Transportation Management Report 2011 - Capgemini
s u p p ly c h a in m a n a g e me n tTransportation Management Report 2011Latest insights into business drivers for transportation processesand software
ContentsPreface1Executive Summary2Part I: Business InsightsCost Cutting in DistributionThe customer service dimensionReduce costs with centralized planning and execution of logistics activitiesDistribution network planningSelecting the appropriate mode of transportOutsourcing3PL agreementsWhere to start cuttingConsiderations for Distribution Network OptimizationIntroductionTrends in transportation planning5566788891212Beating the Crisis by Better Planning12How to Manage Your LSP17Reducing CO2 by a Modal Shift to Rail Transportation22Driving Compliance and Efficiency with a Freight Control Tower24The TMS Legacy Dilemma28Past (through the mid 90’s)PresentFuturePlanning through the crisisConclusionOutsourcing of logistics servicesWhat goes wrong in your LSP relationship?Why LSP relationships cause headachesCreating a partnership improves performanceA successful LSP partnership needs IT supportExternal pressures: Terrorism and security requirementsInternal pressures: Standardization, export & import documentationsSolution: Freight Control TowersConclusionStrategy for changeStandardization versus differentiation413131414161717182020242525262930
s u p p ly c h a in m a n a g e me n tResponse to the Crisis: Phased Introduction of a TMSSituationSolution approachDesigning the target functional architectureDesigning the target technical architecturePlanning the incremental transformationOrganizationalFunctional domainsGeographical coverageOptimizing the financial investment flowConclusion3131323234343535353535Part II : Transportation Management SystemsProfile of the Transportation Management Systems Market36Functional Insights47Capgemini, Your Partner in Supply Chain54Research approachParticipating vendorsTransport Management Systems product typesClassification by geographies servedSize of the vendorsMergers and acquisitionsMost important market developmentsCompetitors/dominant players in the marketIndustries servedMost important product developmentsSupply chain integrationCollaboration in the industry will increaseSoftware as a ServiceTransportation reference modelStrategic transportation functionalityTactical transportation functionalityOperational transportation functionality: PlanningOperational transportation functionality: ExecutionOperational transportation functionality: VehicleOperational transportation functionality: FinanceMapping vendors’ products to the reference modelTransportation Management Report 20115 2011 Capgemini.Reproduction in part or in whole is strictly 1515
PrefaceRoy LendersVice President Global Supply ChainManagementThe last time Capgemini published areport on transportation managementwas in 2007. The years since thenhave been challenging ones. Thefinancial and economic crisis hit allindustries hard but nowhere moreso than the transportation industry.Logistic service providers, carriersand technology vendors all havehad to deal with the harsh reality ofdifficult market conditions. Besidesthese macroeconomic factors thesecompanies are also dealing with anincreased demand from stakeholdersfor sustainable business models andinnovative solutions at the sametime that technological capabilitiesare increasing and evolving at whatmight be considered by some to be abewildering pace.All of these factors led us to believethat the time for an update toour transportation managementstudy was at hand. The approachwe chose for this report is verysimilar to the previous edition. Inthe first part, Capgemini supplychain and technology professionalsfrom different countries share theirexperiences and insights with you inarticles that focus on both businessand technology. The articles covertopics like distribution networkoptimization, sustainability intransportation, planning, (out)sourcing and IT governancechallenges.1The second part of the reportanalyzes the TransportationManagement Systems (TMS) market.As part of the vendor analysis, aquestionnaire was sent to thosevendors who handle standard, offthe-shelf transportation managementsoftware. Survey topics includedquestions about competition, productdevelopment, and market trends.The editors of the study compiled allthe responses in easy-to-read tablesand then added their observationsin the text. To facilitate comparisonsamong the often diverse andsometimes even confusing solutionsin the marketplace, we developed animproved transportation referencemodel. Participating vendors wereasked to use this model to indicatethe areas covered by their solutions.The result is an interesting andhelpful overview for anyone in theindustry and especially for those whomight be looking for a TMS solution.Hopefully, the business insights in thereport will lead you to think aboutor perhaps rethink how to organizetransportation. And after readingabout the latest developments insoftware solutions, maybe you’ll wantto consider updating your existingIT solutions. Whatever your nextmove might be, the consultants atCapgemini will be more than happyto discuss the study with you indetail and to explore how we can beof further assistance in helping youdevelop world-class transportationmanagement.
