As the global economy has expanded, so have the supply chains employed by companies to source, make and deliver goods at the lowest price in the least amount of time. To keep up with the complexities of global commerce, multinational manufacturers and retailers have invested millions of dollars in Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) systems to help run the extended enterprise. That investment has delivered necessary economic benefit inside the manufacturing, procurement and financial silos. However, many organizations have failed to achieve the expected returns from integrated transportation management. The optimized global supply chain remains a mere theory for most companies. Why?

Today's ERP and SCM systems have failed to adequately address the needs of the fragmented and diverse international freight transportation services sector. Service providers in the transport industry, therefore, have had to invest in proprietary systems to improve business processes. As a result, the industry lacks a sufficient level of information and process standardization to support the supply chain integration efforts of many of its customers - the multinational manufacturers and retailers. The resultant 'information gap' between the enterprise systems of shippers and the back-office systems of transportation providers has left retailers and manufacturers lacking the actionable data needed to optimize the transport functions within their global supply chains. Many companies continue to expend considerable time, money and resources to collect and organize disparate information to make tactical and strategic transportation management decisions with direct effect on product delivery capability and the bottom line. Multinational manufacturers and retailers need a new, more practical and focused approach to bridging the transport information gap. Let's call this approach Pragmatic Transportation Management.

The information gap

Across the global supply chain, the enterprise must manage myriad functions to maintain the timely and efficient flow of goods from supplier to consumer, from raw materials to intermediate goods to finished product. Key functions include procurement, manufacturing, consolidation, transportation, deconsolidation, warehousing, assembly, distribution and replenishment. Numerous planning and execution decisions are required on an ongoing basis.

At their core, supply chain management (SCM) systems are designed to provide the enterprise with the information needed to support effective decision-making during both the planning and execution stages-and, ultimately, also during optimization. SCM applications, in general, have succeeded in integrating information from and within the procurement, manufacturing, warehousing and replenishment function areas. However, they have not achieved expected results in the transportation management area. This is largely because SCM systems have not extended outside the four walls of the enterprise to the systems of transportation providers. Attempts to do so have failed due to the complexity and fragmentation of the international freight transportation sector. Standardization in transportation information technology is insufficient to support SCM integration. The legacy systems of providers are often outdated and inflexible. Existing Electronic Data Interchange (EDI) conventions have not evolved to support new SCM initiatives. As a result, many companies continue to rely on manual spreadsheet and paper-based business processes to collect transportation decision support information with varying degrees of success and at significant cost.

Inadequate Information = Ineffective Decisions

Key strategic and tactical transportation management decisions with direct effect on the enterprise's delivery capability and bottom line are carried out without knowing the ultimate effect on cost or competitiveness. Visibility into actual transport performance and cost on a daily, weekly, or monthly basis remains unattainable given existing system architectures and business processes. Critical transportation management functions in the global supply chain - such as shipment tracking, exception management, capacity forecasting, contract tender, invoice auditing, allocation management, service performance and cost calculation - go unsupported by actionable decision support information. Recent technology initiatives to improve the flow of information from the transportation sector to enterprise systems, such as carrier information portals and online exchanges, have failed to deliver enough functionality to enhance supply chain optimization efforts. The result is excess inventory and cost in the supply chain and a loss of productivity within the transportation management department.

To unravel the complex matrix of data sources and business processes halting the integration of transportation decision support information, the enterprise must identify the specific data inputs needed to optimize each functional area of transportation management taking into account realistically how service providers can provide the information. As each service partner relationship and supply chain configuration is different, so are the nuances of integration. The key to success is the creative application of integration solutions that bridge the realities of the transport sector to the requirements of transportation management optimization. This Pragmatic Transportation Management approach will complement enterprise supply chain improvement initiatives by addressing specific transportation management issues in a prioritized, value-conscious manner.

Measurable benefit

By prioritizing the implementation of targeted transport management tools and processes, companies can realize improvements in all aspects of their international transportation operations. The Pragmatic Transportation Management approach enables the enterprise to acquire three critical supply chain management capabilities. It helps companies monitor transportation orders, execution, shipment delivery, alerts and invoicing data via an information hub integrating enterprise management systems and transport provider systems. It enables intelligent transportation management decision-making based on objective, contractual, planned and operational data. It allows for continual measurement of transport service performance to facilitate true supply chain optimization.

Business benefit is achieved from the following:

• Reduced cycle times through improved transportation efficiency, visibility and collaboration
  
• Improved order fulfillment from better allocation planning and exception management capability
  
• Reduced inventory with more reliable shipment planning and delivery
  
• Eliminated cost and time from transportation data collection and analysis
  
• Extended ROI from existing ERP and SCM system implementations

Sidebar: Effective decision support

Each critical transportation management function depends on the consistent input of execution data from service providers integrated with information within the enterprise to facilitate intelligent decision-making. Each integration solution must help to answer the correct questions to achieve the desired transportation management objective.

Track & Trace
Objective: Access current shipment location and event information as transportation partners report it

Questions: Where is this P.O. in the shipment process? This SKU? This shipment by a reference number of my choosing? By container, Bill of Lading, or Booking #?

Shipment Monitoring
Objective: Monitor shipment delivery against proforma schedules to manage exceptions and set proactive alerts for management

Questions: Which shipments are not on track for on-time delivery? What is the compounded effect of a delay early in the shipping plan?

Capacity Forecasting
Objective: Based on forecast order volumes, calculate transport capacity requirements by mode, route and shipment or delivery date

Questions: How many containers/trailers/shipments will I need by mode, by route and by week/month?

Contract Tender Management
Objective: Communicate capacity requirements to carriers and manage the tender process in collaborative online environment

Questions: Which carriers are best equipped to meet my delivery needs? Who provides the best overall value - price, service?

Allocation Planning
Objective: Plan allocations by transport provider based on service/rates and manage day-to-day carrier selection using allocation monitoring

Questions: How many containers should be allocated to each carrier? If I change my allocation in a given week/month, what impact will that have?

Invoice Auditing
Objective: Generate invoices automatically for electronic payment to providers by integrating rate and order data; or use invoices to audit

Questions: Is the carrier's invoice accurate? How much should I pay?

Service Performance
Objective: Establish Key Performance Indicators (KPI) from which to measure the service performance of transport partners over time

Questions: How did each carrier perform? Who are my preferred carriers?

Because the data inputs and integration solutions required will vary by enterprise, service partner and world region, only a focused effort to satisfy the unique transportation management objectives of any given company will succeed. The Pragmatic Transportation Management approach takes into account what transport providers can provide today to make the most of that information while the industry evolves to a higher level of capability. This approach allows companies to address information and process issues in a prioritized method tied directly to measurable ROI expectations.