Logistics Process Improvement and Transportation Management

Introduction to Logistics and Process Improvement

Companies clearly recognize that these are highly competitive times. With the rapid rate of change, continuous technological advances, and the world becoming increasingly interconnected, only the most adaptive organizations will succeed. That is why leading companies rely on systematic methods for enhancing their logistics planning. Transportation, which represents a major cost for most companies, is one area that can be streamlined and significantly improved — and one of the most effective ways to achieve that is through process improvement.

Process improvement simply means making things better proactively — acting in a preventative mode rather than reacting when a crisis arises. It requires examining the various steps involved in an activity and identifying how each can be enhanced. When engaging in true process improvement, individuals seek to understand how a process operates and use that knowledge to reduce variation, remove activities that contribute little or no value to the product or service, and improve customer satisfaction. A team examines all of the factors affecting the process: the materials used, the methods and machines employed to transform those materials into a product or service, and the people who perform the work.

Although process improvement was first applied in manufacturing, it has since proven effective in any department of an organization that follows an established operational format. When everyone involved works together, they can collaboratively focus on eliminating significant losses of money, labor hours, materials, time, and opportunity. The ideal outcome is that jobs can be done cheaper, faster, and more easily.

Transportation Excellence and the Role of TMS

In his article "Achieving Transportation Excellence," Dan Gilmore discusses an approach that can be used to improve processes in transportation. Many organizations, Gilmore explains, are recognizing that transportation and logistics excellence is a key enabler of an outstanding supply chain. It is therefore necessary to find ways to deliver high ROI, rapid payback, and — most importantly — a foundation for all integrated supply chain management initiatives. The opportunity lies in reducing sizeable transportation costs, which can range between 3% and 7% of total sales and add millions of dollars to the bottom line. In process improvement and Six Sigma terminology: "Transportation provides the richest, lowest-hanging fruit of any potential area of supply chain improvement to quickly drive out costs and achieve improved operational performance." In other words, transportation is one of the areas most readily improved with the least expenditure of resources.

The Transportation Management System (TMS), which Gilmore describes, is a tool for determining the most efficient and cost-effective way to move products from one point to another. TMS serves a number of different functions and roles. Properly applied, a TMS can provide support in areas such as reverse logistics, live reporting, EDI, auditing, multi-location and multi-carrier shipment management, consolidations, real-time tracking and tracing, carrier selection, barcode scanning, process automation, and security measures.

Gilmore notes that TMS automation is especially valuable for process improvement because most organizations can significantly lower or redeploy current transportation personnel and reduce overhead, in part by automating manual tasks. This results in considerably enhanced productivity gains for transportation staff. Many organizations can also reduce overhead by centralizing transportation functions at a network level, rather than maintaining the high cost of transportation staff at each individual shipping point. Companies implementing these network "load control centers" typically experience substantial savings in overhead and total freight costs.