Tag Archives: transportation management

4 Common Misconceptions about Non-Asset Based 3PLs

What is a non-asset based third-party logistics provider?

A non-asset based third-party logistics provider is a firm that doesn’t own equipment, but partner with carriers to provide transportation services. There are many myths and misconceptions about non-asset based 3PLs. However, none of them are telling the truth. So, we have outlined the most common stereotypes, and crushed them:

Misconception 1: We don’t need to work with a logistics firm since we own our own fleetnon asset based 3pls

Fact: Whether your company leases or owns its own fleet of trucks, complications arise in the quest to maximize shipping efficiency.

Government Rules and Regulations

Carriers and drivers are responsible for safety and compliance. So when government and transportation associations rescind, suspend and update the standards for drivers, it can be difficult to keep up. When demand shifts and current events call for change in capacity or routes, outsourcing lanes could be a better option than relying on your private fleet.

Rising Costs and Capital Investment

Operating your own fleet comes with financial obligations. This means that fuel, equipment, accounting, and insurance costs affect the bottom line. Besides unpredictable costs that can be unprofitable, there are also liability issues. Also, all fleets must carry insurance, usually with exorbitant deductibles. In case of an accident, a private fleet could suffer excessive financial loss. After accidents, lawsuits typically arise, and truckers rarely come out on top. Transfer this burden to a carrier who has a good reputation on the road. When working with non-asset based 3PLs, you can find a carrier who meets your company’s safety requirements and values.

Customer Service and Added Value

For unique or unusual freight, a company will often use a 3PL to find the perfect driver. Public carriers are just as competent as private fleets with regards to routes, customers and products. Through a network of carriers, a 3PL can assign a driver to specific accounts. This way, they can develop a relationship and recognize the routes, products, and requests.

Driver Landscape

Private fleets haven’t escaped the problems of the driver shortage. What if your top drivers leave you for a competitor? Public carriers have relationships with 3PLs, so they can help find solutions to guarantee capacity through backhauls or less than truckload moves. Also, for a private fleet, the driver shortage limits options.

Does your company have a private fleet? Find out how PLS can find you backhaul opportunities here.

Misconception 2: Partnering with a transportation management provider for customized solutions will eliminate my job

Fact: Outsourcing transportation management doesn’t mean turning over your job responsibilities. So, outsourcing specific parts of business operations to an expert is not uncommon. Also, outsourcing is a relationship, a strategic partnership, which adds value to the entire organization. Outsourcing provides more time for you to focus on your core competency and discover cost-saving results.

Outsourcing should be seen as a resource, to produce more efficient processes; it’s a tool that generates data to make better decisions; it’s an identifier of inefficiency and a key to overall growth.

Organizations expect to spend, on average, $65.4 million on transportation, freight services, and equipment in the upcoming year.

Misconception 3: If I work with non-asset based 3PLs on transportation solutions, I’ll lose any or all visibility non asset based 3pls

Fact:  A 3PL’s transportation management solutions provide your company with historical and real-time shipment data. When leveraged and managed properly, big data is used to make smarter operational decisions and optimizes supply chains.

Visibility represents the real-time status of supply chain operations

Consumers, manufacturers, and suppliers want to know where their order is at any point in the supply chain. For companies that want to keep visibility into its supply chain and shipments, they can partner with a 3PL and integrate advanced TMS technology that allows information to be gathered from internal and external sources. The real value in increased visibility includes more effective management, simple monitoring and the ability to optimize business intelligence and practices.

Misconception 4: 3PLs offer a one-size-fits-all strategy

Fact:  Transportation management has a suite of services to fit your business needs. A 3PL managing your transportation will work behind the scenes while you manage and monitor the decisions that are best for your business. A 3PL provider will enable you to eliminate tedious day-to-day activities and deliver customized monthly reports comparing current and historical data.

Solutions to consider from a 3PL:

  • Freight Brokerage
  • Managed Transportation
  • Full Outsourced Transportation
  • Technology and Management
  • Risk Mitigation

Whether you have objected to working with a 3PL because your business is too big, too small, has never used brokers or only uses preferred carriers, it’s time to reconsider.

A 3PL is able to provide an evaluation of current processes and find solutions that will cut transportation spend and improve service and processes. Also, it can create shipment visibility and efficiently manage inventory.

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4 Common Myths about TMS Software

Despite the common TMS myths, it lets companies understand their processes while reducing costs, and forecasting accurate demand.

Here are 4 popular misconceptions about TMS:

Software as a service (SaaS) transportation management system (TMS) solution doesn’t add value, is expensive, and doesn’t present ROI for years.

