Make sure you are ready before diving into a digital transformation.
By Harsh Joshi
It’s very clear that new technology tools can be critical to improving the costs and efficiencies of companies, bringing better transparency across the supply chain. However, not many companies can invest in these tools since they operate on decentralized and non-standard data infrastructures. Before diving into a digital transformation, it is important to ensure that your Transportation Management System (TMS) is ready.
TMS serves as the logistics management hub in a collaborative network of shippers, carriers and customers. A reliable TMS platform can help manufacturers, distribution companies and suppliers cut costs, improve warehouse efficiency, boost customer service and drive sustainability.
These platforms give shippers the ability to automate their processes and give customers increased visibility into the movement of goods from the warehouse to their facility. Additionally, according to recent studies, shippers can now experience 8 percent to 10 percent in freight cost reductions using a TMS platform.
In order to successfully establish a TMS, however, so that ROI is sustained over the long haul, supply chain leaders must take a holistic, organizational-wide approach to its implementation. Before launching, leaders must confirm that they have the right processes in place to be what Argo calls its proprietary process of being “TMS ready.” This is something to determine as you source a system, including comparing RFIs, preparing RFPs, negotiating contracts, etc.
Is Your Organization TMS Ready?
One of the most alluring capabilities of a TMS platform is its ability to standardize the processes you already have in place. However, an organization must first ask if it actually has the right processes in place. If you have developed workarounds or hacks to your system, you don’t want to leverage a TMS to standardize those practices.
Ultimately, it’s just a system; a TMS is not doing anything other than what you tell it to do and it will work based on the rules or parameters you define. So make sure it’s best practices being institutionalized rather than the workarounds.
To identify these gaps in your systems, meet with all the stakeholders, including supply chain, sales, operations, IT and manufacturing to understand how everything flows together. Once you have a clear idea of how these business functions work together, the gaps you identify will define what your business needs to do to become TMS ready.
How to Become TMS Ready
There are three requirements that organizations must meet to be TMS ready: system ready, change management ready and supply chain ready. It is imperative that these areas are examined since not doing so can lead to problems down the road. For example, 40 percent of all TMS implementations will fail in the testing stages due to inconsistent design and build. The following list will help organizations determine if they are ready to take full advantage of a TMS platform:
1. Are you system ready?
• IT infrastructure – Examining your infrastructure from an IT perspective is critical. Is the legacy technology in place robust enough to integrate with the new system? How does the TMS integrate with your enterprise resource planning (ERP) system? Is there a streamlined process from order to delivery? The more variances you have, the more the tech goal is to drive towards standardization.
• Data – Having a good process to collect, parse and manage data is key to TMS success. For example, making sure that weight and dimension data are accurate and consistent is key. If you don’t have the right weight and/or dimensions when shipping, you can’t control cost or even have a real sense of what the costs are. If you ship out a package at the 100-pound rate, but it actually weighs 150, guess what? You’ll be charged for the difference.
• Customer management – Setting customer expectations is another important agenda item. Does your customer need a specific shipping label? Do they expect to have their package in two days? What value-added services are offered? And are they lead-time system driven? How are you receiving orders? Once those expectations are set, businesses can work within those parameters while managing cost.
2. Are you change management ready?
• Leadership buy-in – Effective TMS implementation requires strict alignment between stakeholders and the C-Suite to drive change throughout the company. It’s one thing to implement, it’s one thing to sustain and how you go from implementing to sustaining recurring returns on your investment is no small task. Executive sponsorship is key to this. Organizational objectives must be clarified up front so that stakeholders understand what’s in it for them and how it will impact their jobs. Leadership must say: “I believe in this, this is the organizational objective, this is how we are going to execute and I need your support.”
• Warehouse process standardization – The warehouse will be the recipient of this complicated management system, so leaders must determine if the distribution center is ready to drive the agreed upon organizational change. In addition to understanding how the new system will function, there must be a clear distribution process in place that ensures the warehouse can execute orders that meet customer expectations.
3. Are you supply chain ready?
• Inventory management – Good inventory management is essential for controlling and predicting costs. Before installing a TMS, putting in place proper inventory allocation will help ensure that the right products are in the right place at the right time. Having a good sense of inventory availability will reveal how much product there is and when you need to replace it. Having a good dating methodology will help set a clear definition of ship dates and delivery dates, which will help internally as well as help establish customer expectations. Addressing these business ready rules will help ensure the success of your new TMS platform.
• Carrier contracts and capacity – One of the key benefits of a TMS is to drive carrier compliance to shippers’ business rules, low cost carrier selection and a score card to measure key metrics (e.g., acceptance rate at the contracted capacity). In addition to real time track and trace, EDI enabled tracking messages and enforcing appointment times to drive on time pick up would help distribution centers not only to level load and plan their resources efficiently, but also to avoid detention fees from carriers.
Harsh G. Joshi is the director of the operations, supply chain, private equity and business restructuring practices for Argo Consulting. He has more than 14 years of private equity, operations and supply chain management experience managing 20-plus financial and operational efficiency improvement and transformation projects, providing management consulting, entrepreneur transition and interim management.