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International Transportation

The Business Case for a Global TMS

The major benefits that a global TMS provide are operational, management, and C-level control. Understanding these elements will help determine TMS value.

Ned Blinick

Chief Product Officer at 3rdwave

Managing global freight is ladened with challenges. Possibly the most critical challenge is the limitation of time. Demands on the transportation teams are growing as political posturing ramps up causing rapid disruption to global supply chains. A global TMS solution provides an automated and systemic way of addressing the challenges that are the reality for most organizations that source globally.

The major benefits that global TMS provide a company are operational, management, and “C”-level control. Understanding how the global TMS solution addresses these 3 organizational groups is important in getting to the value that the solution will deliver.

Major Benefits of a Global TMS

1. Execution Control

Execution control provides the infrastructure that enables the transportation operator to manage, influence, and control all aspects of the global transportation activity from Purchase-to-Receipt or Sale-to-Delivery. This control is done through Dashboard process management, real-time access to in-line look-ups, and direct access to underlying master data and transportation execution detail.

The global TMS functionality necessary to support execution control are:

  • Freight contract management
  • RFQ
  • Carrier Route Base Rate and Ancillary Charge Control
  • Origin and Destination local charges
  • Route Management
  • Supplier PO Release Planning
  • Carrier Booking and Confirmation control
  • In-Transit milestone tracking visibility
  • Milestone exception alerting
  • Pier management (demurrage control)
  • Inbound/Outbound delivery control
  • Transportation Visibility and Exception Management
  • Supplier PO shipment execution status control
  • Carriers/3PLs execution status control
  • Customs and Regulatory Agencies
  • Inbound/Outbound Delivery – demurrage and detention status management
  • Warehouse Receiving/Shipping POD
  • Freight Invoice Auditing
  • Invoice Estimating
  • Invoice Estimate-to-Actual Validation
  • Invoice Discrepancy Alerting

2. Management Control

There are 3 critical capabilities that they require in order to effectively and holistically manage global transportation execution, cost, and the actors across the transportation supply chain. Each activity is reliant on current and accurate information. The required information is generally stored in disparate systems that require manual intervention to acquire and put into manageable formats – like spreadsheets or disconnected databases.

3 Critical TMS Capabilities

  • Decision Support – a Global TMS provides the infrastructure to aggregate data from transportation network partners, analyze it, and report it in useable formats. A TMS presents the information as alerts, KPIs, or decision support Analytics in Dashboards, reports, or dynamic queries.
  • 3rd party Communication/Negotiation – information is the life-blood of global TMS. Because there are so many parties involved in ensuring that product moves from an international source to a final domestic destination clear communications is a critical factor in managing and coordinating the planning and execution of shipments.
  • Transportation Partner Collaboration – A global TMS provides the infrastructure that supports interactive and controlled communications that is key to collaboration among all actors in the transportation supply chain. When affected parties have the same information, at the same time, they are able to quickly and effectively resolve outstanding issues and ensure that appropriate decisions are agreed to and executed.

3. “C” – Level Control

The “C” level in the organization is interested in strategic issues related to the companies global supply chain network. While they are not particularly interested in the daily idiosyncrasies of global transportation, they are keenly interested in how the organization’s supply chain is optimized to the organizations’ supply and risk profiles. The “C” level becomes very focused on the role of transportation when disruptive influences negatively impact their global supply chain network and the company is exposed to increased risk. Transportation becomes a critical factor in re-factoring global supply networks and supporting the overall strategic design of the company’s global supply chain network.

The Business Case for a Global TMS

Global transportation is its own unique space within the transportation team. The global transportation space is challenged by the sheer number of players involved in moving the product through the transportation life cycle – often upwards of 6 players. Adding to the physical move are the added challenges of managing the distance/time relationship, currency and language, along with unique local complexity. It is for these reasons that the management of global transportation has been, and continues to be, outsourced to 3rd parties.

Because of the physical complexity of the global transportation life cycle, it is necessary to engage 3rd parties to manage the physical execution of a global shipment. However, the management and control of the processes can effectively be managed within the organization.

However, because the global environment is so much more complex than its domestic counterpart the ability to manage and control the global environment requires specially focused solutions. It requires the implementation of a global TMS solution.

The value that a global TMS brings to the organization is substantial from both a cost savings perspective, but more importantly from an information perspective. While the information component is hard to quantify, the hard savings are quite easy to identify.

Operator EfficiencyOperational Savings – Automated GTM capabilities increase operator productivity by a factor of 2-3X. The elimination or massive reduction in manual data and document processing free up operator time for much more valuable activities.

  • Reduction in manual data input – integrated information feeds from 3rd parties.
  • Reduction in time managing 3rd parties
  • Reduction in time responding to internal inquiries from managers and associates
  • Reduction in time accessing and formatting reports and analyses
  • Reduction in document management

Freight Contract ManagementFreight Cost Savings – Freight contract management is very time consuming to initiate and maintain. It begins with the request for quote and extends to managing the contracting process. Managing the process on spreadsheets is highly manual and provides poor control and historical visibility. With the number of changes to the ancillary rates that are integral to international freight contracts managing the process without a system is time-consuming, inefficient, and error-prone.

