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Leading companies today are finding that while transportation management is not one of their core competencies, it is a critical component of their overall competitive advantage. These enterprises are migrating toward a new business model — called managed transportation services (MTS) — that allows them to outsource non-core activities while maintaining other key logistics functions in-house, along with control over carrier relationships. For these companies, the MTS model is providing a new competitive advantage.
A New Model for Transportation Management
Today's business environment is no longer about "company versus company." Instead, the real competition now is "supply chain versus supply chain," an environment that places a premium on a company's ability to leverage an agile, lean transportation network to meet stringent customer-service requirements.
In this environment, many companies are finding that outsourcing the entire transportation management function can result in giving up too much control and may be cost prohibitive. Retaining carrier relationships and some other key functions within the company may be the preferred solution, and the new managed transportation services business model provides that option.
Managed transportation services allow the outsourcing solution to be tailored to a particular company's business objectives. Companies can outsource functions that may not be core competencies (e.g., transportation planning, execution, or payment operations) while still retaining oversight of their transportation operation and strategic carrier relationships. In this way, a company using an MTS model can improve bottom-line performance while maintaining flexibility and control.
The core of this new model is an on-demand transportation management solution combined with business process management services and an on-demand network of carriers and other logistics service providers. The following case studies, based on companies working with LeanLogistics Managed Transportation Services (LLMTS), demonstrate how companies already are driving significant value by leveraging the MTS model.
Rich Products
Rich Products Corporation, a leader in the food service industry, has an extensive distribution network that encompasses over 60 locations, including 17 plants, 35 other production locations, and five regional distribution centers (DCs). Some of the network locations were managed by third parties, and there was no consistency in processes or procedures. Procurement (contracts and carrier negotiation) was performed by Corporate Management, and a third-party handled freight payment.
Rich's decided to outsource the daily management of transportation in order to centralize and standardize their processes while retaining strategic control of their carrier relationships. Choosing LeanLogistics' new managed transportation services model, LLMTS, Rich's centralized command and control of its transportation processes.
LeanLogistics manages daily operations for all locations: planning, including consolidation/optimization, carrier selection, and capacity commitments; tendering freight to carriers; monitoring carrier performance to plan and to contract (reporting exceptions and managing tactical issues); leveraging the network to obtain additional carrier and capacity options; and reviewing unanticipated accessorials and payment anomalies.
Rich's views managed services as the model of the future for transportation solutions, replacing both traditional third-party logistics providers (3PLs) and software solutions. Transportation is managed with better technology, providing better coordination and control, and at a lower cost. No personnel were displaced; since transportation was only a part-time function, over 100 people were freed to concentrate on other service functions.
ACE Hardware
ACE Hardware was unsatisfied with its carrier contracts. The rates were outdated and likely not competitive, and the accessorials were not standardized. Also, there were too many brokers rather than true carriers, adding additional cost.
Ace decided to issue a national request for proposal for transportation procurement and retained LLMTS to provide both the RFP format/verbiage and an experienced practitioner for eight months to establish rates and route guides. Using the On-Demand TMS® network to benchmark Ace lanes, LeanLogistics provided the carrier list for the RFP, identifying 400 carriers Ace had not used previously. LeanLogistics created the RFP rate matrix structure to meet Ace's requirements: point-to-point high volume, dedicated, point-to-region (seasonal), and region-to-region, all supporting FTL and multi-stop loads.
Ace now has control of its transportation costs, with standardized rates and accessorial charges. Better carrier relationships are established by contracting directly with asset-based carriers. Benchmarking its rates in the on demand network allows Ace to validate its costs.
Procter & Gamble
Procter & Gamble had an objective to improve performance on a number of "bleeder" lanes (lanes with coverage and capacity problems). To implement Best Practices in its Transportation Coordination processes, P&G called on LLMTS, who provided an operations manager and two analysts to manage the bleeder lanes.
This project team used the On-Demand TMS® Supply Chain Monitor (SCM) to communicate process failures to both P&G and its carriers throughout the cycle from Carrier Acceptance to Load Delivery. They also identified and recommended process improvements to increase performance on these lanes, provided proactive communication to P&G Customer Service Teams, and ran daily operational reports to manage timeline defects on the bleeder lanes, resulting in increased on-time delivery performance for bleeder lanes from 94 to 97 percent.
AEP
AEP, a major supplier of plastic packaging film products, determined it could reduce costs in the transportation payment process by bringing the process in-house, thus providing tighter control and eliminating 3PL charges. Carrier late fees and last-minute accessorials were symptoms of the chaotic process.
AEP selected LLMTS to assist in the transition from outsourced/3PL to using LeanLogistics' On-Demand TMS®. LLMTS provided transition services, with an administrator, payment coordinator, and load planner performing business rules set-up, daily planning, and WebSettle® tasks to ensure proper carrier selection and proper payment while mandating strict compliance to established guidelines and deadlines for submitting accessorials.
AEP was able to painlessly move from outsourced/3PL management of planning and settlement to handling these functions internally while gaining significant control over carrier selection and payment processes, reducing carrier costs significantly. During the transition period, the LLMTS team trained both the new AEP staff as they were hired and the AEP carriers, providing expertise and knowledge transfer that resulted in additional module usage and time and cost savings.
Market-leading MTS
LeanLogistics, a leading MTS provider with its LLMTS offering, provides four categories of services in support of its clients:
- Implementation Services — The combination of LeanLogistics' On Demand business model and experience implementing dozens of major corporations and thousands of users results in extremely fast implementation, providing the lowest-risk, shortest time-to-benefit.
- Managed Services — Combining the outsourcing of transportation business processes with the power of LeanLogistics' industry thought-leadership and On-Demand TMS® software, this comprehensive offering allows a client to outsource functions that may not be core competencies and still retain oversight of transportation operations and strategic carrier relationships.
- Value Realization Services — Best-in-class companies regularly implement best practices to derive maximum value from their business processes. LeanLogistics has long been the thought-leader in developing best practices for transportation management business processes and dialogues. These best practices help clients derive maximum value from their implementation.
- Community Services — The On-Demand TMS® network is a community of many companies representing a variety of industries. LeanLogistics' broad-ranging community services promote collaboration and knowledge sharing among the members of this community. Services include collaboration initiatives, such as network wide-benchmarking.
For more information:
LeanLogistics
3347 128th Avenue
Holland MI 49424
Phone: 616.738.6400
Fax: 616.738.6462
E-mail: sales@leanlogistics.com