s u p p ly c h a in m a n a g e me n tExecutive SummaryThis report has twosections. In the firstpart, Business Insights,Capgemini logisticsprofessionals providetheir opinion on differentaspects of managingtransportation in thecontext of the currentchallenges facing thetransportation industry.The second part of thereport, TransportationManagement Systems,gives an overview ofthe software solutionsthat are available tosupport transportationmanagement.Transportation Management Report 2011Business InsightsThe Business Insights articles coverthe following topics: The recent economic downturnhas led to cost-cutting programsin many sectors. But minimizingcosts has always been one of thetop priorities for transportationand logistics managers worldwide.So, what choices do they havewhen facing this new economicclimate, with even more focus onminimizing cost of distribution?Shrinking business volumes callfor changes in the distributionsetup, while still maintaining focuson customer needs. KristofferArvidsson and Lina Aronssondiscuss different options they seefor cost cutting in distribution. There can be many reasons thata distribution network no longerhas the best configuration inrelationship to desired service leveltargets. But the net result couldbe missed opportunities for costreductions. Leanny Pizzolante,Ramón Fiol García and PedroProvedo provide insight intodifferent aspects of a distributionnetwork optimization project. The focus on efficient planninghas grown over the last fewdecades. But with the economiccrisis and increased uncertainty inthe supply chain, many shippersand logistic service providershave learned that their planningand decision making process hasweaknesses. Jasper van der Schaarand Erik Bootsma discuss trendsin transport planning and providerecommendations for planning inthese turbulent times. Outsourcing logistics serviceshas become common practiceand transport execution is oneof the most outsourced businessprocesses. When companiesoutsource their logistics it istempting for them to think thattheir ‘logistics problems’ areoutsourced as well. Althoughsome problems may become theLogistics Service Provider’s (LSP)responsibility, shippers will stillbe responsible for managing theirLSP. “How to Manage Your LSP” isthe subject of an article by HugoHaarman. Currently, the transport sectoris responsible for a quarter ofEurope’s total CO2 emissions.Along with plans to include thetransport sector in the EmissionsTrading Scheme by 2020 will comean urge for companies to startlooking for more CO2-friendlytransportation alternatives. Shiftingto rail transport brings direct andsignificant results. In their article“Reducing CO2 by a Modal Shift toRail Transportation”, Vicky Verbeekand Joël van Gogh discuss how railcan assist the transport sector aswell as global society in their questto reduce CO2 emissions. The article “Driving Complianceand Efficiency with a FreightControl Tower” outlines themagnitude of the challengeahead for companies operatinginternationally and examinesdifferent approaches to ensuringthat the supply chain can notonly cope with tighter trade lawsbut actually thrive. Chris Brownand Adrian Paton explain theFreight Control Tower business2
model and its ability to effectivelyreduce logistics costs and improvecustomer service in the currentglobal economic climate. Many companies are using homegrown software to support theirtransport function, especiallyfor areas like rating, operationalplanning, and operationalaccounting that are difficult tosupport using standard off-theshelf software. A lot of theselegacy transport systems were firstinstalled in the early eighties andhave been extended since then.From a technological point of view,legacy systems are fast approachingthe end of their lifecycle. In “TheTMS Legacy Dilemma” Annemarievan Meesche goes into differentstrategies for making changes inthese environments. The constraints that apply whenintroducing a modern TMSsolution have tightened. Now,in addition to an extremelycomplex and inflexible applicationlandscape comes the addedburden of investment budgetsbeing cut significantly. Logisticsspecialists are therefore lookingfor a migration strategy that notonly reduces the business andtechnology risks, but also takesinto account the current constraintsin respect to investment budgetand cash flow/ROI. An incremental/phased approach seems like theobvious solution to dealing withthese constraints. Today’s methods,tools, applications, and integrationtechnology provide us with a newdimension of flexibility that iscrucial for a phased transition. But3often when a company choosesan “off-the-shelf” (i.e., packagebased) TMS solution, they lackthe expertise and resources toensure the necessary flexibility. Inthe article “Response to the Crisis:Phased Introduction of a TMS”, JanLindhaus and Olaf-Rüdiger Hasseillustrate how Capgemini’s ServiceOriented Package-Based Solutions(SOPS) methodology can help youbridge this gap.Transportation ManagementSystemsPart II of the report provides anoverview of the available applicationsthat support TransportationManagement. Twenty eight vendorswere surveyed and providedinput to the inventory of productspresented. Capgemini editors haveadded clarifications and views tothe text accompanying the vendorinformation tables. Some highlights: It is important to recognize thatthere are different groups of TMSusers: carrier, logistics serviceprovider, and shipper. Althoughthey have some requirementsin common, their differencesare important when selecting asolution. Advanced Planning & Scheduling,Route Optimization, ParcelShipping, and Global TradeManagement functionality are areasthat can be part of a comprehensiveTMS. These parts are also availableas stand-alone solutions, whilesome vendors offer these thirdparty components as options totheir own solution.
