DC Velocity - March 2013

opportunities to pair headhaul and backhaul trips—a move that would likely allow them to negotiate better rates. To determine whether such opportunities are available, Ananny says, shippers can pull data from their purchase order system and feed it to the TMS as if it were an instruction to set up a shipment. If the system indicates, for instance, that the product associated with a particular purchase order will be available tomorrow afternoon on the supplier’s dock, the buyer could pick it up with the same vehicle used to make a delivery to a nearby location earlier in the day. “Both freight requirements must come together,” he says.

GOOD IN THEORY …

All of this is good in theory, but it may be hard to achieve in practice, even with help from a TMS. The coordination of outbound and inbound transportation can be complicated and expensive. Furthermore, logistics managers have to temper the simulation’s results with their own assessment of the vendor’s ability to make good on its scheduling commitments.

“In real life, as a shipper, you don’t have a lot of control over the vendor’s dock facilities,” Ananny points out. If a vendor can’t meet its commitments, it could throw off plans to pick up and deliver multiple shipments on a single run. “The vendor says, ‘Come here at 10 a.m.,’ but [sup-pose] there’s an unforeseen circumstance and you don’t get loaded until 2 p.m. The second pickup is in jeopardy because that vendor doesn’t stay open long enough to accommodate the delay,” he says. Even if the TMS suggests multiple pickups are possible, in reality, the success rate will be less than 100 percent, he adds.

And there’s another potential obstacle: Suppliers may be
unwilling to renegotiate the terms of sale to accommodate
a buyer that wants to take control of its inbound moves.
“The vendors may not be willing to change the way they do
business with you,” Ananny says. “The vendors may say,
‘You can pick up the freight, but we’re not going to change
our price.’”
Indeed, many suppliers are resistant to handing over
inbound control because they, too, want high shipment
volumes to use as leverage in carrier negotiations.
“Suppliers who also have scale benefits resist giving up a
portion of their scale to select customers simply because it
would de-scale their network,” explains Kumar
Venkataraman, a partner in the consumer industries and
retail practice at the consulting firm A. T. Kearney.

The takeaway: Although a transportation management system can be valuable in helping shippers identify potential benefits of controlling inbound transportation, logistics managers should conduct any modeling exercise with their eyes wide open. “TMS modeling can play a role in quantifying the value as long as people doing the modeling are aware of the things that can go wrong,” Ananny says. ;

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