7 Steps to Transportation Management Excellence Part 2

July 10, 2008
This final installment offers the last steps in developing a strategy to build a top-performing transportation management function.

The first installment of this two-part series pointed out that many firms are spending more on freight transportation than necessary. Though many recognize the critical importance of transportation management, they postpone projects to improve transportation management in deference to other corporate projects. The first four steps, covered in the earlier installment, communicate the potential improvement a transportation management project can deliver by helping to “size the prize,” design the moving parts of the solution, and articulate the path forward.

The seven steps outlined in the first installment are:

  1. Assess your transportation management capabilities.
  2. Identify your “target state” of transportation operations performance.
  3. Size the prize.
  4. Determine the appropriate moving parts to move you to the target state.
  5. Determine the appropriate solution deployment strategy to move to the target state.
  6. Plot the course.
  7. Keep score for continuous improvement.

Approaching the transportation management business process in this manner provides a series of facts and insights that guide improvement and can instruct top management on the value and importance of the transportation management discipline. To achieve these goals, people, process, and technology will be important. All three dimensions are central to progression toward transportation management excellence.

Steps one through four, work through the process of establishing a current performance baseline and setting goals. These steps also help determine how much opportunity exists in your company, and you will determine what additional capabilities (people, process, and technology) will be required to realize those benefits.

Steps five through seven, focus on ascertaining which deployment strategy best fits your company’s environment and help plot the path forward. The final step helps provide perspective on the importance of performance measurement and the need for a cultural commitment to continuous improvement.

Determine the Best Deployment Strategy
Step five addresses the questions of How? Who? and Where?

In considering so lution deployment, it is important to return to the three performance considerations discussed in step one—People Considerations, Process Considerations, and Technology Considerations. These are essential ingredients in achieving transportation management excellence. Further, all three areas must be sufficient in quality, depth, and availability to ensure success. If, as you consider each of these categories, you uncover an area of deficiency that cannot be remedied in the short term, that shortcoming must instruct your deployment strategy.

Organizational Design Requirements
Let’s first consider your company’s organizational readiness. As mentioned, one of the attributes in a transportation management leader is the presence of a “central leader” or go-to person for the transportation management function. If your company’s culture is one of high autonomy and decentralization of decision-making, then the structure and nature of a consolidated transportation management program must change to respond to this reality. A highly decentralized execution model can still work effectively, but the deployment option may need to be designed in such a way that it is not a headquarters vs. the field cultural challenge. A neutral third-party can enhance the likelihood of deployment success, given the cultural context. Centralized management of the transportation management relationship and function are still necessary, but in this scenario the central management surrounds the third-party’s performance in the role. In this scenario, the field can legitimately see themselves as the customer of the centralized transportation management program because their centralized provider is, in fact, not a headquarters counterpart.

Organizational Skills and Capabilities
A second consideration in the people category takes into consideration the work from the earlier steps to define the “as-is” and “to-be” states of the transportation management function. Chances are, the design specification on the to-be job’s roles and responsibilities will exceed the specifications of the previous as-is model.

Thus, as part of closing the performance gap between the as-is state and the to-be state, there is a question of staffing and training. Your company’s business strategy and outlook will guide the proper deployment strategy here as well. If your company is in a growth mode, and it is adding staff and altering pay grades and job descriptions, then you have a strong chance of making your case for an organizational re-building process to support your transportation excellence program. Alternatively, if your company has recently been in a hiring freeze period, your program’s likelihood of success and speed of deployment will be best served by a third-party deployment strategy.

Infrastructure and Technology Requirements
Another key deployment consideration is the acquisition and deployment of technology. For most firms, available IT resources are scarce, IT budgets are already spoken for by other company requirements (such as Sarbanes- Oxley compliance, ERP upgrades and maintenance, etc.), and the opportunity to get a transportation management technology project approved is simply not in the cards. This will shape your transportation management excellence deployment strategy. Another alternative is the deployment of a Software-as-a-Service or SaaS-based transportation management technology deployment.

In the SaaS scenario, you would not make a capital appropriations request, buy incremental hardware, databases, and applications, or consume your company’s scarce IT personnel’s limited time. In the SaaS deployment model, the solution is designed and tailored to meet your to-be blueprint (discussed in step two). The solution’s moving parts reside on your SaaS provider’s servers, so you avoid the incremental technology investment outlays; and, because the SaaS provider is already serving other users on their own transportation management excellence journeys, your system deployment and go-live lead times are compressed.

Economic Realities
With a SaaS deployment, your company avoids the up-front capital outlays, avoids the internal IT staffing and prioritization challenges, and receives a hosted solution that is delivered securely over the Internet using industrystandards and protocols. Technology costs are included in the scope of the overall managed services relationship. If your company seeks to address your transportation management challenges in the short-term, but your firm’s IT readiness to support you is further in the future, the SaaS delivery model offers an excellent immediate solution that can be re-visited at a later date.

