TMS Strategy in Volatile Times: Where You Should Be & How to Get There
By Mike Skinner, VP, CLX Logistics
We’re currently in one of the most volatile freight markets in the past 20 years. 2018 was brutal for shippers with the demand/supply equation heavily favoring carriers. 2019 brought a dramatic swing back in favor of shippers as capacity loosened. Early in the COVID-19 pandemic, dry van capacity was at a premium. As of this writing, carriers are actively looking to deploy idle trucks. By early 2021 as the economy rebounds and carriers have departed a depressed market, under-prepared shippers will again have trouble getting loads covered.
At the same time, pressure from management remains ever constant. Customers are expecting an “Amazon Experience,” and, as always, your freight costs are “too high.”
Maybe you’ve already implemented a TMS, and if you haven’t, you should! For those who have, and use it effectively, you probably have a good handle on your freight costs and a relatively clear picture of your customer experience. In other words, you have a pretty good view of where you are when it comes to the performance of your transportation activities. But is that enough? Probably not!
What you really need to understand and be able to communicate to management is where you should be and how to get there.
First, let’s look at where you should be.
To put it simply, you want to be best-in-class at what you do. That means you need to be able to define best-in-class. So, first thing, hire a benchmarking service to provide you with the data you need.
Chemical manufacturers need to be careful here, however. When shipping hazardous packaged goods and bulk liquids, be sure you’re not comparing your freight costs against shippers in another “class.” Be diligent about selecting a benchmarking service that knows and understands your freight, and has a large pool of current data. In other words, you should be striving to be the best in the right class.
Further, when benchmarking against the market, try to avoid benchmarking on rates only. Unless you are in a pure commodity market, price is important. Understanding the tradeoffs between cost and service among your potential list of carriers will help you avoid aiming for the basement.
Not many benchmarking services can compare market rates within the context of carrier compliance in terms of visibility and on-time performance. Look for one that does.
Now, let’s look at how to get there. It’s going to take a combination of tools and talent.
In addition to your TMS, there is a wide array of powerful tools available to you, most of which are relatively easy to deploy, often as technology plugins for your TMS. However, as with any tool, if you don’t know how and when to use them, you can run the risk of doing more harm than good.
As an example, consider the growing number of digital freight marketplaces like UberFreight and LoadSmart. These brokerage service providers can readily plug into most TMS solutions and use predictive analytics to provide real-time spot rates and low-cost capacity. In a down or declining market, there is no faster way to drop your freight costs. But, over-reliance on this type of arms-length relationship with carriers can bite you in the rear when markets tighten up. Carriers will gravitate either to the money (highest bidder) or to their relationships with shippers who value long-standing, sustainable relationships. Therefore, it’s critical to use these tools within the context of a well-developed strategy.
Other tools to evaluate for your strategy should include:
- Telematics-Based Tracking from companies like Project44 and FourKites who pull GPS data from truck ELD devices for accurate and timely visibility of your freight
- Dock Scheduling and Yard Management solutions to optimize flows in and out of your facilities
- Vendor Portals to facilitate control and visibility of inbound freight
- Transportation Modeling solutions that provide “what if” scenario-based assessments of cost and service improvement opportunities
- Dynamic Fuel Rating solutions, such as Break-Through-Fuel that feed actual market-specific fuel rates into your TMS to minimize the hedging effect of your carriers’ fuel surcharge tables
Now, about the talent. Setting your targets, selecting the right tools, using them effectively, and tracking your progress along the journey is all about the people engaged in the journey with you. You’ll never become best-in-class if you don’t have the “A” students on your team.
You have some of that talent inhouse. Maybe you have all that you need. But, due to the frequency with which budget cycles tend to hit the logistics department, very few chemical shippers do.
The right people know chemical logistics inside and out. They know how to gather and use the right data to make forward-thinking decisions and plans, and to track your progress against the plan.
CLX Logistics stands alone in the industry with the right people in place who can provide:
- On-demand TMS solutions across all modes of transportation in all regions
- Access to and the ability to effectively deploy the wide array of complimentary tools
- Industry-specific benchmarking of freight costs and carrier service
Click here to learn more about CLX, our array of TMS and related tools, our world-class team of logistics professionals, and how we can help you develop a comprehensive vision of where you are, where you should be heading, and how to get there.
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