Transportation Management Systems Meeting the Challenges and Obtaining Results

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1 Transportation Systems Transportation Systems January 2011

2 Transportation Systems Introduction/Background As businesses become increasingly focused on optimizing their supply chain operations, logistics organizations are continually forced to make critical decisions for creating a highly productive transportation management system. The efficiency with which a company runs its procurement and shipping operations can greatly impact their business bottom line so companies are assiduously searching for methods to improve their transportation practices. Business goals such as reducing costs and overhead, growing profit margins, controlling materials and inventory, and improving customer service can each be achieved through the implementation and efficient operation of transportation management solutions. The findings to a recent market research study conducted by Logistics magazine, on behalf of MercuryGate International, Inc., conveys that transportation management software (TMS) facilitates highly effective communications and information sharing among businesses and their shipping partners. This outcome is realized through better decision-making as it pertains to freight route planning, carrier selection, scheduling & tendering, quality control, regulations and guidelines compliance, reporting, auditing, and invoicing. The survey results highlighted in this brief are intended to offer insights into the freight transportation needs and concerns of companies with an annual transportation spend exceeding $5 million. We ll explore the challenges they face and how they are meeting those challenges. The research further focuses on the adoption of multi-modal transportation management systems (TMS) and the advantages shippers gain through its utilization. Summary of Research Findings u Mid and large market shippers expect to be investing significantly in their logistics operations during the next year. One-third (34%) plan to spend over $100 million on freight services and transportation equipment and solutions during this period while 42% will spend less than $25 million. The area in which the highest percentage (44%) of respondents plan to invest will be on transportation management software solutions implementations and upgrades. u Routing, shipping rates, load optimization, supplier & customer communications, and visibility into all phases of the shipping process are among the many areas in which companies are looking to improve. In addition to increasing efficiencies in these areas, shippers are further planning to set performance measurements and establish KPIs, and to effectively use data to improve upon their planning and decision-making. Interestingly, many companies have yet to automate operations that would accomplish these objectives. u Organizations are leveraging multi-modal TMS solutions to improve business-critical initiatives. Businesses contend that their TMS application enables better control over costs, improves logistics process efficiencies and allows for better customer service. Logistics MercuryGate Page 2

3 10,000-49,999 15% Avg. # of shipments monthly: 107,100 Transportation Systems Scope and of Freight Services Mid and large-market businesses tend to rely on a combination of shipping methods; on average, nearly three different transport modes are used. Most shipments are truckload/tl (77%) and less-than-truckload/ LTL (67%). Small parcel freight (33%) and ocean shipping (30%) are also commonly used methods. On average, these businesses are dispatching over 100,000 shipments monthly; slightly more than three-fourths of these shipments are domestic while one in four are international loads (22%). On average, roughly three-fourths of all freight shipments are managed by an in-house staff versus those loads being outsourced to a third-party provider. We are looking for a solution that helps us analyze market trends, specifies the availability of possible solutions and is suitable for handling my business volume. Logistics, Distribution, Operations ; Plastics & Rubber; Transportation Spend $5M $9.9M Nearly all of the businesses surveyed use contract carriers. While a small percentage rely solely on private fleets, many companies depend on both contract carriers as well as private fleet services for their shipping needs. To better achieve their freight transport objectives, these companies plan to spend, on average, nearly $140,000,000 on freight and shipping solutions and services during the next year. 5,000-9,999 # Shipments Per Month 1,000-4,999 12% 23% 50,000-99,999 9% 100, , ,000 Avg. # 9 monthly: 11% 107,100 10,000-49,999 15% of Freight Shipments 5,000-9,999 12% Avg. # of shipments monthly: 107,100 managed in house 72% of Freight Shipments managed in house 72% managed in house 72% Contract Carriers Type of Fleet Service Use 50% <1,000 21% of Freight Shipments Type of Fleet Service Use Private Fleet 4% Private Fleet 4% 1,000-4,999 23% handled using 3PL 28% handled using 3PL 28% handled using 3PL 28% Both 46% Spending Forecast On Freight Services In Next 12 Months $100M - $249.9M 15% $250M+ 19% Contract Carriers 50% Both 46% Implementing now/outsourcing, etc... Usa $50M - $99.9M 9% $25M - $49.9M 15% $5M - $9.9M 22% Private Fleet 4% Type of Fleet Service Use Now evaluating for adoption Plan to invest, upgrade current app Currently running $10M - $24.9M 20% Both 46% R upgr Average $ spend: $139,000,000 Median $ spend: $38,310,000 Contract Carriers 50% Criteria Con Logistics MercuryGate Page 3 Capabilities/Robustness

