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nels,” Johnson wrote in an analysis of
the results. “And if transportation pro-
curement isn’t closely tied to inventory
strategy, it’s hard to imagine how a com-
pany can ensure its inventory levels and
placement are where they would want
them to be.”
A DELICATE BALANCE
Coordinating transport procurement
activities, inventory placement, and
unpredictable omnichannel fulfillment is
a tricky proposition. As fulfilling “
each-es” becomes more commonplace, parcel
shipping has become the e-commerce
mode of choice. But parcel is expensive compared with less-than-truckload
(LTL) service, making it more important
than ever to consolidate shipments into
the more cost-efficient LTL loads where
possible but hard to do without aligning procurement and inventory control
processes.
With a procurement module embedded in a single-platform TMS that simultaneously manages multiple parcel carriers as well as other modes, businesses gain the visibility to see their entire
inventory in real time. This enables them
to commingle individual packages into
LTL or truckload consignments if the
opportunity arises. They would realize
sizable transportation savings through
such practices as “zone skipping,” where
parcels are aggregated and shipped to a
nearby distribution point for final delivery, instead of shipping single items from
origin to destination, according to several experts. Perhaps unsurprisingly given
the increased demand, LTL carriers are
rumored to be looking at expanding into
parcel services.
The problem, the experts said, is that
integrating parcel services into transpor-
tation management systems traditionally
geared toward freight has been the IT
equivalent of fitting a square peg into
a round hole. “The marriage of parcel
with traditional TMS systems has usu-
ally been an afterthought,” said Daniel
Vertachnik, chief sales officer of Kewill, a
Chelmsford, Mass.-based TMS provider
whose strengths in the parcel arena were
augmented in early May when it acquired
Holland, Mich.-based LeanLogistics, a
TMS provider on the freight side, for
$115 million. Vertachnik declined to
comment on the transaction.
Vikram Balasubramanian, senior vice
president, strategic product development for Cary, N.C.-based TMS provider MercuryGate International Inc.,
said parcel-centric systems typically lack
the capability to consolidate parcels into
larger shipments. Similarly, traditional TMS systems that effectively manage
LTL, truckload, and intermodal shipments have not been designed to provide
parcel consolidations, Balasubramanian
said.
“Identifying and executing savings
across a nationwide or global network is
difficult, if not impossible, by using one
or both types of these TMS platforms,”
he said.
Jim Hendrickson, marketing and
logistics professor at the Ohio State
University’s Fisher College of Business,
said it’s important that a transport procurement system be able to provide
buyers with a multitude of shipping
options to support end-to-end supply
chains domestically and internationally.
“But there isn’t an optimization software
model that cuts across freight and parcel,
and does it efficiently,” he said.
BETTER NEWS
On the positive side, as logistics technology relentlessly improves, the cost of
buying or leasing a procurement module
that can be integrated with a TMS, or an
entire TMS for that matter, has dropped
significantly. Vertachnik recalled that in
2005, the annualized cost of a transport procurement module alone could
be in the seven-figure range and could
only be justified by big shippers with an
equally big transport spend. Today, a
smaller shipper can manage procurement
in-house with cloud-based software for
about $100,000 a year, he said.
Vertachnik said today’s tools are more
intuitive, user-friendly, and aesthetically pleasing than ever before. However,
because of the changes in the way procurement will be used to support omni-channel fulfillment, there will be much
more emphasis, and time spent, on that
function than in the past, he added.
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