  • TMS sanctions effective and fast decision making. It has a customizable interface, streamlines operations, reduces carrier overhead charges, optimizes routes, and has track and trace features.
  • A TMS identifies supply chain pain points and logistics challenges that might have been disregarded.
  • The SaaS model of TMS software requires little to no IT or monetary investment, unlike traditional software. SaaS solutions don’t require costly upgrades. With a SaaS solution, the shipper’s organization pays for what is used.
  • Implementing a TMS creates immediate ROI because it takes away the manual processes. A TMS enables better processes, delivering better customer service at a lower cost. In a 2011 ARC Advisory group survey, 40% of respondents felt that TMS software offers a strong ROI and that if they were to give up their TMS and go back to manual processes, their total freight spend would increase.

For centralized TMS software, you can’t partner with a 3PL

  • When shippers use a 3PL in tandem with a TMS, shippers can greatly benefit. The 2016 Third-Party Logistics Study shows that 73% of shippers indicate they are increasing use of outsourced logistics services this year, which compares to a figure of 68% reported in 2015.
  • A 3PL provides different levels of partnership – some companies choose full-service solutions and some companies use 3PLs for tech support or spot moves.
  • Partnering with a 3PL lets shippers focus on their core competency while 3PL experts form accurate logistics practices and monitored freight moves.
  • The 2016 Third-Party Logistics Study reveals that 73% of shippers interact with their 3PL on a daily or hourly basis, while 80% of 3PLs responded similarly.

I can’t use my preferred carriers, automate rules or use all of the data generated

  • Carrier connectivity is a major benefit of using a TMS: shippers have access to a broad network of carriers, including their preferred carriers, and shippers have the opportunity to become a carrier’s choice through simplified communication and coordination. With such direct access to a carrier network, there tms mythsis substantial ROI, since you’ll be able to find capacity whenever you need freight moved.
  • Logistics Management Research shows that TMS users achieve an average cost savings of 7.5% when they use preferred carriers, better procurement negotiations, and put low-cost mode selections to work.
  • Automation is another benefit offered by TMS technology. With automation, you will avoid making costly errors. Automated rules enable a shipper to select applicable accessorial fees, auto-filled BOL information and access to your scheduling.
  • Only 20% of the data accumulated by structured sources is easily digestible. Taking TMS data and turning it into something actionable reveals profitable results. The information is a key benefit of a TMS and helps companies predict complex situations. Even using a small percentage of the data collected will give companies the opportunity to cut costs, compare lanes and rates, find ways to improve supply chain processes.

Real-time data and visibility are just buzz words

  • Real-time data and shipment visibility are real benefits of transportation management systems. To achieve visibility that provides real-time data, companies must blend all systems and pay attention to the transportation and production details.
  • Implementing real-time data and visibility let companies understand their processes better, while reducing costs, and forecasting accurate demand. The software allows shippers to frequently run reports, receive instant notifications of disruptions and analyze historical and present data on costs and performance.

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Shipper Strategy: Factors That Will Influence 2017 Transportation Management

By 2017, the US population is expected to rise to 332 million, a 70% increase from fifty years ago. Population growth in cities is placing a strain on existing transportation systems and creating demand for more transportation choices. Industries and consumers depend on the consistent, timely flow of goods and services. The mounting volume and availability of information and the rapid development and adoption of technologies is transforming all aspects of life – including transportation.

According to a recent Transport Topics article, economist Diane Swonk said that 2016 was probably the weakest year for US growth since the Great Recession ended. The economy is moving in the right direction, but slowly. Flatbed loads have inflated by 6.6% compared with the same time last year. Refrigerated truckloads have grown, only by 0.7%, after booming by 14.3% in 2015. 

What factors and trends will impact your transportation strategy next year?

  1. Regulations
    Government trucking regulations will have a serious impact on transportation rates, trucking capacity and overall economic productivity.
    The ELD Mandate will affect about 3 million drivers and is effective in December 2017. About half of the trucking industry has already installed ELDs, but if the remaining half doesn’t put in the device, they’ll be forced to exit the industry, resulting in a major loss of capacity. Even though ELDs have constructive implications, the mandate could create logistics headaches by taking away capacity and increasing rates.

