TRANSPORTATION MANAGEMENT
03
Transportation N etw ork Optimization
in the Amazon Effect Era
Having transparency across all aspects of your logistics operation w ill
enable your company to succeed in a co m p etitive marketplace.
By Gary Allen
fficient transportation management with end-to-end
E visibility is becoming more and more vital to a compa
nys supply chain and its overall success. As e-commerce
and omni-channel fulfillment service pressures continue
to mount, transportation managers are faced with a growing
number of challenges: shorter lead times, tighter delivery win
dows, driver shortages, the need to make more frequent and
smaller shipments, rising freight costs, and globalization.
These challenges have a significant impact on a compa
nys operation and its bottom line. From increasing freight
rates to uncertainty in the transportation market, there are
numerous factors playing an influential role in driving the
market forces that could prevent supply chains from meeting
their customers rising demands.
The reality is that in the majority of cases, there is room
for network optimization and cost savings. Private fleet
shippers have the ability to achieve both through routing,
dock scheduling, driver management, backhauls and fleet
right-sizing. And the benefits are far-reaching:
Dynamic planning capability
Flexibility to manage variations in demand
Increased network visibility regardless of mode
Alleviated capacity changes and driver issues
Business intelligence and analytics
Comparison of costs for fleets vs. for-hire carriers
Strategic decision-making support.
You might be asking yourself what actionable things you
can do to really streamline transportation management, trans
form operations and navigate the aforementioned challenges.
First, you can formulate effective baselines that can be com
pared to actual results. Being able to quantify progress can be
made simple if you make it a priority to understand perfor
28 W W W .M H LN EW S .C O M I JUNE 2017 I MATERIAL HANDLING & LOGISTICS
mance baselines and the accompanying network profile.
Second, you can leverage data analytics to quickly drive
business insights. You want to be sure youre spending more
time interpreting the data than on gathering and reporting it,
which can be achieved by purchasing a cost-effective tool that
can quickly turn Big Data into actionable information.
Equally essential is establishing a four-step approach as
the basis for managing and controlling network costs and
service performance:
Performance + Variance to Plan + Root Cause = Action.
You can utilize tools including bar graphs, such as Pareto
charts, to focus on the areas driving the greatest impact to
the issue.
Also, when developing your weekly/monthly perfor
mance bundle for management reviews, the information,
charts and dashboards that you gather should answer the
question: What should the takeaway be from this? All too
often, the audience is left to interpret the information with no
direction from the subject matter experts.
Finally, get into the practice of reviewing. Consistently
monitoring your network (weekly, monthly, etc.) will pre
vent network performance issues from lingering too long and
worsening before getting addressed.
The Am azon and the Uber Effects
In addition to taking these steps when establishing your
transportation management strategy, its critical to be aware
of the different emerging trends within the industry and how
theyre impacting your business. Trends like the Amazon
Effect, for example, can no longer go ignored if you want
your company to experience long-term success. The Ama
zon Effect goes hand in hand with the concept of the now
economy, in which customers order items at the touch of a
button and receive them at their doorsteps just hours later.
The phenomenon is evidenced by 2016 e-commerce growth,
with Amazon accounting for 53% of online deliveries, ac
cording to Slice Intelligence.
The Amazon Effect has skyrocketed demands within the
supply chain and has set the standard for what consumers
have come to expecteverything from competitive pricing
to free shipping and quick delivery time. This trend has been
the key driver behind the closing of some brick-and-mortar
store locations, including M acys, JCPenney and Sears.
 With a limited inventory of in-store
merchandise, fewer retail stores and the
ability to find just about anything you
could possibly need on Amazon, con
sumers are less inclined to get in their
cars and head to the store for something.
And if youre thinking that youre im
mune to the pressures because youre
not in the retail space, think again. This
trend is disrupting supply chains serving
multiple industries, such as food and
beverage, consumer packaged goods,
automotive, technology, and healthcare.
A greater need for asset sharing has
materialized as a result of the Amazon
Effect, fueling whats known as the Uber
Effectyet another trend and supply
chain disruptor. Asset sharing, which in
cludes warehouses, trucks and drivers, is
emerging as an opportunity to help com
panies meet the demands of the Amazon
Effect by facilitating collaboration with
peers and competitors to drive efficien
cies, improve service and manage costs.
This practice, which centers on sharing
space, translates into shared costs, which
will lower overall supply chain cost and
improve cash-to-cash cycles.
These trends are pushing supply
chain managers to adjust their strategies
in order to keep loyal customers and re
main in business. Approaches that once
worked, no matter how recently imple
mented and regardless of the sector, can
be obsolete tomorrow.
For example, up until a few years ago,
a large retailer was performing dock
scheduling for each of its 35 distribution
centers separately. Too many employ
ees were scheduling deliveries and there
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wasnt one consistent process. Transit
times were reliable and tight, but the pro
cess was hampering deliveries, and it
was too labor intensive. With managers
relying on handwritten spreadsheets, the
retailer partnered with a third-party lo
gistics provider (3PL), which installed
web-based software at each DC. Now,
the software allows managers to dynam
ically control deliveries at each location,
saving the company $2.8 million in op
erating and transportation costs the first
year and improving visibility.
A Responsive Supply Chain
New strategies and results have sup
ply chain managers embracing the same
technology customers are using for data
mining, analysis and tracking. In another
approach, competitors are cooperating
with each other to improve efficiency
and keep shelves stocked. These strate
gies enable customer demands to be met
while lowering their cost to operate.
Having transparency across all as
pects of your logistics operation is ulti
mately what will enable your company
to succeed in a competitive marketplace.
This is where technology comes into
play. By investing in new technology
that gives you visibility into your sup
ply chain, you're ultimately enabling
a cycle of continuous improvement, in
which youre able to track parts, com
ponents and products from the manu
facturer to the final destination, both
in transit or at rest. The ideal system
captures data through new and flexible
technologies, makes useful data rapidly
available to stakeholders and custom
sfidi
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MATERIAL HANDLING & LOGISTICS I JUNE 2017 I WWW.MHLNEWS.COM
ers, gives a clear view of inventory and
supply chain activity, and helps create
responsive supply chains.
Many businesses partner with a 3PL
with engineering, integration and oper
ation teams in order to get a true visibil
ity program in place. A 3PL can help a
company execute the five vital steps in
system implementation:
CaptureUse advanced technol
ogies to gain visibility across the
supply chain.
AnalyzeEvaluate where branded
and private label products come
from.
DesignSet up supply chain routes,
material flow and logistics networks to
accommodate varying requirements.
SenseUse advanced analytics, busi
ness process and planning technologies.
StructureDevelop structured
playbooks or scenarios to know how
to comply with rules, regulations,
exceptions and practices.
Technology solutions are available that
work on both smart devices and desktops
and that can provide load location visibil
ity, tracking and customized communica
tions across all modes of transportation
through a single source. MH&L
G ary Allen is vice president, supply
chain excellence with Ryder System
Inc. (w ww.ryder.com ). H e has more
than 25 years o f experience in sup
ply chain management, logistics out
sourcing and professional services.
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