s u p p ly c h a in m a n a g e me n t Connectivity and visibility arebasic components that enablethe multi-party collaborationof shippers, LSPs, carriers, andauthorities (customs, for example).An interesting development isoffering solutions that leveragenetworks where many of themajor players are alreadyconnected to a platform. Thispotentially minimizes the effortand money involved in setting upcommunication with these parties. A major trend is offering TMSsolutions as a shared softwareservice over the Internet, for whichpayment takes place proratedto usage. Software as a Service(SaaS) is considered one of themost important changes in theTMS market. Although smallercompanies can particularly benefitfrom this, larger companies are alsoshowing an interest in this businessmodel because it can mean less ofan upfront investment. The market still has many small,local vendors. They remain aninteresting option for certainusers. For the larger, truly globalcompanies, the continuingconsolidation of TMS providersis an important development.The takeover of i2 by JDA, whohad earlier acquired Manugistics,is an example of a significantconcentration. The on-goinginvestment in the TMS market bymajor ERP vendors like Oracle andSAP shows a commitment to thisimportant segment of the supplychain software market.Transportation Management Report 2011 Supply chain integration,sustainability and SaaS are majordevelopments that will continueto shape the market in the years tocome.The report ends with a transportationreference model for the TMS market.It is a model that should be helpfulwhen formulating requirements fortransportation-related IT solutions.The model is very comprehensive.Many users may need to use avariety of providers to fulfill alltheir IT application needs, althoughsome providers do cover a widerange of services. Integration willremain a key challenge and carefuldesign of IT architecture a criticalsuccess factor. What we have seenin comparison to previous marketanalysis and is also supportedby our practical involvement inimplementing solutions, is thatover time the possibility to covermore (functionality) with less(different vendors) does exist andis indeed increasing. However,in a market where a considerablenumber of the players still workwith legacy solutions that were builtor customized in-house over thecourse of several decades, the stepto a standard off-the-shelf solution iscertainly not to be underestimated.4
Part I: Business InsightsCost Cutting in DistributionKristoffer ArvidssonSwedenLina AronssonSwedenThe recent economicdownturn has led to costcutting programs in manysectors. But minimizingcosts has always beenone of the top prioritiesfor transportation andlogistics managersworldwide. So whatchoices do they have whenfacing this new economicclimate, with even morefocus on minimizing thecost of distribution?Shrinking businessvolumes call for changesin the distribution set up,while still maintainingfocus on customer needs.Factors to investigate in order to cutsignificant cost in distribution arecentralization of logistics functions,distribution network set up andplanning, outsourcing of logisticsactivities, and transport mode and3PL selection. All of this whilecontinuing to provide the rightservice levels to customers.The customer service dimensionLogistics managers always have tostrike the right balance betweencustomer service levels and operatingcosts. But do companies have toserve all customers at the same,high service level or is it better tooffer different service levels andlet the customers choose betweenthem and their corresponding costlevels? Companies should make sureto offer the service levels neededbut shouldn’t hesitate to have adialogue with the customers aroundopportunities to change service levelsthein order to cut costs.Logistics options in the economic downturn Optimizing service levelsMore flexibility in speed and pick-up/delivery times Centralization of logitics planning and executionLogistics Shared Service Centers Distribution network optimizationInput from changing supplier and production locationCollaboration with uppliers and customers Selecting the appropriate mode of transportTrade speed for cost Outsourcing of logistics activitiesMake fixed assets variable Renegotiation with 3PLs5