Read : 2016-2017 Trucking Regulations Aggravate Economic Trends

  1. Globalization
    Transportation connects industries; it’s the key to globalization. Today, about 1/3 of world trade consists of shipments between branches of multinational companies. Technological advances have expanded the global marketplace, highlighting the need for a transportation system that is international in reach. Faster and cheaper transportation systems allow multinational corporations to build facilities across the globe while maintaining scheduled deliveries.
    According to the US Department of Commerce, in the last 25 years, US imports and exports grew from $726 billion to $2.6 trillion. The Bureau of Transportation Statistics reports that the transportation sector represents 11% of the overall US GDP and accounts for 1 in 7 jobs in the US economy.
  1. Smart Cities
    A smart city addresses urban issues like traffic congestion through technology-based solutions. Smart cities’ transportation data is derived from multiple devices that identify speed and traffic volume, then provide traffic analysis. With a smart city, there will be more intelligent transportation management solutions so carriers can be redirected to a less congested route, traffic flow will be optimized and responses to road-incidents will be improved. Research firm IDC predicts that by 2017, at least 20 of the world’s largest countries will create smart city policies to prioritize funding and document operational guidelines.

Read : A Fully Automated Transportation Industry is Closer than You Think

  1. Safety & Autonomy
    US self-driving truck sales are forecasted to reach 60,000 by 2035, estimates IHS Automotive. That would amount to 15% of sales for trucks in the big, Class 8 weight segment. Recently, Uber acquired self-driving lorry startup Otto, and it plans to put the company to work in the long-haul freight business in 2017. Otto’s technology allows existing trucks to be fitted with self-driving technology which can handle driving on US highways.
    Self-driving trucks are able to operate 24/7, permitting much faster delivery at much lower costs. There’s significant potential for autonomous trucks to increase safety and efficiency.
    In 2011, 32,367 people lost their lives and an estimated 2.22 million people were injured in motor vehicle crashes. In the US, almost 90% of all large truck crashes in 2012 were caused from driver error like fatigue, speeding or alcohol use. Automated vehicles will help infrastructure.jpgeliminate risk and could decrease the number of accidents involving commercial vehicles.
  1. Infrastructure & Environment
    Total GHG emissions in the US increased by 21% from 1990 to 2011, with over 60% of the total increase attributed to the transportation industry. Today, the US transportation network accounts for 30% of US greenhouse gas emissions. President Obama signed into law the FAST Act to fund surface transportation programs. The FAST Act injects $305 billion into the federal transportation budget from 2016-2020. The Nation’s road network includes more than 4 million miles of public roadways and approximately 605,000 bridges. In 2010, this network carried nearly 3 trillion vehicle miles of travel.
  1. Economic Competitiveness
    Economic and job growth continue to grow at a moderate pace. The transportation sector contributed approximately $1.466 trillion, or 9.7% to GDP in 2011. Nearly 54 million tons of freight worth more than $48 billion currently moves through the US transportation network each day. Freight tonnage is expected to increase by 45% by 2040, requiring additional capacity for highways, railroads, ports. Freight transportation is an integral part of our economy, with over 44 million jobs directly dependent on the industry. Failing to make strategic plans to improve could hurt the country’s growth: one study estimates that roadway congestion delays cost shippers approximately $10 billion each year.

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Source: FY 2014-2018 DOT Strategic Plan

How to Use a TMS to Manage Inbound Transportation

TMS for inboundInbound freight management is multifaceted and can eat up more than 40% of the average organization’s annual freight budget, according to Aberdeen Group. However, using a TMS for inbound shipments can help prevent unwanted costs.

Since inbound freight savings have a direct impact on an organization’s bottom line, shippers that make it a supply chain priority reap inventory efficiencies, cost containment, and enhanced productivity and service.

Companies expect to receive about 34,000 inbound shipments every month, so even decidedly successful inbound freight shippers are likely to encounter glitches.

35% of shippers claim that lack of visibility is one of the biggest challenges of inbound transportation, while 37% say determining hidden costs, and 25% say data analysis and decision support are the greatest challenges. Shippers experiencing challenges with inbound freight management might not be fully leveraging available optimization logic with a transportation management system (TMS).

Download Inbound Freight Cost Management ebook.

Why Companies Use TMS?

A TMS has capabilities that make life easier, it can manage by exception, easily track KPIs, optimize carriers with routes, and proactively notify you of disruptions or risk. A recent SupplyChain24/7 article explains the distinction of shippers who use a TMS when managing inbound transportation. A TMS’ biggest advantage is that it supports inbound transportation by providing shippers with visibility.

In today’s omni-channel world, control over inbound freight management requires detailed visibility on all accounts of the supply chain. Chris Cunnane with ARC Advisory Group said, “It’s really all about visibility into freight – understanding where it is and when it’s going to arrive so that you can plan effectively.

How Can You Benefit From TMS For Inbound Transport?

With good visibility, you don’t have trucks waiting around to unload with merchandise needed to fill pressing orders while other trucks with less time-sensitive inventory are unloading. The biggest thing a TMS can provide to improve inbound logistics is that visibility aspect.”

