Transportation Optimization: Is This The Next Step?
Cost reduction through effective transportation management remains a high priority for most organizations. The challenges include decisions about where the greatest opportunity exists, what systems or technology investments to make, and what operational changes need to take place in order to realize the greatest benefit. The variety of solutions and approaches that are available to address transportation management make these decisions even more difficult.
When it comes to transportation operations, many companies still operate either partially or entirely in a manual, paper-based mode. Depending on the complexity and volume, there are often significant opportunities to improve shipping performance. By simply automating the routing, rating, consolidating, manifesting, auditing and claims process, companies can realize shipments that are more accurate, compliant and cost-effective every time. This provides an opportunity to impact both top and bottom lines of an organization.
However, many companies feel the need not just to automate, but also to optimize because of the implied promise to reduce costs. Although there is great potential for savings when it comes to the use of transportation optimization technology, many times shippers are not ready to deploy and support this technology and/or their transportation network does not warrant this type of technology.
Optimization technology has been used to model transportation networks in an effort to support infrastructure decisions, resource planning, and contract negotiation for a number of years. Optimization technology has also been used at an execution level to solve very high volume consolidation problems and complex network problems with multiple origins, destinations and hubs. These environments are typical of 3PLs and very large manufacturers.
Risk is part of any significant opportunity and the adoption of transportation optimization is no exception. Risks manifest themselves through failed implementations, cost overruns, ROI shortfalls and significant, unpredictable supply chain disruption.
The purpose of this paper is to help readers gain an understanding of what is required to rationalize optimization technology and to identify the prerequisites for the adoption of optimization in order to mitigate risk and set appropriate expectations.