DC Velocity - March 2013

Automated Vertical Storage Systems

It All Adds Up To VALUE

Small parts are expensive.

Traditional shelving eats up valuable floor space and exposes parts. What’s more, parts can be tough to find and reach; accurate inventories a challenge.

The Lauyans Small
Parts Storage
System (SPSS) is
a USA manufactured
solution offering
high density storage
utilizing vertical space

for greater footprint capacity, worker safety, security, labor savings and the most competitive pricing available.

Before you decide to buy any Automated Storage System, go online and check out our pricing.

www.SPSSonline.com

It All Adds Up To VALUE It All Adds Up To VALUE

Lauyans & Company, Inc. 1-866-LAUYANS (528-9267)

USA Manufactured Since 1986

technologyreview TMS

than their suppliers could. But the desire to control inbound shipments isn’t just about money. “Retailers also want to use their preferred carriers to … ensure that they are working with the carriers that understand the retailer’s specific needs and requirements,” says study co-author Brian Gibson, a professor of supply chain management at Auburn University in Alabama. Furthermore, a retailer that operates a private fleet may have another motivation for wanting to take control of its inbound shipments: It may be able to reduce empty miles by picking up an inbound shipment from a vendor after delivering an outbound load in the same vicinity.

In order to decide who should control inbound freight, shippers first need to do an analysis. And a TMS gives them a tool to weigh the tradeoffs. For instance, Monica Wooden, chief executive officer of the TMS developer MercuryGate International Inc., reports that a number of her company’s retail clients, including Dillard’s, Bed Bath & Beyond, and Walmart.com, have recently used a TMS for evaluating inbound options.

How does a TMS help with such an
analysis? For starters, it can model
whether a proposed shift in control of
inbound transportation might allow a
buyer to obtain a lower rate on a specif-
ic lane. “A what-if analysis can deter-
mine what it will cost me on a per-unit
basis if I take on control of transporta-
tion of this product,” explains Derek
Gittoes, vice president, logistics product
strategy at Oracle, which offers a TMS.
“I can then compare that with the cur-
rent freight cost.”
TMS modeling can also help users
determine whether a buyer could tap
into its carrier network to coordinate
pickups with deliveries, either with an
existing for-hire trucker or with its pri-
vate fleet. When used this way, the TMS
can provide the visibility needed to
make better decisions regarding
inbound transportation expenditures,
says Chuck Fuerst, director of product
strategy at TMS provider HighJump
Software Inc.

Increasingly, that visibility is expanding beyond domestic boundaries. Historically, when companies have used a TMS to assess the cost implications of taking control of their inbound shipments, they have looked only at truck movements within the United States. But some are starting to use this type of software to examine inbound air or ocean shipments from overseas suppliers. “I expect to see more growth for doing this on the international side,” says Fabrizio Brasca, vice president of global logistics for JDA Software Inc., another TMS provider. “There’s a growing trend for larger retailers to look at this analysis from origin to ultimate destination.”

THE MATCH GAME

Because modeling requires time and resources, this type of analysis should not be undertaken lightly. Before getting started, a shipper should have at least some idea where savings opportunities are likely to be found, cautions Roy Ananny, a senior manager in the transportation practice of the consultant Chainalytics. If the shipper operates a private fleet, for example, the company might focus on identifying potential backhauls.

Alternatively, the buyer might want to look at how the vendor’s freight charges stack up against market rates. If a vendor includes a “freight allowance” on the bill, it’s fairly easy to tell whether that’s the case. A freight allowance is the amount the manufacturer will deduct from the bill should the buyer pick up the freight. By law, the freight allowance must reflect the seller’s actual cost for moving the goods. “The easiest way to justify a TMS modeling is if the freight allowances along specific lanes are [higher] than the market rate,” says Ananny.

Unfortunately, not every manufacturer breaks out the inbound transportation cost on the bill of sale. “If the vendor is covering the freight himself, he may not tell you his rate cost,” Ananny warns.