Visibility doesn’t exclusively rely on a TMS though, to gain full visibility, shippers must build relationships with suppliers, carriers and logistics providers. These partnerships enable shippers to get real-time insights and a chance to optimize best practices.

There is a major savings potential when using a TMS. To operate efficiently and effectively, companies need visibility into their entire supply chain process – including inbound freight.

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How New GHG Regulations Affect the Future of Transportation

On August 16th, the Obama administration released the final rule on Phase 2 of greenhouse gas (GHG) regulations for the transportation industry. Phase 2 is more comprehensive than Phase 1, and will gradually be enforced from January 1st, 2018 until its full implementation in 2027.

Under the Phase 2 regulation, for the first time ever, trailers will be subject to aerodynamic standards to improve fuel efficiency beginning in 2018. Additional truck and trailer requirements, including fuel-efficiency guidelines and CO2 emissions standards, will be implemented in 2021, 2024 and 2027. Phase 2 GHG emission regulations will affect every business involved in freight transportation.

The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) have worked closely with industry insiders to develop the final GHG rule, so many in the transportation industry are satisfied with the rule.

How Phase 2 Will Affect Carriers

A spokesperson from Daimler Trucks North America said, “DTNA is pleased that the EPA and NHTSA chose a non-disruptive implementation of the standard, thereby allowing the industry over a decade to phase in technical changes.”

However, as with all new regulations, for every potential benefit there is a potential danger. Glen Kedzie, who provides energy and environmental counsel to the American Trucking Association (ATA), said, “While the potential for real cost savings and environmental benefits under this rule are there, fleets will ultimately determine the success or failure of this rule based on their comfort level purchasing these new technologies.”

Kedzie also mentioned that lab tests and cost estimates are not a substitute for actual highway experience. The effects of Phase 2 regulations are difficult to predict and we won’t know for sure until after they’ve been implemented.

Potential Benefits of Phase 2 GHG Regulations

  • It’s expected to cut 1.1 billion tons of CO2 emissions over the lifetime of the rule
  • 2 billion barrels of oil will be saved
  • It’s a huge step in achieving climate change goals agreed upon in the2015 COP 21 conference
  • Original equipment manufacturers (OEMs) gain long-term certainty –continuous demand for green technology
  • 2027 heavy-duty trucks, compared to 2017 models, will save $170 billion in fuel costs over the lifetime of the vehicle

Potential Dangers of Phase 2 GHG Regulations

  • Rising operating costs due to investment in new equipment, which will increase the cost of shipping
    • Small carriers are particularly vulnerable to monetary investments and if new trucks and trailers with fewer emissions are too expensive, many could go bankrupt or exit the industry
  • OEMs may be unprepared or ill-equipped to meet aerodynamic standards as soon as 2018
  • More fuel-efficient trucks mean less fuel is bought, which means that the Highway Trust Fund (HTF) loses a portion of its main source of revenue – leaving already unstable infrastructure in an even more dire condition, increasing the risk of accidents and disruptions

How Phase 2 Affects Freight Shippers

Phase 2 GHG regulations have great potential benefits for shippers. Without making any of the upfront investment in equipment or processes, they may experience lower shipping costs. Carriers may pass on cost savings due to lower fuel costs and increased efficiency in operations.

As with carriers, there’s also great potential dangers to shippers if critics of the regulations, such as the Highways and Transit Subcommittee Chairman Sam Graves (R-MO), are correct about the undue burden it will put on carriers. In this scenario, shippers could face higher transportation costs and a need to redesign their distribution network. Carriers would not be able to pass on any type of cost savings, creating a fragile pricing environment.

To avoid being hurt by Phase 2 rules, shippers should keep an eye on 4 trends in the industry that could indicate rising costs as a result of GHG regulations.

  1. Fuel Taxes and Surcharges

Even if fuel costs decrease, carriers won’t necessarily pass savings on. Freight carriers could maintain current fuel surcharge levels, or even increase them to help cover the cost of equipment investment and recover from a long stretch of small profits.

With the HTF set to lose funds from fuel-efficient vehicles, the government might raise the tax on gas and diesel, which hasn’t been done since 1993. An increase in fuel taxes will lead to higher freight rates, as the tax will cut into carriers’ profits.

  1. Carbon Taxes

Carbon taxes are quickly gaining popularity around the world. They are even being implemented in some places around the U.S. An energy-dependent, emission-heavy industry like freight transportation will inevitably be hit by these taxes. It could be a way to fund the soon to be depleted HTF, or it could simply be implemented to reach COP 21 goals. Either way, carbon taxes will increase operating costs for carriers, which will translate into higher rates for shippers.

