Summary of Transportation Management and Distribution

Summary of Transportation Management and Distribution

TRANSPORTATION IS THE MOST expensive logistics activity, representing over 40 percent of most corporations’ logistics expense.

1. Definitions:

The management of transportation operations of all types, including tracking and managing every aspect of vehicle maintenance, fuel costing, routing and mapping, warehousing, communications, EDI implementations, traveller and cargo handling, carrier selection and management, accounting.

Transportation Management is a system designed to manage transportation operations.

The Logistics of Transportation are including:

• Transportation network design

• Shipment management

• Container/fleet management

• Carrier management

• Freight management

Transportation master planning leads corporations to an optimal transportation solution for their supply chain, addressing the five activities in the logistics of transportation. In turn, the methodology addresses

• Transportation activity profiling and data mining

• Transportation performance measures

• Logistics network design

• Shipment planning and management

• Fleet, container, and yard management

• Carrier management

• Freight and document management

• Transportation management systems

• Transportation organization design and development

2. TMS (Transportation Management System)

A TMS usually "sits" between an ERP or legacy order processing and warehouse/distribution module. A typical scenario would include both inbound (procurement) and outbound (shipping) orders to be evaluated by the TMS Planning Module offering the user various suggested routing solutions. These solutions are evaluated by the user for reasonableness and are passed along to the transportation provider analysis module to select the best mode and least cost provider. Once the best provider is selected, the solution typically generates electronic load tendering and track/trace to execute the optimized shipment with the selected carrier, and later to support freight audit and payment (settlement process). Links back to ERP systems (after orders turned into optimal shipments), and sometimes secondarily to WMS programs also linked to ERP are also common.

Transportation management systems manage four key processes of transportation management:

1. Planning and decision making – TMS will define the most efficient transport schemes according to given parameters, which have a lower or higher importance according to the user policy: transport cost, shorter lead-time, fewer stops possible to ensure quality, flows regrouping coefficient, etc.
2. Transportation Execution – TMS will allow for the execution of the transportation plan such as carrier rate acceptance, Freight Audit and Payment, Freight Procurement, Multi-modal transportation, carrier dispatching, EDI etc..
3. Transport follow-up – TMS will allow following any physical or administrative operation regarding transportation: traceability of transport event by event (shipping from A, arrival at B, customs clearance, etc.), editing of reception, custom clearance, invoicing and booking documents, sending of transport alerts (delay, accident, non-forecast stops…)
4. Measurement – TMS have or need to have a logistics key performance indicator (KPI) reporting function for transport.

Various functions of a TMS include but not limited to:

• Planning and optimizing of terrestrial transport rounds
• Inbound and outbound transportation mode and transportation provider selection
• Management of motor carrier, rail, air and maritime transport
• Real time transportation tracking
• Service quality control in the form of KPI's (see below)
• Vehicle Load and Route optimization
• Transport costs and scheme simulation
• Shipment batching of orders
• Cost control, KPI (Key performance indicators) reporting and statistics
• Typical KPIs include but not limited to:
1.  % of On Time Pick Up or Delivery Performance relative to requested
2. Cost Per Metric - mile; km; Weight; Cube; Pallet
3. Productivity in monetary terms, e.g. $/lb or $/shipping unit
4. Productivity in operational terms, e.g. shipping units/order or weight/load

3. Transportation Optimization

The overall goal in transportation should be to connect sourcing locations with customers at the lowest possible transportation cost within the constraints of the customer service policy.

The highest level transportation optimization equation can be expressed as follows:

A. Minimize: Total Transportation Costs (TTC)

The total transportation costs (TTC) include:

• Freight

• Fleet

• Fuel

• Maintenance

• Labour

• Insurance

• Loading/unloading

• Insurance

• Demurrage/detention

• Taxes/tolls

• International fees

B. Subject to: Customer Service Policy (CSP) Requirements

The optimal transportation solution must also satisfy the requirements set forth in the CSP, including:

• Response time requirements (arrive before)

• Time windows (arrive after/depart before)

• Volume requirements (cube or weight delivered between each origin and

   Destination)

• Frequency requirements (shipments per time period)

• Minimal damage in route

At the same time, the optimal transportation solution must not exceed the following:

• Lane capacities (cube, weight, travel speed, or frequency restrictions  

   between origins and destinations)

• Vehicle capacities (cube, weight, or operating hour restrictions per vehicle)

• Container capacities (cube, weight, balance, or dimensional restrictions per

   container)

• Workforce capacities (restrictions on consecutive operating hours or lifting)

• Workload imbalances (restrictions on workload imbalances amongst

   transportation professionals)

4. TRANSPORTATION ACTIVITY PROFILING AND DATA MINING

Transportation activity profile (TAP) must be accurate, thorough, and representative of current and future transportation activity to yield reliable transportation solutions.

• Shipment frequencies

• Cube-per-shipment distributions

• Weight-per-shipment distributions

• Value-per-shipment distributions

• Shipment classifications

• Origin-destination time windows

• In-transit time requirements

• Mode and carrier availability and capacities

• Transportation rates

• Carrier on-time performance statistics

• Claims and loss rates

• Average and deviant travel times and speeds

• Distances

5. TRANSPORTATION PERFORMANCE MEASURES

     A. Financial Metrics

  Transportation financial metrics should include total transportation costs and   

  related ratios, as well as economic values for fleet assets.

- Total Transportation Costs and Cost Ratios

- Transportation Asset Economic Value Analysis

    B. Productivity Metrics

       - Transportation Asset Productivity and Utilization (Two main assets are container

         & Vehicle)

       - Transportation Operator Productivity

    C. Quality Metrics

       • Claims-free shipment percentage

       • Damage-free shipment percentage

       • Distance between accidents

• On-time arrival percentage (OTAP)

• On-time departure percentage (OTDP)

• Perfect delivery percentage (PDP)

• Perfect Route Percentage (PRP)

     D. Cycle Time Metrics

            • In-transit time (ITT) Point-to-point in-transit times by driver, carrier, lane, and

   location.

• In-transit time variability Point-to-point in-transit time variability by driver,

   carrier, land, and location.

• Vehicle load/unload time Vehicle loading and unloading times at each

   pickup/delivery location by driver, carrier, lane, and location.

• Detention time, Time spent waiting for loading or unloading at a

   pickup/delivery location due to dock congestion and/or delays caused by

   the shipper or consignee.

• Delayed in traffic time The time spent idling or at reduced speed due to

   traffic congestion for each driver, carrier, lane, and pickup/delivery

   location.

Source of references:

1. Edward Frazer, The logistic of Supply Chain Management-Supply chain strategy,

    Chapter 7 (Management Transportation and distribution)

2. ORACLE, TRA2008 – Lubljana April 21-24,2008

3. Magic Quadrant for Transportation Management Systems, 2007, C. Dwight

    Klappich