The CSCMP’s 2013 State of Logistics Report tells us something most transportation executives already know: transportation costs are increasing. In fact, they’re currently up more than 3% over 2012 numbers, reaching $836 billion or 5.4% of GDP. This is why it’s no surprise that TMS adoption continues to increase with more than 37% of large companies already using a TMS up from 16% in 2012 according to Logistics Management magazine’s recent software users study. They also reported 50% were planning to use a TMS in the near future and projected to grow at a compounded rate of 6.8% through 2015.
With the necessity of TMS as the backdrop, we’re offering our outlook on the coming New Year and the top 3 business challenges a TMS will help transportation departments to overcome in 2014.
Reason – 3 Rising Costs for Transportation
Without a TMS, your organization won’t have sufficient visibility into spend and, perhaps more importantly, the dynamics driving inefficient rating, routing and tendering. Selecting acceptable modes lanes, rates and loading strategies using “tribal” or anecdotal processes is no longer sufficient if the goal is to maximize every penny spent on transportation. Leveraging a multimodal (truckload, LTL/consolidation, rail, intermodal) TMS software platform that can manage a combination irregular route common carriers, owner operators and private fleets provides shippers with a distinct advantage in the marketplace and delivers the visibility to not only optimize the network, but also to take advantage of the available capacity.
2014 will almost certainly see a continued growth in the utilization of optimization tools leveraging powerful algorithms to reduce total shipments, miles, trucks used, etc. In addition, leading TMS solutions provide automated and incredibly accurate freight payment and audit capabilities which add additional savings to the bottom line.
Reason 2 – Regulatory Requirements
Companies are already grappling with the consequences of 2013’s significant change to hours of service rules. The impact on driver scheduling, delivery/pick-up appointment settings and other concerns are substantial and add an increased risk to shippers not in compliance. A TMS is specifically well-suited to codifying not only business rules, but enforcement of HOS standards across the entire transportation department helping organizations avoid costly fines while still maintaining a high degree of on-time pickup/delivery for customers.
Another issue for 2014 is the impact of the Affordable Care Act (or Obamacare) and the increase it is likely to have on insurance costs for hourly workers. Increases in worker hiring and retention costs add to overall labor expenses. A TMS can make marked improvements to labor efficiencies by automating a significant portion of the work currently performed manually by those without a TMS solution. TMS could allow companies to make the most of the available labor force within their organizations by reducing the workload and allowing employees to manage exceptions, etc.
Reason 1 – Capacity, Capacity, Capacity
HOS regulations and corresponding efficiency losses will continue to create more of a capacity impact in the industry in 2014. First, more regulations piled on drivers will further exacerbate the shortage of drivers willing to run long haul. This will, in turn, reduce the number of available trucks and motivate asset based carriers to concentrate on regional operations. In addition, the recent change to bonding fees charged to brokers has priced more than 8000 smaller brokers out of the market. While this does not in itself reduce the volume of equipment available at any given time, it does reduce the pool of competition for rates. Having a TMS in place will protect a shipper’s ability to overcome capacity issues without being forced to necessarily pay more per load.
What do you see as the primary challenges facing shippers in 2014? How will you leverage TMS to overcome them?