If your business is highly cyclical, how do you derive value from a transportation management system (TMS) in an environment where there is a flood of orders or the flow of shipments has slowed to a trickle?
It’s an important question for anyone who has to justify an investment in the technology – and that surely includes freight managers who have bought into a TMS solution.
Seasonal shippers that outsource to an offsite TMS service provider are particularly affected. In addition to the uncertain nature of their business, they do not have direct control over how the TMS resources are deployed and allocated. Here are four ways in which these types of companies can get the most out of their investment in a TMS with managed services solution.
1. Look for a Creative Service Provider
Smart shippers use down cycles to tackle those projects that they can’t get to during busy periods when their staff members are stretched to the max. IT bugs that need to be ironed out or continuous improvement projects that whittle costs are examples. Perhaps there are strategic tasks that are out of bounds when the tactical work load peaks.
A creative, experienced service provider can help you to build a bank of back up ideas. The third party is also a useful resource when prioritizing tasks, so you are ready to tackle the to-do list as soon as your freight volumes hit a low point in the business cycle.
2. Build Seasonality into the Relationship
If you want to develop the kind of long-term relationship with a TMS service provider that provides strategic value for both parties, the structure of the arrangement must be robust.
A key component of this structure is the pricing model. As a seasonal shipper, you rightly expect the highest levels of service regardless of whether your freight volumes are up or down. But it is also in your interests to make sure that the business is profitable for the solution provider, otherwise the relationship will probably be short lived. That requires the contract to be priced in such a way that you deliver volumes that meet the provider’s profitability thresholds in a fluctuating market.
Another factor to consider is the level of flexibility that your provider can offer. The solution supplier must be able to effectively manage its resources in an environment where freight volumes swing in line with extreme shifts in demand.
3. Advanced Analytics a Key Capability
The TMS service provider must offer high-level analytics that are available 24×7. Demand forecasting and planning are difficult enough in relatively stable markets, but can be even more challenging in seasonal businesses. Make sure that your provider has the analytical horsepower you need to manage these gyrations and continuously improve operational efficiency. Crucially important is the ability to avoid surprises as load counts hit the roof.
Comprehensive analytics also help you to plan for down cycles as described in the first point. Armed with detailed information on volume trends, you can budget for the resources needed to tackle B list projects when market activity is at a low ebb.
4. Inform Carriers
Good and proactive communications is another must in a seasonal environment. A common stumbling block is failing to keep carriers in the loop when you are planning for future demand surges. Even approximate information on the volumes involved and likely delivery locations help carriers to position their assets accordingly. Some shippers send out email alerts a month in advance with rough estimates of peak volume demands (for more on this see Making the Sales Surge Connection and This Weeks Special Offer: Better Promotions).
The TMS solution provider should be central to this effort, by supplying the necessary facts and figures and building effective communications into the freight management strategy. A provider with a seasonal mindset appreciates the importance of preparing carriers for the next peak.
A TMS is a highly effective tool for managing the ups and downs of cyclical freight flows (see A Fresh Crop of TMS Applications for more on this). However, these businesses have special demands. The technology has to deliver an ROI even when volumes dip, for example. Seasonal shippers need to work with service providers that are aware of these nuances.