A common issue in today’s world of e-commerce and increasing trade resides within TMS and collaboration. TMS and collaboration is the way supply chains work together and communicate with their partners, suppliers, customers, distributors, and everyone in between. Ineffective TMS and collaboration will effectively result in problems further down the line, and in the case of e-commerce orders, customers may not receive their products on time, if at all. Fortunately, the implementation of a TMS can provide the jolt of energy and accuracy necessary to achieve optimum results and responsiveness from your supply chain. This is possible through its creation of a network effect, and shippers need to understand how this effect is realized.
As explained by an older Material Handling & Logistics’ article, the biggest challenge for shippers today is understanding and buying into the network effect. Although this sentiment dates to 2006, it continues as Amazon relentlessly stares down every retailer on the planet. The best-laid systems in the world will lack value if they do not leverage TMS and collaboration. Shippers may fail to populate the correct data within the system, and carriers may rely on outdated information to generate freight quotes. Additional problems with poor collaboration and efficiency include:
The list only grows longer as these problems result in compounding consequences for supply chain management.
The introduction of new technology in logistics is not a new concept. Improvements in supply chain management have come out to everyday operations and insight from individual companies. The rise of cloud computing software offered the promise of cheaper, faster access to the power of a TMS, and ongoing technological development, such as the development of smart sensors within ocean shipping containers, contribute to more information that shippers can leverage. The same example applies to the rise of electronic logging device (ELD) legislation, and the ability to provide complete insight and traceability into a truckers’ movements strengthen the cause for ELD. Within a few short years, the ELD mandate had taken effect, and shippers across the country realize the benefits of improved visibility into transportation. Of course, the implementation of the ELD mandate did contribute to tighter capacity and out-of-service designations. However, its overarching benefits outweigh the damages.
A network effect refers to the compounding effects within an established network that derive from a single improvement. In other words, an improvement in one activity that results in improvements throughout the remainder of the day’s events. Creating the most straightforward example would be waking up on the right side of the bed, and the rest of your day falling into place. Implementing a TMS has this effect on your supply chain network. It eliminates the uncertainty and areas that may occur when performing your internal process, such as shipment tendering or selecting the right degree of cargo insurance.
Since your information resides within the TMS, which releases information to appropriate carriers and other relevant supply chain entities, risk decreases. Furthermore, subsequent supply chain operations receive a boost in efficiency resulting from improved planning on your part. A TMS furthers the collaboration among shippers, carriers, logistics service providers, freight forwarders, freight brokers, and other supply chain entities.
As collaboration improves among these parties, everyone realizes the benefits as a whole and individually. For companies trying to stay competitive with Amazon and its growing prowess in developing its own fleet of vehicles, drones and logistics capabilities, increased use of TMS and collaboration will continue to grow in importance and serve to combat the Amazon Effect. It sounds ironic. A TMS that creates a network effect is tantamount to overcoming the Amazon Effect.
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Software is a necessity in all facets of business today, but people are needed to manage the software, and insure data integrity for accurate data output. People are your most important product. Use them to continuously improve your organization. Cross-Functional Teams are a good way to use multi-talented people to solve many kinds of problems and or opportunities in your organization.
A Cross-Functional Team is composed of people with varied levels of skills and experience brought together to accomplish a task. As the name implies, Cross-Functional Team members come from different organizational backgrounds. Cross-Functional Teams may be permanent or temporary. Some members are strangers, some are enemies, some are colleagues, and some are friends
In Logistics, and in order to achieve true logistics collaboration, it is a good idea to have a Cross-Functional Team made up of the logistics provider and shipper/customer to continuously improve their relationship and meet the goals set in a mutually agreed upon Service Level Agreement (SLA) with Key Performance Indicators (KPIs). This is also very true in the realm of carrier relationship management to maintain rates and long term working relationships.
If it’s a Quarterly Business Review (QBR) to improve the Transportation Management System (TMS) optimization, the same applies. If there is a Fuel Surcharge (FSC) increase talk about it/negotiate it in a Cross-Functional Team atmosphere. This kind of communication solves problems to the benefit of both parties in the process of logistics collaboration. It has collaboration and harmony at its foundation.
Some would say this is radical collaboration, and if it works, what’s wrong with that?
Companies should always look for Cost Reduction whether business is good or bad. Cost- Functional teams in a company, can provide Cost Reduction. How? Use Pareto’s 80/20 principle to choose parts, subassemblies or commodities to study to reduce the cost of goods (cogs) and increase profitability. Pick a captain of the team and a recorder. Bring the item to the meetings. Visually inspect the item. Ask the team for ways to reduce the cost yet maintain the quality of this item. Never jeopardize quality in this process. All thoughts, no matter how outrageous, are put on a flip chart or white board. Brainstorm freely. Be freewheeling; anything goes. Invite suppliers in, who are the specialists in producing this item, to join in on the team meeting, and offer cost reduction ideas. The above tactics are the heart of the execution of your logistics collaboration strategy. Ask the following questions to go further:
Challenge yourselves, and come up with a better way to produce this item, but reduce the cost and maintain quality.
As I always like to say: There is a better way to do anything. Find it. Blast! Create! Refine! ….as a Cross-Functional team.
If you choose to have a company wide Value Analysis (VA) program to reduce costs using several Cross-Functional Teams, have a formal program with Top Management investment (remember for true logistics collaboration, TRUST is the key, and leaders can help build trust top down).
Have a VA Administrator to oversee this program. Offer positive reinforcements in the way of prizes to a winning team quarterly. Review VA ever quarter as a training/learning experience. Have each team present the status of their VA project quarterly by having captains review their project with the entire group present. Make it a fun project. Many members will be happy to get away from their day-to-day duties to brainstorm ideas with their team in competition with other VA teams.
All cost savings reduce the cost of goods sold (cogs) so the company gains profitability. Each member is invested in the company’s profits.
Occasionally have a Supplier Day Conference on an item or commodity and invite all of your Suppliers of that item/commodity to present their ideas on a structured Supplier Day Conference. Have a plant/operations tour, so Suppliers familiarize themselves with your operation. You give presentations, and so does the Supplier. It enhances collaboration and harmony in your working relationship.
To review, when should you use a Cross-functional Team approach for your logistics collaboration strategy?
As a leader of a Cross-Functional team the implications are clear: Insist on a clear team goal and a plan to achieve it; work hard and smart to gain the commitment of team members and other stakeholders to the team’s goal; emphasize collaborative efforts and team rewards; provide training on how to work with a diverse group of people; and create a set of policies and procedures that support a team-based environment.
Are you using Cross-Functional Teams in your business to solve problems, increase logistics collaboration for ongoing resource use reduction, and/or to reduce costs? It works in any business environment. If not, why not?
You don’t have time? There is always time to do the right things. In the New Year 2014, introspect, and find the time to reduce costs and solve problems investing your own people in the process. There is nothing like ownership of a successful company program.
I have been a Value Analysis Administrator for a large mid-west Company: The General Binding Corporation (GBC) in Northbrook, IL, and I can tell you personally that VA works for the company’s profitability and team spirit. Our projects were submitted to Purchasing Magazine and they had write ups on our groups. It saved GBC millions of dollars.
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