  1. Automated freight RFQ (Request for Quotation) management: RFQ management allows organizations to control the freight quote process and obtain more favorable rate and contract terms with few resources.
  2. Provides opportunity to incorporate both contract and spot rate management that delivers freight cost savings opportunities.
  3. Delivers immediate access to negotiated freight contracts and quantity commitments.
  4. Provides integral support for Automated Freight Audit Management.

Freight Audit Management Freight Cost Savings – Global freight invoices are fraught with errors. The errors are a result of carriers changing ancillary rates to contracted rates but not adequately documenting them within their own systems. This results in an industry average overcharge of ~2%. While the value of the error on any specific invoice is generally not significant and the cost associated with resolving the overcharge too great, the cumulative cost of the errors can be significant and worth pursuing.

  • Reduces costs associated with resolving carrier invoice errors.
  • Industry average invoice error rate: 2%
  • Range of carrier invoices with errors: 2-20%
  • Average time to audit and invoice: 20 minutes
  • Average time to resolve invoice error dispute: 60-90 minutes

Visibility: Freight Execution ControlFreight Cost Savings – Visibility is the essential control element for transportation management. Knowing the status of a shipment across the entire transportation life-cycle is critical to transportation performance. This begins with visibility into a PO (ensures on-time shipment) through to arrival at the final destination (on-time delivery). Visibility of the freight execution process provides the ability to proactively manage shipments and constituents to align expectations with deliverables. Relying on disparate systems for transportation visibility is time-consuming and inefficient.

  1. Aggregation of transportation data from all actors in the supply chain to provide a single view of the transportation supply chain
  2. Greater visibility and management of suppliers and carriers milestone events
  3. Visibility into equipment/package status at points of entry – ability to prioritize delivery, avoid/reduce demurrage and/or detention charges

SKU Level VisibilityReduction in Inventory, Product Cost Savings – A major determinant of inventory safety stock is the level of confidence in the purchase-to-receipt visibility of the SKU. Visibility to the SKU from PO-to-Receipt and understanding its real-time availability is critical for inventory planning, management, and control.

  1. Aggregates SKU level visibility across the transportation life-cycle
  2. Supports collaboration among internal stakeholders
  3. Increases delivery options and optimization
  4. Increases inventory management capabilities through visibility to in-transit SKU positions and delivery schedules

3rd Party CommunicationReduced transportation cycle time, Improved on-time Delivery – The ability to effectively communicate with suppliers, carriers and other service providers responsible for coordinating and moving cargo is dependent on current accurate information. Greater access to global transportation information in real-time enables the global transportation team to be more effective in managing all the external actors.

  1. Visibility into supplier PO execution – increases supplier compliance with order preparation and ship plan execution.
  2. Increases 3PL/carrier oversight by providing real-time alerts and notifications when critical milestones are not updated.
  3. Provides infrastructure for systemic workflow and processes with enhanced automated communication capability.
  4. Controlled reporting and analytics – captures and aggregates all global transportation details in a single data warehouse/lake. Eliminates dependency on all 3rd parties for reports and analytics.

Intra-company CollaborationImproved efficiency, Improved effectiveness. One of the most significant challenges facing transportation is sharing SKU related information with internal stakeholders. A global transportation management system that provides intra-company actors with access to the positioning of their products across the supply chain has real value in enabling them to do their jobs more efficiently and effectively.

  • Provides internal actors immediate and direct access to validated SKU level information across the global supply chain.
  • Delivers a single view of the global supply chain in near real-time..
  • Requires minimal effort by the transportation team to support internal actors.

Independent Information Control: Improved Reporting and AnalyticsIncreased Understanding, Better Decisions, Improved Results. Reporting and Analytics are driven by information. Control of the data is the critical factor in both the accessibility and quality of information. Capturing, validating, aggregating, and contextualizing the data is the determining factor in the value of the information. Information and the way it is presented is essential in support of both tactical and strategic decision making processes.

  • Provides a single data repository of all global transportation data – ability to capture, validate, and aggregate information from all 3rd parties to a transportation activity.
  • Contextualizes information into the perspective of the user. Improves decision outcomes
  • Provides reporting and analytics tools with validated information for accurate and timely operational perspectives and business intelligence.
  • Reduces dependence of 3rd parties that normally control the transportation data.

Conclusion

To be effective, a global transportation solution must simplify the complexity that global transportation managers must deal with every day in order to deliver the right SKU, to the right place, at the right time, and at the right price. The solution must simplify the decision making options that the “C” level confronts when they review their global supply chain options. Lastly, but not least, the global transportation solution must simplify the daily routines that are burdensome, time-consuming, and reactive for operators and analysts.