  1. Mode Usage

Freight volumes shift to rail transport when cost is a bigger priority than service – or, in other words, when over-the-road transportation costs become unsustainable on a large scale. If freight volume starts shifting to rail, it’s a sign that carriers are raising rates due to fuel costs, taxes or equipment investments. A shift in mode usage is a signal for shippers to find cheaper and fuel-efficient transportation.

  1. Truck Capacity

When times are tough, small freight carriers are pressured into unsustainable rates and are susceptible to bankruptcy. When carriers are experiencing low profits, it’s more difficult to pay truck drivers a high salary. Without competitive salary, drivers find jobs in other industries that pay well and are close to home. A loss in drivers creates a loss of truck capacity and hints at rising operating costs for carriers, which translates into higher freight rates for shippers.

Conclusion

Phase 2 GHG regulations will have a far-reaching impact for the transportation industry. Despite potential dangers posed to shippers and carriers, much of the industry is confident these rules are reasonably achievable and will bring about cost savings and environmental benefits.

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To cut transportation costs now or to prepare for rising freight rates, check out these s:

 

Sources: Transport Topics, Print, August 22, 2016 Issue

Market Update: 9 Factors Determining the Rise in Transportation Rates

Freight shippers are enjoying a buyer’s market at the moment. There’s widespread overcapacity in the trucking industry, forcing carriers to lower prices in an attempt to keep their trucks full. For now, shippers can find low transportation rates relatively easily.

As with any cyclical industry, this will all change. Soon, carriers will be dictating rates and shippers will be competing for trailer space, paying much more for transportation than they are right now.

Why is this happening? And when can shippers expect to pay higher rates?

There are 9 major factors that will determine the severity and timing of the rate hikes.

Operating Costs

  1. When energy prices rebound, it will increase operating costs for trucking companies. In response, they will have to increase fuel surcharges to cover their expenses. Carriers make more profit from fuel surcharges when fuel costs are high, so the surcharge increase won’t be proportional.
  2. Government regulations affect carrier productivity. The ELD mandate, set to start in 2017, is expected to have huge impacts on capacity since almost half of the trucking industry hasn’t installed the technology yet. When trucking companies are less efficient, they have to increase rates to make up for lost revenue.
  3. Reliable drivers are hard to find and require more pay and benefits. Good drivers increase operating costs for carriers, who have to increase linehaul rates to cover the additional cost to hire, train and retain drivers.

Read more about rising operating costs here.

Truck Capacity

  1. Smaller LTL trucking companies are being pressured into lowering their rates, despite steadily increasing operating costs. This will burden the LTL industry, forcing many LTL carriers to go bankrupt or take trucks off the road.
  2. Truckload carriers aren’t expanding their fleets. Truck sales have decreased for 27 straight months, including a whopping 5% decrease in May. Truckload carriers are gaining little to no profit. They are expected to reduce capacity in late 2016 – which could leave the economy without enough truckload capacity when freight demand picks up.
  3. The driver shortage constantly threatens the trucking industry. There are just enough truck drivers to handle the slow freight demand now, but any uptick in load volumes will expose the true shortage.

Read more about diminishing truck capacity here.


rise of transportation rates Freight Volume

  1. Inventory levels are high right now, but soon they will level out. Flat inventories lead to more aggressive production, which translates to higher freight volumes.
  2. Currently, the U.S. dollar is very strong, creating an import-heavy environment. It is expected to weaken in the near future, dramatically increasing export levels. Higher export levels mean more demand for freight services.
  3. The U.S. is near full employment levels. This will create wage raises, which, historically, leads to increased consumer spending levels. More consumer spending translates to higher freight volumes.

Read more about rising freight volumes here.

Key Takeaway

The important thing to realize is this: freight volumes will increase at a time of higher operating costs and lower capacity in the trucking industry, leading to a rapid rise in transportation rates.

Freight demand will bottom out as early as the third quarter of 2016, meaning in late 2016 or early 2017, the buyer’s market will be reversed.

Once these factors start to work in carriers’ favor, the rate hike will happen very quickly. Shippers can prepare by streamlining transportation processes and locking in low transportation rates now.

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Why Right Now is the Perfect Time to Invest in a TMS

Despite the rapid evolution of today’s supply chain and the proven cost-saving ability of a transportation management system (TMS), few shippers are using TMS software. In fact, only around 35% of shippers have a TMS. implement tms

Transportation management is gaining importance across all industries because of the wealth of opportunities available to reduce operating costs and improve service levels. Shippers who manually manage transportation are missing out on efficiency opportunities.

Why is Now the Time to Invest?

