In many businesses, transport management and planning can be a complex and dynamic process that involves managing customer-specific business rules, trade-offs between service-level, cost, and/or vehicle and route optimization, as well as managing the legalities of fleet management and driver hours.
Whether you operate your own vehicles or sub-contract to third parties, here are some common errors we have observed when reviewing transport management functions:
1. Poor Data Quality and Record-keeping
Any shipper needs to keep their own record of what they have shipped, the volume, weight, dimensions etc, service level or mode used and importantly the agreed cost. Without this you will be unable to check transport charges properly and you will almost inevitably be overcharged. In addition, you will find it difficult to review costs or re-bid efficiently, as you will be unable to accurately provide an historical model of your network, which a potential new service provider will need.
In dedicated fleet operations poor data quality has been seen to lead to vehicle overloading risk and potentially illegal operation.
Data management should be reviewed periodically to ensure master data is correct and validated. Record-keeping can be addressed with a good transport shipping functionality either through a standalone basic Transport Management System (TMS) or functionality provided by a general ERP or WMS system. Alternatively, for core fleet operations a Fleet Management System would cover this requirement.
2. Poor Forecasting
An example of this is when a sales function unexpectantly ramps up sales activity by offering new sales incentives or creates new product offers to drive up demand with no reference to logistics. This creates a big demand peak that own-fleet transport operations can’t cover, leading to expensive use of sub-contraction, often at ad-hoc rates. Even if all the transport is outsourced this can put a strain on service levels, as 3rd party fleets struggle to react quickly to the demand increase.
Take steps to even-flow demand which will allow you to optimise transport costs and protect service level performance to your customers and if you can’t, at least ensure transport capacity can be planned for in advance.
3. Mode Mis-management
This can occur when the wrong transport mode is selected, usually to the detriment of cost. This varies from larger air consignments suitable for airfreight being put into express parcel networks to the opposite, with small air express shipments going via airfreight providers. Another classic example is to expedite an entire shipment when only one order line is actually required urgently; thus, losing the opportunity to mitigate the cost of the expedited shipment.
Transport planners or schedulers need a good idea of their operational costs and hence what the cost impacts of their decision-making is.
4. Poor Procurement Practices
This includes not having contractual rates for sub-contraction, relying on spot market ad-hoc rates or having contract rates that have not been tested on the market for a long period.
The last 4 years have seen large upward and downward swings in transport costs. You are best protected against financial uncertainty and increased costs by taking a more dynamic approach to transport procurement by securing rate stability through contracts and reviewing at least annually.
5. Poor KPI Regime
This is particularly an in-house problem but is also seen in outsourced operations, even with the big 3PL logistics players. Statistics are not KPIs if they don’t guide management action. Transport planning for example, is a key supply chain function yet it is only rarely that KPI’s relate to the key business imperatives.
It is important to be able to actually measure the effectiveness of transport planning and answering the questions ‘Did it do what it promised to do?’, and ‘will the trade-offs between cost and service be optimised against your business requirement?’