Opinion: Rethinking the Freight Transportation Model

This Opinion piece appears in the May 22 print edition of Transport Topics. Click here to subscribe today.

By James Stevenson

Vice President

TMW Systems

The trucking landscape is changing. For-hire carriers are increasingly offering dedicated freight management and brokerage services. Corporate pressure to reduce costs is driving private fleets to operate as for-hire carriers. For-hire carriers are acting as third-party logistics providers, or 3PLs, including incorporating brokerage. And, of course, traditional non-asset-based providers are acquiring assets to guarantee service.

Stevenson

Driving these trends is the changing face of the supply chain and, particularly, the rise of omnichannel distribution networks. The internet has opened a new frontier that is rapidly transforming the way goods are ordered and delivered. Last year, according to Ohio-based website design firm OuterBox, online sales were up 45% over 2015.

The omnichannel supply chain — through which goods move in nontraditional ways — is having a profound and disruptive effect on freight carriers and logistics service providers. The growth of e-commerce and final-mile delivery is forcing these companies to transform their transportation models by expanding delivery offerings beyond traditional truckload and less-than-truckload moves.

Carriers must adapt to the changing distribution and delivery arrangements established by retailers that are utilizing a network of constantly changing channels. What was once fixed is now becoming highly dynamic. Online orders are being shipped from distributors and manufacturers directly to customers. More complicated models involve shipping lower-volume online orders from brick-and-mortar stores.

Traditional motor carrier transportation models are not designed for these challenges. They now need to support multistop planning and advanced scheduling capabilities. They also need to handle more frequent moves by smaller vehicles to end users. Likewise, the increase in final-mile deliveries raises a distinctive set of needs for more sophisticated planning, multistop routing, tight delivery windows and non-dock deliveries.

Understanding these challenges is the first step in determining what changes need to be made to current transportation systems. In many cases, meeting the requirements of omnichannel distribution involves organizational transformation to build agile, responsive capabilities as part of a new transportation strategy. In what can be an inherently inefficient transportation model involving smaller shipments moving at a faster pace, logistics providers and carriers are being called upon to offer higher service levels that typically underutilize capacity. And they must meet these challenges and field more resources in an environment that already faces a driver shortage.

The key to solving this puzzle is advanced analytics. Successful carriers and logistics companies are using complex costing models to profitably bid freight and select the most effective transportation modes. When examining operating practices that might be outside their traditional comfort zones, they are using tools that capture detailed metrics to determine where service needs can converge with profitability.

However, the use of obsolete management methods and tools often compounds the problem of improving delivery performance. Outdated planning processes and disconnected systems simply do not work.

To meet the delivery challenges inherent in omnichannel freight handling, companies need a final-mile component in their existing transportation management systems, or TMS — one that has the functionality to specifically address unique and changing needs. More sophisticated systems have these capabilities, but many were simply not designed for omnichannel and final-mile operations.

What’s required is a single, unified, fluid process for integrated scheduling, dispatch and real-time visibility. Complex planning requires complex optimization of data on customers, shipments, time windows, available equipment and any restrictions that might affect a delivery. It’s no longer as simple as matching a driver to a load — not when 15 trucks, each with 15 stops, represents 1,800 possible combinations.

Also essential is the ability to analyze data using transportation-centric business intelligence tools. BI provides historical and predictive views of operations that improve bid planning and strategic decision-making. Referencing data from many sources on operating, fuel, maintenance and driver costs can determine true profitability.

The delivery puzzle is uncharted territory for many carriers and freight brokers. Adding omnichannel and final-mile capabilities to their TMS solutions will help them rise to current and future challenges.

One of the key new capabilities of modern supply chain management platforms is true end-to-end visibility of order and shipment information to customers. In place of traditional electronic data interchange, which has built-in latency on shipment status, customers now expect real-time updates in a uniform system regardless of how the load is being delivered. This information must be accessible via mobile devices, giving customers online access to constantly updated delivery status along with automatic notifications.

It all starts with the new omnichannel model that provides a seamless experience online, in a store or on the phone. It leads to high expectations for carriers and logistics companies that are being called on to pick up and deliver goods anytime, anywhere.

Tasked with offering exceptional flexibility and service to provide on-the-fly product availability, retailers are relying on multiple shipping and delivery options to satisfy demand. This changing landscape is causing a rethinking of traditional freight transportation models, one that leading motor carriers and 3PLs are addressing more effectively every day.

Stevenson, vice president of sales for TMW Systems, was co-founder of Appian Logistics Software, which today represents TMW’s final-mile suite of solutions. Transportation businesses use TMW solutions to collectively manage more than $71 billion in annual freight spend, direct more than 500,000 power units and maintain more than 1.7 million assets worldwide.