored outsourcing, which is the traditional form in which production or service is contracted out to suppliers with infrequent performance evaluations. Using an offshore vendor to manufacture a component for a larger automotive assembly is a typical example.
Orchestrated outsourcing is more common in logistics, where businesses require close coordination with a supplier who has a core competency in a particular discipline. A 3PL is a common orchestrated relationship, in which the provider is part of the day-to-day operations with frequent communications.”
It's the view from outside that allows 3PLs to orchestrate all aspects of freight management from within the network through transportation optimization.
Another Thing to Consider: Network Versus Execution-Level Optimization
Once an organization has a broad understanding of the meaning of transportation optimization and its relationship to manage transportation, there is another confounding factor. Transportation optimization can occur at a network level and an execution level.
Network level optimization focuses more on higher-level design improvements like landed costs analysis of moving facilities, such as suppliers, manufacturers and distribution centers, assessing aggregate level impact of transportation expenses for customer demand changes, e.g., new customers, new product releases, and aggregate level service impacts.
Execution level considers business rules and defined freight profiles to ensure end customer commitments are held while achieving the highest value to transport goods.
As a further example, a broad mix of carriers allows for rapid scalability during times of disruption. A managed transportation solutions provider could enable that with pre-on boarded carrier networks. However, those carrier networks lack value if they cannot be immediately tapped when needed. That is where an execution-level optimization, using technology to seamlessly automate and complete execution processes for each shipment is important. Loads of information can be overwhelming so see transportation terminology to learn more.
Put the Power of Technology and People to Work to Take Advantage of Transportation Optimization
The modern supply chain continues to evolve and become more complex Finding success depends on around-the-clock scalability, insight into specific market granularities, clear data and visibility, and understanding how to stay strategic. Learn more about transportation optimization and how it can help you drive operative advantage while meeting customer expectations and delivery requirements.