s u p p ly c h a in m a n a g e me n tUltimately, many companies mustask themselves if the cost of speedis worth the price and are theircustomers willing to pay for it.Moving production closer to theconsumer may offering a “greener”,slower, and cheaper transportationsolution that could both attractpositive consumer attention andminimize distribution costs.Another way of reducing costs isto even the flow of goods over thecourse of a day or a week to minimizepeaks. A steady flow makes iteasier to plan for personnel, trucks,distribution centers and so on and,ultimately, uses fewer resources.Expanding the usage of a truckthrough morning pickup or eveningdelivery not only let’s a companyuse its fleet in a more efficient waybut also makes it possible to reducecongestion in peak hours and therebyreduce driving times and emissions.As an example, DSV Road inSweden is now offering a “green”transportation solution that is alsocheaper than the regular solution. Ifthe customer chooses this cheaperproduct, they must accept a flexibleloading day which makes it easierfor the transportation company tomaximize utilization of the trucksand travel shorter distances.These types of initiatives call forchanges in the service agreementswith the customers and mustultimately be decided in collaborationwith the customer. If all parties in thevalue chain can benefit, it is certainlyworth the effort to look for new waysof working together.Transportation Management Report 2011Reduce costs with centralizedplanning and execution oflogistics activitiesCompanies typically have theirlogistics functions spread over severaldifferent locations, often tied to theirfactories or warehouses. Centralizinglogistics functions to a shared servicecenter is a way to leverage economyof scale and reduce headcount acrossbusiness units while maintainingor even increasing service. Sharedservice centers make it easier tostandardize processes, implementbest practices, and focus on keyactivities. Companies that haveimplemented shared service centersoften report savings of 20-40%compared with a more decentralizedstructure.In a logistics shared service center,distribution activities such asroute planning, transport ordermanagement, and customer contactscould be centralized without losingany control over the transportationprocess. It’s also easier to minimizesub optimization in the distributionnetwork if one unit is doingthe planning instead of severalgeographically spread units.Distribution network planningThe cheapest and mostenvironmentally-friendly transport isthe one never carried out! This mightseem obvious but in light of theamount of goods that are transportedback and forth in a supply chainbecause of poor planning it is a truththat is worth mentioning frequently.In order to minimize distributioncosts, the focus must always beon maximizing utilization andminimizing distances travelled.6
Because the form and shape ofa company’s value chain altersalmost daily, short- and mid-termlogistics planning becomes veryimportant. The planning of theoptimal distribution network is anongoing process that needs constantattention. Many networks are setup by tradition and over time mayneed to be changed in order to fit amore current situation. Distributionnetwork analysis makes sure thatwarehouses and hubs are placedin optimal locations and the use ofadvanced software tools for dailyroute planning helps shorten thedistances travelled to the customers.Where to locate a split point or thestrategy behind FTL/LTL decisionswill influence distribution costs andmust be constantly monitored tomake sure they match the currentneeds of the supply chain.Consolidation of shipments is one ofthe easiest ways to increase utilizationof trucks and lower emissions.Keeping track of orders to suppliersand consolidating customers’ orderswill reduce transportation costssignificantly over time. Transportationand warehousing activities mustbe in sync in order to consolidateshipments and reduce inventorylevels. Therefore both transportationand warehousing activities should bealigned through common planningprocesses.The effects of careful logisticsplanning will be even more powerfulif the planning is carried out togetherwith suppliers and customers. Thistype of collaboration will make surethat every part of the value chainknows when to do what. The resultis a more visible and flexible supplychain that is easier to manage.7A leading consumer electronicsproducer introduced CollaborativePlanning, Forecasting
Transportation Management Report 2011 5 s u p p ly c h a i n m a n a g e m e n t 5 2011 Capgemini. Reproduction in part or in whole is strictly prohibited. Response to the Crisis: Phased Introduction of a TMS 31 Situation 31 Solution approach 32 Designing the target functional architecture 32 Designing the target technical architecture 34
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