Control tower taking over the supply chain

September 14, 2012
by MM&D staff

BOSTON, Massachusetts—A recent study has determined that a growing number of best-in-class supply chain operations are adopting Internet-based applications to run their transportation operations.

The report by the Aberdeen Group, Rising about the Cloud—The Integrated Transportation Multi-Party Control Tower, examines the trend toward cloud-based/software-as-as-service-based (SaaS) transportation management platforms that provide users with a control tower environment. (The study defines a control tower as offering “a shared platform of visibility and control/optimization” which offers an “element of near real-time ‘collaboration execution,’ which enables ongoing ‘in-flight’ course corrections, advanced decision making and optimization”.)

According to the report, the companies that use this type of transportation management system (TMS) perform “substantially better than their peers on key metrics. The Best-in-Class not only maintained a 97 percent perfect order rate, they did so while reducing per-unit transportation costs four percent over the last year.” In comparison, companies deemed to be average by the study had a 93 percent on-time and complete order rate while achieving a two percent reduction in per-unit transportation costs, while the laggards had a 92 percent perfect order rate with a whopping 14 percent increase in transportation handling costs.
The adoption rates for SasS TMS differ wildly between the best-in-class companies and the rest. Aberdeen reports 29 percent of best-in-class companies are converting to the cloud while only eight percent of the rest are doing so.There was another wide gulf between those who outsources aspects of the transportation management process (such as auditing and payment processing) versus those who didn’t: 62 percent of the top performers outsource, 33 percent of the average performers outsource and only 22 percent of the laggards outsource.

The ability to respond quickly and react nimbly was one of hallmarks of the best-in-class organizations.  By fully utilizing their control tower capabilities, the best-in-class companies had the ability to

• respond in near real-time to events across multiple channels (33 percent more likely)
• make supplier-distribution network realignments such as sourcing, mode or routing shifts (25 percent more likely)
• support DC bypass with orders pre-labelled and shipped straight to store, consumer or via cross dock (11 percent more likely)

The best-in-class companies who were early adopters of SaaS TMS control towers are, on average, able to resolve their carrier and supplier issues in 56 percent less time than companies not using the technology. Other reported benefits include reducing freight costs through improved shipment optimization, better visibility to shipment status, better business decisions as a result of improved analytics and improved access to transportation capacity.

The report concludes with four suggestions for companies looking to improve their transportation management processes:

• Integrate collaboratively on a shared multi-party platform
• Implement a unified transportation control tower
• Close the loop and span planning/execution with automation.
• Optimize what your automate.