Implementing a TMS is great step towards improving your transportation performance and holds the potential for considerable transportation cost savings. So why should you consider changes to your transportation network design in addition to implementing a TMS?
First, let’s clarify just what transportation network design is. Network design optimizes your transportation network to achieve cost savings while maintaining acceptable service levels. It may involve adding or removing distribution centers, cross-docks or pooling locations. Network design changes can also involve a shift toward using a different mode, such as rail, or routinely combining LTL shipments into viable truckload shipments. It might even entail changing production locations for specific product lines -sometimes even to the extent of moving a production line!
Optimizing may be as simple as considering different “what-if” scenarios by building an Excel spreadsheet model. For example, you may capture inbound and outbound costs and use these along with simple distance calculations to consider an alternative or additional distribution location. Network design can also involve using a commercial software tool to build a robust model of the network and then exercising this model over a number of different “what-if” scenarios to identify the optimal cost/service trade-off. Most companies start their network design endeavors with Excel and grow into use of a commercial software tool as their needs and capabilities grow.
Network design changes can be costly and significant. Opening a new distribution center or cross-dock is a substantial change not to be taken lightly. But this type of change can often result in substantial cost savings beyond what a TMS implementation can yield. All transportation networks change over time – through organic or population growth, acquisitions, new product introductions and other changes. Oftentimes, operations continue in the same manner, even though the business has changed. Network design studies give you the opportunity to take a holistic view of the transportation network. Changes to the design of your network can yield 5-15% savings, depending on the amount of change and the amount of time that’s passed since the last network design study. A TMS system will yield cost savings on a daily basis as planning efficiency improves. An improved network design has the potential to make a step-wise change in transportation cost that can be realized in addition to daily planning efficiency.
Ms. Sara Curtis, principal at Peak 5 Supply Chain, has been a product manager, business unit director, consultant, trainer and subject matter expert for i2/JDA Supply Chain Strategist and LLamasoft Supply Chain Guru. Through this work, she has consulted with all types of supply chain entities, developing robust models & repeatable processes in supply chain & transportation network design.