Every business is different and values certain technological investments over others. But due to several trends within the transportation industry, right now is the perfect time for shippers to successfully invest in and implement a TMS.

There are 3 main reasons why TMS investment makes sense in our current economic climate

Transportation Costs are Low – For Now

The relatively low cost of diesel fuel, combined with mild demand for trailer space, has created good pricing conditions for shippers. Freight carriers have to drop prices to stay competitive, but this won’t last long. The price of oil is on the rise, and a driver shortage is continually on the horizon. Both of these trends will force freight rates to skyrocket. Invest in a TMS now while transportation isn’t inflating operating costs, and you’ll be prepared to find cost savings when transportation rates rise — giving you a competitive advantage over your competition.

Recent TMS Improvements

Cloud technology has completely changed the way businesses use and benefits from TMS software. With software-as-a-service (SaaS) TMS technology available, there is no upfront investment in the technology. Nobody needs to come and install the program. It’s available on the web, in a format where you simply pay for what you use, and there are never costly upgrades. These systems are easier to use than ever before, making ROI much faster and easier to achieve. The recent improvements to TMS technology mean that there’s less risk in investment, lower costs to operate and more benefits from the system itself.

Supply Chains are Changing Rapidly

Technology changes industries in fits and starts. While transportation has yet to be completely overhauled by technology, industries like video rental stores, which disappeared overnight, have been permanently affected. Drone delivery, 3D printing, e-commerce, and omni-channel fulfillment, self-driving vehicles, and rising consumer demands are all disruptive trends. Many industries face a future in which their distribution network will be entirely altered. Investing in a TMS now is important for the future. You’ll need a system in place to help manage transportation while it undergoes dramatic transformations.

The industry is in a sweet spot right now – a growing need for TMS technology coincides with a time of low costs and low-risk investments, and all of it near the tipping point of rising costs and extreme supply chain innovations.

How to Get Started Looking for a TMS

Shopping for a TMS can be a daunting task. There are hundreds of options, and whether you are a small or large shipper, it can be difficult to determine which one best fits your needs. It’s one decision to invest in a TMS – it’s a whole other ball game trying to choose one.

To help guide your evaluation of different TMS software, there are 3 very important questions you can ask.

  1. What’s Important to My Business? You first have to consider what your immediate business needs are in relation to transportation. You’ll want a TMS that can provide immediate ROI so that implementation is successful and the investment is not a huge burden on your business. But you’ll also have to think about long-term needs. Will you be operating in a new region, a new mode or with new freight? Is inbound and outbound visibility important? Will your business outgrows the TMS’s carrier capacity? You n eed to consider all of these features when comparing to TMS features.
  2. What’s the True Price of the System? Make sure to get a line by line pricing from a TMS provider. Installation, training, reports and instant notifications could end up costing you 25-30% You’ll need to know the cost of operating a TMS long term, too. Are there charges for technical support or system upgrades? Does the TMS have the necessary billing capabilities? The cost to operate a TMS can easily end up being more than the original price of the software – getting detailed cost information is crucial.
  3. Does the TMS support Systems Integration? A big benefit of a TMS is its ability to help provide a broad view of supply chain performance. If a TMS can’t integrate with your other internal systems, such as a WMS or ERP system, you’ll be missing out on this functionality. Visibility into transportation is necessary for enacting cost-saving solutions, but end-to-end visibility in the supply chain is far more valuable. Will your company want to leverage big data? Transportation data is vital to using big data in the supply chain. Without TMS integration, you’ll be missing a crucial part of that visibility.

Summary

Deciding to implement and then choosing a TMS is a big undertaking for any business. However, by making the decision now to invest in a TMS, and closely researching your options, you can start saving money on transportation right away and be prepared for a future in which transportation is changed dramatically.

 

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Diesel Climbs: What Will Happen to Transportation Rates?

The price of diesel fuel will play a heightened role in transportation rates in the next couple of years. Fuel costs are always an important indicator of over-the-road (OTR) shipping costs, but a perfect storm of events will make diesel prices more important than ever before.

As of June 2016, diesel fuel is $2.382 per gallon on average –a high for the year. Fuel prices are expected to rise for the rest of 2016 and throughout 2017. Under normal circumstances, this would lead to rate increases due to higher fuel surcharges, but the next few years in the freight industry are far from normal, and a few different outcomes are possible.

Obstacles in Transportation

To see the impact of diesel prices on transportation rates, it’s first important to understand the many challenges facing OTR carriers. These obstacles all affect efficiency and profitability for trucking companies, consequently affecting rates.

