One of the biggest opportunities to dramatically improve supply chain performance occurs when traditional supply chain functions are decomposed and reinvented as integrated business processes. Few supply chain practitioners would dispute that notion. However, when it comes to their technology strategy, too many practitioners end up deploying their transportation management system (TMS) or multiple systems in silos: outbound TL/LTL, parcel, inbound, international, etc. The challenge facing supply chain practitioners who want to achieve breakthrough performance improvement is to understand the value and difference of converging TMS and connecting to their trading partners.
Breaking down the silos is not as simple as integrating the various existing applications. Instead, we are talking about how the business process would be fundamentally different or have completely new capabilities if the technology silos didn’t exist and multiple functions had been designed together in the first place. Part of the problem supply chain practitioners face is stepping out of the business process paradigms that have been dictated by technological limitations of the past. Applications on the same technology stack do not necessarily address the issue. Sometimes it takes new technologies or disruptive business practices to cause us to rethink what we have done in the past. Currently, the market pressures of the Amazon effect, coupled with the capacity crunch are perfect drivers to force this change.
A good example of converged TMS is what is happening to routing and mobile software because of same-day delivery requirements by retailers. To offer cost-effective same-day delivery, retailers must be able to make delivery window promises in real-time to customers based upon fleets that are in motion. The traditional route planning paradigm of taking orders, batch planning them and sending the results to a mobile solution for daily route execution doesn’t work for same-day delivery appointment scheduling and execution. Instead, the appointment promising must use the dispatch schedule that is currently being executed and contains real-time vehicle location updates from the GPS-enabled mobile applications being used by drivers. Equally, the integrated driver mobile application has to be able to accept new orders dynamically and potentially guide pickups and deliveries from multiple stores or depots to keep the delivery vehicles in constant motion and fully utilized.
A similar point for integrated TMS can be made for the evolution of fleet and for-hire transportation management as companies look more holistically at optimizing their transportation profit & loss (P&L) and capabilities. The traditional approach has been for the TMS to make the transportation mode selection decision based upon a static set of assumptions and then in “open loop” fashion, pass that answer off to route planning software, assuming that the work will get done there. But what happens when the distribution strategy is to maximize fleet utilization and then look to commercial carriers for overflow work or orders that do not make economic or customer service sense for the fleet to execute? These situations require “closed loop” interaction between the TMS and route planning functions and the ability of either function to be the master decision maker. There are even more complex scenarios where companies looking at backhaul and transportation revenue optimization that considers not only the fleet but commercial carriers too where the whole planning process needs to be solved collectively and dynamically.
For me, the current transportation environment is extremely existing because new processes are constantly being created which redefine a company or even a market performance. In most cases, this transformative performance improvement is enabled by technologies that support the new business paradigms and not through legacy technology based upon the functional silos that have artificially been created by legacy supply chain technology constraints. Supply chain practitioners looking to achieve industry-leading performance should challenge themselves and their vendors to think about a more integrated TMS approach can deliver the customer experience while balancing the costs.
Can you outline other examples of siloed approached? What are some of the best use cases you have seen with converging TMS processes has created huge value? Your comments are welcomed!