When Procter & Gamble in the mid-2000s sold Sunny Delight to private equity investor JW Childs, the consumer beverages producer had about $550 million in annual sales, but did not have private or dedicated fleet service to its North American customer base, and its existing carrier contracts were about to expire.
As part of the sale, P&G agreed to provide service and support up to a year, giving SunnyD just 12 months to establish its own logistics infrastructure. It desperately needed a smooth transition to ensure the right products would be on its U.S. and Canadian store shelves at the right time.
Ultimately, SunnyD turned to Transplace, a Frisco, Texas-based third-party logistics provider to manage the company’s transportation network, including the implementation of its transportation management system to control the planning and execution for shipments from factory to store.
In the end, SunnyD was able to separate from P&G six months ahead of the required date and cut all logistical ties two months later.
The SunnyD-Transplace relationship underscores the solutions 3PLs and technology companies can provide shippers in complex and challenging supply chain situations. Along with the volatility and risk in today’s transportation world, it also helps to explain why TMS demand is strengthening.
In the end, TMS is all about connecting all parties in the logistics chain, according to Charles T. Trimarco, senior manager of supply chain technologies for Capgemini North America.
For Transplace and other TMS providers, the priority is to deliver new and upgraded models that provide functionality to not only optimize users’ networks, but also to lower costs and other barriers to entry in a highly competitive market.
For supply chain software provider Descartes, that model predominantly is software-as-a-service, on-demand, pay-as-you-go technology typically accessed in the cloud and managed by a third party, as opposed to installed TMS that requires in-house support and the kind of cash that only a handful of large multinational companies can afford. “TMS is better served as a network-based solution, since it’s all about connecting shippers, carriers and suppliers,” said Chris Jones, executive vice president of marketing and services for Waterloo, Ontario-based Descartes.
Jones wants to dispel the myth that delivery models correlate to functionality, and that installed software is superior to SaaS. The proof is that plenty of multibillion-dollar companies run global transportation networks with SaaS. “I guarantee you that all products in markets have the same challenges whether on premises or network-based,” he said.
Descartes’ SaaS 2.0 TMS includes connections to thousands of carriers and cost-effective services to connect with those not already part of the network. It employs an activity-based, pay-as-you-go pricing model that has attracted customers from a variety of industries.
Demand for TMS is strong among Descartes customers in retail, consumer goods, food and beverage, and other industries that realize there are efficiencies still to be wrung out of the supply chain. They’re drawn to supplier connectivity, time to value, low upfront costs and the SaaS pricing model.
3PLs and freight forwarders are big users of Descartes’ networked TMS, which is well-suited for the relatively cash-poor logistics industry with its historically thin margins. “3PLs are faced with the same fundamental challenges and costs as other shippers,” Jones said.
Descartes’ networked TMS is part of its global logistics network, which has more than 20,000 connected parties in more than 160 countries. The global logistics network, or GLN, is a current generation, high-speed messaging network that fully integrates supply chain partners with back-end systems such as finance order management.
TMS capabilities have been enhanced significantly in areas such as parcel manifesting and end-to-end intermodal management. Small-package manifesting and labeling, for example, includes compliant interfaces for UPS, FedEx, DHL and hundreds of other trucking companies.
Logistics Flow Control is a next-generation TMS capability. It addresses the challenge of coordinating multiple parties and systems that have traditionally made inbound retail supply chains inefficient and difficult to manage. “It’s about solving customers’ problems,” Jones said. “You have to have an answer for any eventuality.”
C.H. Robinson’s managed TMS combines cutting-edge technologies with supply chain expertise provided by “power users,” dedicated teams of logisticians and process engineers who operate the TMS and work to optimize transportation networks.
The blended-service TMS model allows customers to devote their time to strategy and core competencies rather than transportation management. “It is a transformational capability that gives customers the ability to change not just transportation networks but supply chain baselines,” said Glenn Koepke, general manager of TMC, a C.H. Robinson business unit that provides managed TMS services.
Power users are what differentiate managed TMS from the pure SaaS model. The service is differentiated from traditional 3PL transportation outsourcing services by allowing shippers to retain full control over their transportation strategies, freight networks and carrier selection.
C.H. Robinson’s power users are Six Sigma experts with extensive industry experience. As part of dedicated account teams, they operate out of TMC’s four global command centers — in Chicago, Amsterdam, Shanghai and Mumbai — or at client sites, and work with clients to identify metrics and key performance indicators for optimizing processes and networks.
With managed TMS, C.H. Robinson, the world’s fourth-biggest 3PL in 2012 with $9.7 billion in revenue, according to the Top 40 Global 3PL rankings published by The Journal of Commerce and SJ Consulting, is attempting to adopt transportation management to customers’ needs and networks, rather than the other way around. “We do not force customers into processes that take an out-of-the box approach,” Koepke said.
By centralizing TMS management in four global control towers, C.H. Robinson has the flexibility and agility to manage global transportation networks. The company’s dedicated management teams provide ongoing stability as changes occur over time, mitigating the risk of disruption. “Just because your networks are good today doesn’t mean you might not have to change your sourcing tomorrow,” Koepke said.
The upfront cost reductions that SaaS and managed TMS deliver are well-known, but they also eliminate barriers to upgrading or replacing existing systems that are inefficient. Executives often demand that logistics teams find ways to make systems work to justify the initial investment, which can result in shaping networks to fit the technology rather than the other way around.
TMS users were initially were concentrated in fast-moving consumer goods and food and beverages, but barriers have fallen. Customers of managed TMS range in size from as little as $8 million to $10 million to more than $500 million in annual transportation spending.
Transplace uses a progressive up-grade approach to its SaaS platform, releasing a new version of the TMS approximately every four weeks. Recent upgrades include enhanced international capabilities, freight brokerage management, optimizing parcel shipments, and processing non-managed carrier freight invoices through audit and payment.
Transplace markets its TMS separately from its transportation management services. In addition to SunnyD, Transplace has 16 SaaS customers, including five-year customer Pep Boys. Recent TMS customer additions include Advanced H2O, Diamond Foods and Feeding America.
Business intelligence is a core part of the Transplace TMS offering. Standard business intelligence reports and dashboards include on-time deliveries using multiple metrics; executive summaries of volume and cost information by transportation mode; cost mapping and cost-component data; and carrier scorecards with multiple tracking metrics.
In June, Transplace announced the release of Freight Allocation Module 2.0, a Web-based application that optimizes transportation by allowing shippers to auction freight with approved carrier partners. The upgrade includes improved visual presentation of available freight along with spot rate quotations in real time.
Transplace has two main groups of customers for its TMS, shippers who outsource their entire transportation management operations and those that only use the TMS platform. For the latter, the new FAM capability enables customers to capture capacity when lead times are short, and to find the lowest rates when freight is put out to bid, said Matt Menner, senior vice president. “You can capture contract or spot rates,” he said. “It automates the entire process.”
Cloud-based SaaS is the only logical model for deploying and using TMS technology, Menner said. The ability to add new functionality without having to reinvent the product saves millions of dollars for Transplace and its customers, with minimal time and effort.
Menner credits Transplace’s customers with providing feedback on ever-changing business requirements that allows the company to make functional enhancements. “Without them,” he said, “we’re just a bunch of geeky software developers.”
Contact David Biederman at firstname.lastname@example.org.