Transportation management systems (TMS) excel at helping companies to manage day-to-day changes in their freight networks, but the technology can also perform in markets that shift by the hour. These applications are relatively new, but are opening up opportunities for growers and shippers that were unheard of a few years ago.
The agricultural sector offers prime examples of ultra fast-moving markets that lend themselves to a TMS-driven freight management strategy.
Produce is often picked in the early morning, goes through cooling and packaging processes, and is ready that evening for shipment. In addition to the product’s limited shelf life, grower shippers and buyers must juggle a number of variables such as changing weather patterns, seasonality, and extreme peaks in demand.
They must also contend with a level of freight rate volatility that can make more conventional markets for transportation look almost sedentary. For example, when shipping produce across the country, say, between California and New York, rates can jump 10% to 15% in a single day, or in some cases, within hours. These percentages can balloon even more in regional short-haul markets where leaving product on the dock is simply not an option.
An advanced TMS solution can help shippers to manage this roller coaster market and provide the kind of network analytics that has proved so valuable in less frenzied commercial environments. Here are some ways in which this is happening.
Post-Monday meltdown. Not surprisingly, there is high demand for produce and hence cargo space just prior to major holidays such as Thanksgiving. But less obvious is the capacity crunch that hits just after these peak days. When a holiday falls on Monday, which many do, trucks are not emptied until Tuesday. This seemingly innocuous delay means that many long-haul trucks do not arrive back in primary growing areas such as California until the weekend, causing a sudden capacity shortfall late in the week. In a recent case, the supply/demand scenarios generated Friday morning were completely redundant by the afternoon because of such an imbalance. A TMS enables freight managers to rapidly regroup in this type of situation. They can quickly see where trucks are available, rearrange production schedules, and lock in capacity at the optimum rates. Being ahead of the competition by just a few hours can make a tremendous difference in these predicaments.
Planning benefits. Without the market visibility and ability to mix and match commodities afforded by a TMS, load planning is more difficult – particularly with LTL cargoes – and the cost penalties of underutilized trucks in the produce business can be huge. When moving a relatively light cargo such as leaf lettuces and salads,you are more likely to cube out than weigh out, but the opposite is true for heavier items such as apples and potatoes.
Moreover, the TMS can free up lead time which may allow you to plan for a less expensive move by rail, and find the refrigerated equipment that is required for transporting most types of produce. And, of course, reduced lead times often translates into higher costs and reduced service levels.
Shippers on the spot. Although in most cases freight transportation is arranged by the receiver, many times the grower-shipper is called on to provide capacity. These shippers are more likely to turn to the spot market to secure trucks than players in other industries, given the unpredictability of product supply and demand. Also, if the receiver makes such a request, the shipper has to comply or risk losing the order. A TMS helps them to minimize spot market moves, and to negotiate the best rates, saving them time and money.
Network reengineering. TMS solutions are used extensively to improve network efficiency in industries such as consumer packaged goods. This analytical power is now being unlocked in fast-moving businesses such as fresh produce. For example, a recent analysis looked at the loads a Texas-based shipper was building. The analysis showed that building the loads through a TMS would yield total cost savings of at least 16%. In addition, reducing the number of loads shrinks the shipper’s carbon footprint and helps to ease capacity constraints because fewer trucks are needed.
The use of TMS solutions in extremely dynamic freight markets is in its infancy, but there is vast potential for these applications. The technology could also raise the profile of logistics generally in these businesses. In the agricultural industry, for instance, logistics tends to be something of an afterthought; the emphasis is on production. This is likely to change as companies realize that more efficient freight operations deliver reduce costs and better customer service.