Plot the Course
Step six involves laying out the time-phased plan for moving from your as-is transportation management capability to your aspirational to-be blueprint. At this critical point, much of the hard work and internal selling is done. Now, you have reached the moment of truth where the project kicks off and now you must deliver.

Organizational Sponsorship and Commitment
To succeed in this phase, the first order of business is to secure sponsorship from the top of your organization. Strong project sponsorship and meaningful steering committee participation will make or break your transition journey. Securing sponsorship at the outset, and involving the sponsor in the kick-off, is a key success enabler. Get the support and make it easy for your leaders to involve themselves throughout the program. If you are the person at that level, be sure to demonstrate visible support and involvement vertically with the team and horizontally with other senior executives.

Prioritize Actions
The second order of business is to sequence your project’s key activities and milestones in accordance with your business’ stated objectives for approving the program. If the project clincher was the rapid resolution of an operational challenge, tackle it first.

Getting a quick win on a highly visible challenge is a great way to lock-in your project sponsorship and gain the momentum that a transformational project like this needs. Conversely, if the primary driver for getting the project launched was the size of the prize, sequence your project to attack the areas of richest opportunity first. Capture those savings early, and use the savings to prefund the subsequent activities in the project.

Contingency Planning
Finally, ensure that your transportation management excellence program has a well-documented and published process review calendar. Projects have ebbs and flows to them. During one of the lulls, you want to have that pre-published calendar of process review meetings available to remind your audience of your continued progress and momentum. Also, have a contingency plan in place for the inevitable project disruptions that surface after kick-off. The mere presence of a “what if?” contingency project plan will calm the anxiety of your most challenging project participant.

Change Management and Communications
Projects that involve a great deal of change in the organization create both excitement and angst. It is the angst that you must proactively manage. The best method of managing an anxious audience is with consistent and constructive communication. Ensure that your program management team establishes and executes a change management and communications methodology from the outset.

Keep Score for Continuous Improvement
The final step in the process is to acknowledge that this journey is never completed. With a best-in-class transportation operation now established and running as designed, your final step is to deploy a fact-driven performance management program.

Essential Performance Measures
There are many business intelligence and reporting tool kits available in the marketplace. Many of these tools come pre-populated with thousands of defined metrics, ratios, and indicators. It is far more important to ensure that you are focused on quality in this area. Quantity— when it comes to analytical tools and performance measurement— can quickly become a curse rather than a blessing. Experience teaches that less is more in this area.

In step two, we discussed three key indicators that transportation management leaders can be identified by: (1) Transportation cost as a percent of revenue; (2) Annual year-over-year freight cost reduction/increase actuals; (3) Percentage of on-time deliveries.

With those three outcome-based measures, you have the core of a transportation management excellence performance management program. Beyond those three outcome-based measures, we typically work to define the appropriate additional operational metrics to deploy as part of the program. Typical operational metrics include items such as:

  • Percentage of shipments delivered complete (right quantity of goods).
  • Percentage of shipments delivered damage-free.
  • Average lead-time for a carrier to accept or reject a tender (by carrier, by lane, by date range, etc.).
  • Average time for a carrier to communicate in-transit updates.
  • Average time for a carrier to communicate resolution of a problem/error.

Many other metrics could be listed, but the key take away is that less is more when it comes to transportation management excellence. Decide on the essential performance metrics that will instruct your continuous improvement efforts, and implement them in cooperation with your trading partners.

Deploying an Intuitive Score-Carding Portal
Another key strategy is the deployment of an easily accessed and reviewed score-carding portal. This deployment strategy is your single source of truth for all transportation- related pieces of your business. With everyone looking at the same figures, in the same environment, collaboration and shared understanding are the result.

Periodic Performance Reviews
Finally, you must conduct pre-scheduled, periodic reviews of your transportation management program. For some of the metrics, a quarterly review is appropriate. For others, weekly and daily frequencies are more appropriate for fostering continuous improvement. The key is to establish a pre-published calendar of reviews and required attendees so that all trading partners will have the same information, reviewed at the same time, in the same context. Consistency in execution feeds, fosters, and drives continuous improvement results.

In conclusion, we have provided a guide for pursuing transportation management excellence. By approaching the transportation management business process in this manner, you will have a series of facts and insights that guide your improvement, and instruct your leadership on the value and importance of the transportation management discipline. The importance of people, process, and technology cannot be diminished, nor can any one of the three topics be discounted. All three are central to your company’s progression toward transportation management excellence.

Scott Sykes is senior director of solution sales for Transplace, Matthew Menner is senior vice president of sales and alliances for Transplace, Vincent Chiolo is senior vice president of solution sales for Transplace.

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