  • Regulations. The hours of service (HOS) mandate has been highly controversial, the most debated provision of which is currently suspended for further review, but the HOS ruling has the potential to severely limit carriers’ time on the road. The electronic logging device (ELD) mandate is possibly just as controversial and will take effect in 2017. This regulation will require expensive investment and implementation in new technology to track truck drivers’ hours.
  • Driver shortage. While the shortage of drivers has yet to impact carriers in any meaningful way, it is getting harder, and more expensive, to recruit and retain truck drivers. More drivers are retiring every year, while very few are entering the industry to replace them. This means higher salaries for current drivers, and more investment in recruitment tactics to attract new talent.
  • Mediocre freight volume. The economy has been slowly but steadily recovering for a few years now. Current truck capacity levels have been just enough to cover demand. Carriers haven’t had the pricing leverage they’d hoped for – a strong economic recovery would have led to far higher demand for trailer space, forcing shippers to outbid one another for regular capacity. Now, the short-term economic future is uncertain and carriers are hesitant to raise rates.
  • Equipment investments. In addition to ELDs, most OTR carriers are using old equipment that needs to be replaced. The total cost of owning a commercial vehicle went down by 14% in 2015. This means that, with lower operating costs, right now is as good a time as ever for carriers to replace trucks and trailers. There’s a reason carriers are operating with old equipment – new equipment is expensive. Carriers, although experiencing a rare investment opportunity due to low diesel prices, will still have to shoulder an immense load of paying for new trucks and trailers.

Diesel Comes into Play

While it’s typically safe to assume higher diesel prices will lead to higher rates, that’s not always the case. Fuel surcharges are negotiable, and a recent study shows that only 41% of carriers expect to increase rates in 2016. On the other hand, transportation analysts say shippers should expect a 3% to 5% increase in base rates in the next 12 months.

There’s a lot of conflicting information due to the high level of uncertainty in economic forecasts. Carriers are left unsure of what to expect in the near future, which makes predicting their rates very difficult.

It is most likely that through the rest of 2016, and possibly into 2017, carriers will be able to shoulder the load of rising diesel prices. Consulting firm FTR predicts favorable market conditions for shippers during 2016 and some of 2017.

impact of diesel prices Recently, carriers have been making significant time investments in training their employees to be experts in their field. Carrier executives claim this has made positive impacts on efficiency. On top of this, shippers have been very receptive to the notion of being a preferred shipper in anticipation of capacity shortages, which further boosts productivity.

Efficiency improvements mitigate the impact of regulations and capital investments, but mediocre freight volume still forces carriers to keep prices low, putting a cap on profit margins which are currently razor thin.

Looking further ahead, carriers will reach a tipping point, late in 2017 or possibly in 2018, where costs must be passed on to the shipper. For shippers, now is the time to lock in transportation rates.

Transportation rates will rise regardless of economic conditions, but diesel will play a role in various ways.

If the economic recovery gets into full swing, rates will rise due to limited capacity. Diesel prices may inflate these costs even more. As regulations, the driver shortage and equipment costs start to affect carrier efficiency, they will need to find a place to make up revenue. Historically, fuel surcharges have been used as a source of revenue when possible, and it’s likely carriers will resort to this when operating costs rise, despite the overall rise in rates.

If the economy never quite picks up or even falls into recession, transportation costs will still rise. Without competition for trailer space, carriers have to compete for freight by lowering their costs as much as possible. This will be very difficult to do as diesel approaches $3 per gallon and above, and current transportation obstacles become more challenging to overcome. Carriers may not be able to use their fuel surcharge as a significant source of revenue in this scenario, but they will be passing on operating costs to shippers so they can maintain their thin margins.

The bottom line is this: expect rates to rise within the next few years, and keep a close eye on diesel price projections, as they will have a major impact on the level of transportation rate increases.

 

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How to Improve Loading Dock Processes

The loading dock is the access point for shipping and receiving. Well-designed loading dock procedures minimize delays, reduce damage to cargo and optimize productivity.

Here are 3 quick ways to improve loading dock processes:

Enhance Dock Safety

Loading and unloading trailers present safety risks for operators, attendants, drivers, and employees. Injuries on loading docks account for 25% of all reported injuries within supply chain facilities, according to Material Handling and Logistics.

In order to increase productivity and reduce injury at the loading dock, follow these tips:

  • Examine safety before someone gets hurt and evaluate security at the facility.
  • Create a maintenance schedule. Dock levelers, lights, seals and overhead doors should be tested regularly to ensure reliability.
  • Keep docks dry. Water on the loading dock creates a dangerous situation.
  • Upgrade equipment and replace equipment as necessary.

