What Wholesale Distributors Look for in a Transportation Management Solution

February 14, 2012 by Mike Thornton

I recently read an article by James Cooke of DC Velocity magazine talking about what to look for in a transportation management solution (TMS).  Based on the distributors I talk to every week, his observations are on target when you look at shippers as a whole. Distributors, however, focus upon a narrower list of features than manufacturers.  Here is how I would categorize TMS features in three tiers based on additional input wholesale companies consistently tell me. 

Top Tier

Tracking and managing carrier contracts – When talking to distributors about transportation issues the difficulty of tracking carrier contracts is consistently top of mind. Carrier contracts are not all the same.  Each carrier offers their own combination of accessorial charges for labor, or special equipment.  And often these contracts are for only a short time, or for a specific lane.  The ability to keep track of all these charges and provide drill down capability for each contract as well as aggregate reporting features is key.

Freight settlements – Just last month I had an extensive phone conversation with a distributor about freight settlements.  The overarching theme of this conversation as that a shipment is not successful unless the invoices are matched to receiving documents, and once approved, paid according to the shipper’s established policies and all charges are allocated to the proper general ledger account.  (In the near future, TMS systems with superior integration capability will be able to calculate profitability as well.) In addition, invoices need to be audited for accuracy and also for internal metrics such as on-time deliveries and damage

Item visibility – Not only do distributors talk about features they require, but I have noticed that there are some transportation features that they no longer ask for. This is because the requirement and the solution have become main stream, and are therefore seldom mentioned.  This is the case with item visibility. For some time now, customers expect to be able to pinpoint the exact location of their orders at any given moment and to send alerts when there is a delay.

Second tier

Parcel shipping – There are many exceptions to this, but many distributors run their own delivery fleets and most of their customers are close by. The use of a van or a local courier service is a more practical way to handle emergency orders than the parcel carriers. This said in today’s market, a TMS that does not offer the ability to rate and route parcel shipments should be treated as a warning flag, and that vendor given a long and critical look.

International movements –  I put this in a second tier of features because most distributors are local business.  They may receive product from international sources, but they deliver to their local area and deliveries seldom cross international borders.  But like parcel shipping mentioned above a TMS that does not offer this feature is suspect.

Other Considerations

In addition to features that address the day-to-day requirement of getting product in, and customer orders out, there are companywide considerations when selecting a TMS.  I find these issues come up when distributors start talking about “lessons learned,” or “what we would do if we had to do it again.”

Business intelligence – Distributors of all sizes and in all industries mention to me how a TMS is a source of key data for their entire business.  Sorting through all this data will identify key information such as the impact of a new supplier on the profitability of a product line, as well as internal metrics such as on-time records of each carrier and shipping lane, rate structures, and damage history. This capability also will allow shippers to conduct “What If” analysis to determine the impact of a natural disaster or a man-made calamity such as a terrorist attack.

Ease of integration – I recently talked to a distributor who clearly saw that industry leading features and functions are important, but the ability to integrate with other systems is equally so. The ability to connect across the company helps breakdown intercompany barriers and allows real-time, actionable insight into bi-directional data flows such as changes to orders, shipping schedules and warehouse work schedules.  Integration also allows for rapid on-boarding of new carriers into the system and continuous visibility into activities such as tendering, invoicing and notifications.

Most technology vendor selection processes require a hard look at features and functions, but should not be the final word. You should also consider the financial health of the TMS vendor, their long term product roadmap and also meet with their technical and executive teams.  You can only become comfortable with a technology vendor if you allow them to get in front of you so make appointments with vendors who make your short list and make your own determination of how well they will fit with your company.

For more information on SAP TMS:

www.sap.com/transportation

http://consumergoods.edgl.com/2012-readers-choice/supply-chain-execution

Mike Thornton is solution manager with the Wholesale Distribution Industry Business Unit (IBU) at SAP.  He has deep experience in warehousing, inventory and logistics as well as ERP and mobility solutions. He was a supply chain practitioner for 17 years before moving across the aisle to the technology side of the business.  Mike can be reached at: mike.thornton@sap.com.

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