WORLD CLASS

FREIGHT TRANSPORTATION PURCHASING EXCELLENCE

 

Presented to

The International Federation of Purchasing and Materials Management

In Honor of their 30^th Anniversary

Global Purchasing & Supply Chain Strategies

November 3, 2003

 

Executive Summary

Transportation and technology continue to influence the global economy and its supply chain.  Both have significantly increased the speed of commerce and the flow of associated information. 

 

While speed has proven to be an important advantage, supply chain performance is also dependent upon the knowledge and experience of the transportation and purchasing professionals.  Additionally, supply chain speed and worldwide events of “transportation importance” have reduced traditional barriers between the purchasing and transportation disciplines.  The shift from governmental regulated transportation to a market driven environment was a primary motivating force that positioned the purchasing professional to buy freight transportation services.  The elimination of governmental regulation also removed those highly specific transportation laws and thereby reduced the need for such specific knowledge which had been previously required for the transportation buy. 

 

Freight expense represents a significant portion of the overall corporate budget.  Because of its size and relative position, freight expense plays a major role in corporate profitability.  Freight expense for the average company is large enough to warrant attention and intelligent management.

 

Notwithstanding the foregoing, purchasing freight transportation efficiently and effectively continues to require the specialized skills, education, imagination, and knowledge.  Likewise, effectuating successful purchases, other than transportation also demands that the purchasing professionals bring their talent, skills, and experience to the corporate table.  The combined resources of the purchasing and transportation professional will achieve significantly “better purchases” than could be achieved independently.  Additionally, the data and information derived from such a union will produce a robust information base that will improve the probability for timely and accurate decisions.  To successfully combine the resources of these two important disciplines, “convergence” should be considered as the “enabler”.

 

“Convergence” is simply a coming together, but convergence as created and practiced by TransportGistics is, “the coming together of like and disparate knowledgebases, skill sets, technologies and disciplines; the purpose of which is to solve business equations with the intended results of creating new paradigms and achievements that would be unachievable through traditional processes”.

 

By “converging” the purchasing and transportation professionals’ disciplines, technologies and resources, knowledge bases, skill sets, imagination, and talents establishes both the basis and sustainability necessary to satisfy the important human resource portion of the equation. 

 

Technology is the third component required to achieve the objective of “world class freight transportation purchasing excellence”.  In order to properly select the appropriate and respective purchasing technology and systems, it is incumbent upon the “convergence work group” to first identify all of the items in the “transportation purchasing profile” so that all of the business areas that are impacted by freight transportation can be addressed.

 

Traditional Systems Acquisition

In order to complete the entire process, a “high level integrated macrologistics strategy that will continually improve operations and drive down costs” must be created.  TransportGistics’ extensive experience and depth of knowledge gained through its worldwide logistics and transportation consulting practice demonstrates the need to focus on those technology products and systems that meet the following criteria: incremental and connectible solutions; performance; ease of use and implementation; and scalability.  Pursuing these criteria from the perspective, “simpler is better” will satisfy both the short and long term objectives.

 

Another traditional systems acquisition question that must be addressed is, “buy or build”.  Using the criteria identified above, consideration must be given to the following concerns but not limited thereto: available systems resources; department or vendor response; direct and indirect costs; proximity; system maintainability and accountability; R & D knowledge base and resource in order to properly answer the “buy or build question.  The traditional method of approach for systems acquisition is replete with an extensive history of issues and concerns that must be addressed.

 

A New Model

The ASP, application service provider, and BPO, business process outsourcing have very recently appeared.  The ASP provides hosted expert systems on the Internet in a highly secure fashion.  The BPO performs similarly but also provides selective labor.  This “new model” vendor is characterized as being a new company with seasoned management that recognizes highly competent customer staffs.  They also recognize the customer driven need and importance of giving control back to the customer and allowing all customer authorized users’ access to their information 24/7.  This understanding has proven value and by converging expert systems with customer capability and customer trained staffs, the power of two (2) has the strength of history and the benefit of the combination of resources to assure performance.

 

Through a highly secure process, customers and their authorized users have full and complete access to and control of their information 24/7.  Once the customer loads all of their data files, most of which can be downloaded or the BPO will supply the entry labor, the expert system takes over. 

 

World Class Excellence

As an ASP/BPO provider, focused in transportation management systems, with a combined experience exceeding more than 100 years, TransportGistics’ expert systems embrace the “simpler is better” focus; its products and services incrementally improve the transportation management function within the supply chain, and offer products that address the “micrologistics components and macrologistics strategies”.  Additionally, TransportGistics’ systems development method of approach embraced the convergence practice and process to assure the transportation and purchasing professionals of meeting their scheduled goals and objectives.

 

Each of its current TMS products efficiently and effectively satisfies the system acquisition criteria properly addressing the issues and concerns identified above. 

 

In assisting its clients with achieving world class freight transportation purchasing excellence, the TransportGistics design; system features and functionality were driven by multi-dimensioned customers participating in heuristic user sessions.  With participants representing a broad spectrum of industry ranging in type and size, the TransportGistics systems have broad appeal across commerce and industry, worldwide.

