Increase organizational efficiency with sustainable transportation

Introduction

Your CEO has just set a very ambitious net-zero goal for the company, and you, as a supply chain manager or director, are now being asked to help your company achieve that goal. You recently upgraded your transportation management system (TMS) and are wondering how the new system can help you support the net-zero goals your CEO just set.

Does this sound familiar?

TMS has become critically important to companies of all sizes, particularly in a world with limited resources, changing customer expectations, and evolving government regulations. Organizations that have implemented TMS experience benefits throughout their supply chain such as: less trips; improved routing; improved pick, pack, and ship planning; decreased manual labor; and decreased emissions outputs. These and other efficiencies give companies that have implemented TMS an average return on investment between 8% and 17%, depending on TMS capabilities utilized.¹

Despite the growing visibility of net-zero targets, World Wide Fund for Nature found that only 20% of Financial Times Stock Exchange (FTSE) 100 enterprises had road maps allowing them to meet a net-zero target by 2050, despite 74% having targets.² Transportation, the category responsible for the majority of the emissions within North America, directly affects companies’ abilities to meet their goals. With a properly configured advanced TMS, companies can decrease costs and reporting, but also work toward achieving their sustainability goals. Advanced and standard TMS are both an improvement over manual transportation management but should be the minimum. True maturity within transportation management comes from not only finding the efficiencies but understanding the far-reaching consequences of the improvements.

Maturing from basic to advanced TMS

Basic TMS capabilities are an important foundation for visibility into transportation sourcing, procurement, and execution across shipping modes. For companies with lower transportation complexity (i.e., those with locally managed, siloed transportation needs), basic processes within TMS can still provide benefits. However, as a result of manual processes, efficiencies are missed. For companies with more advanced transportation networks, foundational capabilities should be implemented, but they will need to be upgraded to provide the maximum benefit.

The upgrades required for advanced TMS capabilities center on automation and detailed visibility into the full network. This visibility can be achieved through technologies such as a cloud-based system, which more than 80% of supply chain leaders expect their organization to use within the next one to two years, both within and outside of TMS.³ The potential within a TMS is expansive: optimized freight, improved routes, enhanced labor, and data visualization within the system, or other business intelligence tools. These and other TMS capabilities are integral technology in order to compete within the market and meet customers’ ever-changing expectations. Every company does not need advanced TMS capabilities, but every company can benefit from their use.

Not only should companies be creating efficiencies by utilizing their TMS, but they should also be tracking the resulting improvements. Newfound TMS-specific efficiencies can be applied to a variety of organizational goals, including sustainability and net-zero emissions, a top priority for many companies. An effective transportation management system can optimize an organization’s supply chain by providing visibility and transparency into all areas of transportation. Upstream, this can include planning and forecasting network needs, optimizing shipment plans, and managing sourcing and procurement of carriers. When configured correctly, these and other measures cut costs by creating more accurate, cost-efficient contracts with carriers, thus avoiding unnecessary fees with contracted carriers and excessive spot market needs. By understanding network shipping needs and volumes earlier, TMS can also assist with determining appropriate modes for transportation (e.g., shifting from truck to rail), saving costs, and reducing emissions without sacrificing service levels.

While upstream capabilities increase planning potential, downstream capabilities increase ability to execute in a cost-efficient and timely manner. The system can choose transportation modes; book and tender loads; plan routes; optimize freight; and invoice and settle with brokers and carriers. The dynamic nature of transportation combined with customer needs requires the TMS to continuously react and may include the decision to outsource the movement of goods to a third-party logistics carrier, even in one-off cases for a company that typically uses its own fleet.

Above all, the most important piece an advanced TMS provides is strong data tracking and analysis, which can be used to further understand a company’s transportation needs. Dashboards, alerts, and other analysis from strictly governed TMS data can provide employees from C-suite down to entry level with the complexities of the current and future state. The stronger the understanding of the needs of the enterprise, the more effective steps can be taken to address expected and unexpected occurrences in the transportation supply chain.

While not commonly implemented, advanced TMS can also connect with other systems to create a fully integrated network, providing visibility from purchase order to point of sale. Pairing a TMS with marine tracking capability combines inland planning capabilities with port-to-port visibility, furthering the ability for a company to forecast its transportation needs, supply customers in a timely manner, and understand impacts of the end-to-end supply chain, from total costs to greenhouse gas (GHG) emissions. Leaders in the supply chain space are in the process of creating this “control tower” view of their network and gaining significant benefit from the visibility it offers.

Driving sustainability with TMS

Initiatives designed specifically to address sustainability are important and necessary. However, these are not the only initiatives that are important to meeting sustainability goals. If tracked properly, initiatives focused on cost savings or efficiencies can also count toward net-zero emissions goals. Accurate, efficient tracking is critical—if tracking is heavily manual or relies on significant assumptions, the likelihood of an accurate, usable output decreases. An advanced TMS can supply data, but additional calculations outside the TMS are likely required to understand the full benefits within a sustainability context. That doesn’t make the benefits any less important; instead, it allows the company to take advantage of the sustainability strides they’ve already made, regardless of the original intent of the enhancements.

Sustainability improvements as a result of TMS can be placed into two categories: those that are easy to track within or consider throughout the system, and those that require outside calculations to fully understand the implications of the efficiencies created. Easily tracked improvements, such as decreased miles, increased weight/cube shipments, or decrease in deadhead miles, will offer insight into sustainability effects of the system. Mode shifts to reduce emissions and sustainable carrier prioritization can also be considered within the TMS. This category of easily tracked and applied improvements will often affect bottom-line savings and contributions to the net-zero goals of the company and is important to achieving both goals.

Sustainability improvements requiring calculation to determine impact currently cannot be fully aggregated within current TMS applications. The systems require outside modifications or bolt-on programs to perform the calculations, which should be based on industry agreed-upon standards (i.e., GLEC Framework) for calculating and reporting emissions. Once configured, the metric calculators will require little to no additional work on the part of logistics professionals. The metrics, such as GHG emissions reduced as a result of better routing, can be calculated, tracked, and shared with sustainability teams internally and externally, contributing gains toward a company’s net-zero goals with minimal monetary or time investment. Without the TMS bolt-on programs, it is possible for organizations to calculate the metrics alone; however, it is a manual-intensive effort, and the resulting calculations are only as good as the data provided by suppliers and carriers. Leveraging a TMS can help automate much of the data capture and cleansing efforts, ensuring higher data fidelity, and fast-tracking the reporting process.

Organizations with leading sustainability practices also use emissions (calculated through miles traveled, shipment weights, etc.) as one of several decision variables when utilizing a TMS to plan and execute a transportation plan, in addition to traditional variables of cost and service level. The consideration of emissions may require significant upfront efforts to ensure accurate data entry and alignment with respect to prioritization of sustainability variables; however, upon alignment, a TMS could optimize as easily as around the traditional variables of cost and required service levels.

Conclusion

As net-zero emissions goals become a top priority for companies and consumers, the ability to make simple improvements with tools already in place is critical. Advanced TMS is already a requirement in order to stay competitive in today’s marketplace, plus emissions tracking and decision-making capabilities, does just that: increases efficiency and works toward making the world a cleaner, more sustainable place.

Endnotes:

¹ Brock Johns and Oscar Sanchez Duran, How to calculate and measure ROI for a transportation management system, Gartner, November 2021.
² World Wide Fund for Nature, Turning blue chips green: A review of FTSE100 net zero commitments, October 2021.
³ MHI and Deloitte, The responsible supply chain: Transparency, sustainability, and the case for business, 2023.

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