Supply Chain Optimization and Transport Management

Transportation ManagementBeing a logistics professional and achieving supply chain optimization has never been tougher. The pressures and demands have never been greater than they are today, and it doesn’t look as if they’re going to ease-up anytime soon. The goal of trying to keep costs as low as possible, while at the same time endeavoring to still deliver the best levels of service, can be draining, even on the most accomplished professionals.

In this article we are going to be taking a quick look at how you can balance low costs while maintaining high levels of service; achieving supply chain optimization in transport management in today’s demanding omni-channel environment.

The secret is to be able to think strategically while at the same time being able to exploit any tactical opportunities that arise. It’s the ultimate challenge for any company that has products to process through its supply chain.

There are in actual fact 5 basic factors that can help to bring about this success in transport management. They are the key to controlling costs, while at the same time taking complete ownership of the transportation process, all the while ensuring that the best levels of customer service are maintained. As far as supply chain optimization in transport management is concerned, this is the Holy Grail.

Facing up to the challenges

The global transport environment is now more complex than it has ever been. One of the best aids towards achieving supply chain optimization, as far as transportation is concerned, is to incorporate TMS (Transport Management Systems) in your supply chain software. This helps to automate transport management and deal with the various challenges including:

Cost control - It is crucially important to be fully aware of all your inbound and outbound costs. They can become quite substantial, so it’s important that they must never be taken for granted, or disregarded. Controlling transport costs at the same time as optimizing service levels is one of supply chain optimization’s biggest challenges.

Welcoming the omni-channel environment - Because of the nature of an omni-channel environment, optimizing service levels is made even more difficult. Depending on the nature of the industry you operate within, delivering to private addresses (same day and next day) must be mastered if businesses are to compete with the likes of Amazon and Wal-Mart. This must be built into TMS given the expanding presence of the omni-channel environment.

Optimizing collaboration – Control is simply not possible without effective collaboration. This collaboration is both internal and external.  It includes all parties in supply chain transportation including manufacturers, shipping companies, 3PLs and clients.

The Importance of visibility: Wherever a product is within the supply chain, it must be clearly visible. Whether it’s in the air, on the oceans, overland via TL or LTL, or in distribution warehouses; having a clear track on goods and precisely where they are is of paramount importance. Supply chain optimization across the transportation spectrum relies on total product visibility.

The 5 cornerstones of supply chain optimization in transportation

Supply Chain Station conducted a survey of top supply chain managers to find out what their cornerstones were for transportation supply chain optimization.

Managing costs 

Creating a database containing a matrix of up-to-date transport costs it vital. All sizes of consignments must be considered, as must all modes of transport. Once this type of matrix has been created, supply chain managers have all of the information they need to select the most cost efficient mode. A rating engine can then be incorporated into the software to automate the choice process. It is an important aid to supply chain optimization in transportation.

Drawing up Service Level Agreements (SLAs) and maintaining compliance

Once the transportation matrix is in place, the prices can then be used to formalize Service Level Agreements with the various transportation companies within the supply chain. This type of price contracting allows all parties to know where they stand and facilitates the use of a rating engine system. These types of SLA’s allow supply chain owners to predict transportation costs and ensure they are operating within budget.

Manipulating modes and loads

The ability to be able to manipulate modes and loads is crucial. It means that from time to time things like transport modes, performance rates and lane aggregation, must be reviewed. Supply chain managers then have the wherewithal to plan and execute transportation in the most economical way. According to our survey, after a while, employing this type of methodology, supply chain managers were able to confirm that their staff learned to trust the system and its recommendation. This is a key feature of achieving supply chain optimization in transportation.

Creating the optimal transportation plan

Creating an optimal transportation plan is the final part of the process towards achieving supply chain optimization in transportation. This, of course, has to do apply to both inbound and outbound shipments. This type of plan helps to nurture a “kaizen-type” continuous improvement philosophy. The plan will, of course, need to be periodically and regularly updated to reflect best practice. One of the advantages with using this sort of methodology is that it helps to create a proactive rather than reactive problem-solving philosophy.

Collating actual costs

Creating an operating model is one thing, but ensuring that the practice meets the theory is something else. It is therefore of paramount importance to ensure that all actual transportation costs as invoiced, are captured. They can then be compared to the forecast values for those particular modes and lanes. These costs can then be used to drive other analytics. It’s the final proof that supply chain optimization in transportation is working as it should. If performance is below optimization, this analysis can then be used as the tool to modify the practices according.


Does your company accurately capture true transport costs? If so what mechanism is in place to deal with the findings effectively? Have your say at the feedback section below.

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