 

Purchasing and Transportation, Partnering for Success

To harvest the benefits of the combined resources of purchasing and transportation and to achieve the competitive advantage, the intelligence of these professionals supported by an expert system and delivered through the ASP model offers the best opportunity for improved purchasing performance.  Enhanced performance is assured because the ASP model recognizes, understands and embraces the importance of providing the highly capable and specifically knowledgeable, hand picked customer staffs with incremental and connectible TMS solutions.  Clearly, this combined resource is the best method for maximizing each other’s capabilities. 

 

Defining the Need

Freight transportation purchasing is a complex process that must address all of the requirements in the transportation purchasing profile, provide easy access for authorized users to its features and robust information base; while being available 24/7. 

 

Freight Cost Management (FCM) is a planned and structured process; one of its purposes is to identify all of the business areas that are impacted by transportation costs, and to manage those costs effectively.  Purchasing the relevant and respective freight transportation services when acquired through the combined resources of the transportation and purchasing professionals that utilize an expert TMS and delivered through the ASP/BPO business model offers the best opportunity for success. 

 

The Incremental and Connectible TMS Products

Recognizing the importance of the purchasing value proposition, achieving actual landed costs can now be realized because of the combined resource facilitated by a coherent expert TMS. 

 

Incorporating “Terms of Purchase/Sale and Freight Terms” (the governing description of the relationship amongst and between the trading partners) in the TMS at the outset assures that the best practices will be employed to properly address all of the issues surrounding the “buy sell” and transportation activity specifically as well as any subsequent ramifications thereof. 

 

With the terms in place at the appropriate time, the proper system flow and sequence of events is correctly established independently by an incremental solution and/or collectively through connectivity.  As examples, consider the following:

 

BLGen

Supports the purchasing decisions by generating standardized shipping documents, sourced carriers and enables unencumbered data communications

 

FreightTracing

Provides visibility to ensure that sourced vendors are complying with service requirements as well as identifying location of shipments.

 

InsourceAudit

Pre-rating, “pre-pay and add” and terms enforcement, audit, accounting, payment and management reporting would be properly addressed by virtue of the inclusion of the terms and supported by Bill of Lading preparation.

 

LBPservices

Effectively and efficiently targeting carrier type, positions this module to purchase the most efficient and effective and available freight transportation service either for a single shipment or annual contract.

 

ProductReturns

This module addresses the need to allow customers to return merchandise through a coordinated and controlled process ensuring that sourced vendors are deployed and utilized.  This module immediately identifies unauthorized returns and allows for more efficient handling.

 

RoutingGuides

Supports the purchasing decisions by making available carrier assignments and rules of engagement to all vendors, customers, and internal users.

 

TRaIDS

The new freight paradigm identifies “freight” as an item whose identity is established at the moment it is recognized in inventory.  This incremental TMS solution recognizes the importance of knowing where a freight asset is at all times.  In this regard, tracing and tracking occurs at three (3) primary times, pre-shipment, in-transit and post-shipment and at all “touch points” throughout the freight life cycle.

 

Conclusion

Supply chain speed in a global economy, influenced by differing cultures, philosophies and operating styles, must recognize the importance of effective communications, and standards in order to properly support the flow of information, material, and money.  To effectively support either the transportation or purchasing professional or both in their pursuit of successful purchasing, technology, experience and a high level integrated macrologistics strategy  will provide the resources necessary to achieve success.

 

The combined resources of the Transportation and Purchasing professional, supply chain speed and technology, are the three pillars whose impressive capabilities provide new opportunities for driving supply chain value and new paradigms.

 

About TransportGistics, Inc.

TransportGistics is a global, multi-product and services company that provides market leading, simple, incremental solutions for transportation management and logistics functions within the supply chain.

 

TransportGistics commitment to education is portrayed through its advancement of professional logistics and transportation programs.  Its white paper site presents important and timely transportation and logistics subjects each month, and is regularly visited by more than 30,000 companies in the private and public sectors, universities and governments, worldwide. It is an active partner at the Center of Excellence in Wireless Internet and Information Technology at the State University of New York-Stony Brook.

 

Continuation

 

Please consider this white paper as a continuum in this subject area, succeeding white papers will address common issues and address them with common solutions.  We encourage our readers to direct any specific questions or comments to papers@transportgistics.com.

 

Disclaimer

 

The information presented herein represents the opinion of the author, but not necessarily the opinion of TransportGistics, Inc. This white paper is not presented as a legal position or opinion.

 

“Freight Cost Management”(sm) is a sales mark of TransportGistics, Inc.

 

TransportGistics, The DNA of Transportation and Distribution

www.InsourceAudit.com, www.traids.net www.RoutingGuides.com, www.FreightTracing.com, http://www.lbpservices.com, www.BLgen.com, www.ProductReturns.com

 

ASP and BPO excellence, driven by you!

 

All content copyright by TransportGistics, Inc. All rights are reserved. The authors of the articles retain the copyright to their articles. No material may be reproduced electronically or in print without the express written permission from the individual authors and/or TransportGistics, Inc. (papers@transportgistics.com)