Eliminate Bottlenecks

Bottlenecks occur when the flow of goods from the warehouse or distribution center is slowed on its way to the customer. Often, inbound material comes faster than can be unloaded, or products and equipment aren’t properly labeled, creating delays.

Identify any bottlenecks in your supply chain to avoid employee stress, wasted costs, delayed shipments, and unhappy customers. Long wait times and piles of papers are common bottlenecks.

When bottlenecks are identified and effective solutions are applied, companies see a major improvement in inventory management and load times, which in turn reduces detention charges and improves shipper status.

Take Advantage of Technology

Dock management systems and transportation management systems help identify problems inside and outside the facility by using RFID and GPS technology to track the movement of every trailer.

This results in real-time performance reports and the opportunity to reduce delays, improve staffing and better utilize the equipment. These systems capture dock status, an average length of a driver’s haul and loads built by the hour. These metrics help you make the best use of your driver’s time.

Maximize the efficiency of loading and unloading at the dock with safer operations, more technology, and fewer bottlenecks.

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The Building Blocks of Transportation Visibility

Many businesses want to leverage big data in supply chain initiatives to drive efficiency, cost savings and unparalleled operational visibility. In order to do this, however, a business must have an enterprise-wide infrastructure for information gathering. Only 35% of organizations use a transportation management system (TMS), meaning most companies do not have much visibility into shipping processes, but more importantly, don’t have access to data that’s part of the end to end supply chain insight that’s necessary for big data initiatives.

Use a TMS for Data Collection First

There’s more data available now than there’s ever been, and the potential applications are endless. The problem comes in collecting and analyzing all this data in a timely manner. The first and easiest step is to collect the information, but many companies overlook the impactful data available from transportation.

A TMS will constantly monitor shipping processes and gather data for analysis. Typically, a cloud-based TMS is best for data gathering, as many shippers and carriers are providing information through the same portal, making data collection easier and more accurate.

TMS software is great for cost savings, even immediately after implementation, but its true value comes in the data it provides. It collects information from a variety of internal and external sources, enabling historical data analysis and optimization in freight transport. But most importantly, it contributes a crucial portion of data for end-to-end visibility.

With the help of a TMS, any business can begin collecting transportation data. There are numerous metrics available for analysis and it can be difficult to decide which is most important, especially for those companies still building a foundation of data collection in freight transportation.

What are the best metrics to collect and analyze?

Start with the Basics

It’s best to start with simple data collection – large amounts of information can be overwhelming to manage at first, and you’ll want to take the time to ensure you’re gathering quality data. Most shippers, even with manual processes, will collect some information from the shipping process. Usually, they know overall freight costs, on-time pickups and freight cost by location.

These metrics provide you with an idea of overall performance in transportation, but not much else. You know something is wrong if your overall transportation costs skyrocket for a few months, but you probably won’t know why.

There are a few simple TMS metrics that can expand your understanding of your transportation processes. These 3 reports are the building blocks of transportation visibility:

  • Light Load % – This metric reveals what percentage of shipments are sent under the minimum weight requirement of a truckload trailer. If there’s a minimum of 40,000 lbs. on a trailer and a company consistently only loads 35,000 lbs., they will still be charged for a 40,000 lb. shipment. A TMS collects this information through its automated billing features. With this data, you can better understand freight costs and focus your attention on trailer utilization. Light load percentage can be a starting point to start tracking other related metrics like the efficiency of truckload versus less-than-truckload (LTL) shipping, or the effectiveness of freight consolidation.
  • Total Loading Time – This metric refers to the amount of time it takes for a trailer to be loaded, starting the second a truck enters a facility’s gates and ending the moment it leaves. A TMS collects this information through EDI scans at a loading facility. Total loading time is important because it provides insight into the efficiency of the loading dock and the entire facility. A company may be efficient at the dock but could keep a driver waiting for hours before they actually start loading. This metric is a foundation for creating more efficient facility procedures, staff scheduling and can help you leverage lower costs since carriers prefer working with shippers who get their drivers in and out of a facility quickly.
  • Fuel Detail Reports – Fuel, either calculated as a cost per mile or percentage of freight costs, is a major cost component in transportation. A TMS captures this information through automated billing procedures. Visibility into fuel costs helps create a clearer picture of overall costs, but can also go hand in hand with light load percentage, as fewer trucks will use less fuel. Fuel surcharges and pricing structures are not the same between carriers and across the industry. Consistently reported fuel costs to help you compare carriers pricing methods and can even help you leverage lower base rates in the future.

Tracking these metrics will enable you to branch out into more data, and gain close visibility into a crucial aspect of the supply chain.

Collecting this type of information in transportation is not technically a Big Data initiative, but can provide a foundation for more intensive data gathering in the future.

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