4 Median $ spend: $38,310,000 Transportation Systems Many will be investing in TMS solutions, logistics staffing and outsourcing services. Transportation Solutions On Which Companies Will Spend C ts 44% andled using 3PL 28% 33% 30% 13% 8% Transportation Software Logistics Staffing/ Personnel 3PL Services Fleet Equipment Other We are evaluating using a 3PL and their TMS and are providing them with the interface requirements which will allow them to handle it. Sr. Supply Chain ; Chemicals/Pharmaceuticals; Transportation Spend $100M - $249.9M Goals Looking to Attain through Transportation Operations Critical operational areas in which medium and large businesses are looking to improve center on achieving greater real-time visibility from shipment to settlement. Real-time information will further lead to optimized loads, better routing, carrier selection and rate checking, enhanced KPIs, more intelligent decision-making, Companies Allowing Visibility Into Their Supply Chain upgraded reporting capabilities and improved invoicing and payment procedures. oth 6% % of resp. Achieve visibility into shipment status 59% Establish KPIs 71% 55% Optimize/consolidate shipments 59% 55% Improve decision-making & planning/allow for what-if scenarios 54% Receive best rates available 52% More efficient route planning Give suppliers & scheduling visibility Enable customers visibility into planned orders into shipment tracking 51% Reporting capabilities (manifest maps, load sheets, etc.) 47% Enable freight payment/auditing analysis 43% Identify best shipping routes 40% Achieve accuracy of and proper documentation 37% Container/Shipment tracking 35% Optimize resources/fleet 35% Implement internet-based applications 29% Improve import/export operations 29% Reduce miles & CO2 emissions 29% Improve knowledge of customs & clearance issues 25% Attain regulations compliance 21% Enable staging bay planning, loading strategies, order picking efficiencies, etc. 20% Minimize line stoppages 13% I would like to see a TMS system which incorporates all of these traits: electronic communication with customers & carriers; carrier KPIs; dashboard format; integration with ERP or WMS; ensuring the best rate for each shipment; route optimization (consolidation, backhauls, pooling, etc); freight invoice audit and payment. Logistics, Distribution, Operations ; Furniture; Spend $10M $24.9M Logistics MercuryGate Page 4

5 Transportation Transportation Logistics Systems 3PL Software Staffing/ Personnel Services 13% Fleet Equipment 8% Other As already noted, the ability to monitor and manage key stages of the logistics operations in real-time significantly affects resource optimization, cost management and customer satisfaction. Consequently, a growing number of businesses allow shipping partners visibility into their supply chain operations to better understand shipment status, mitigate risks and delivery problems, facilitate greater communication, allow access to track and trace information, and improve efficiencies and quality control. Companies Allowing Visibility Into Their Supply Chain th % 59% 71% Give suppliers visibility into planned orders Enable customers visibility into shipment tracking Better visibility to the shipment from pick up to delivery would be best achieved through timely and complete EDI communication from the carrier network. Logistics, Distribution, Operations ; Computers & Electronics; $500M + Shipping Issues and Challenges Decisions relating to transportation planning, process efficiencies, selecting the optimal technology solutions and applications, and billing administration are among the many demanding issues that logistics operations managers face. Furthermore, the diversity of shipments and the complexities associated with procurement and shipping procedures requires information to guide precise decisions on transportation mode, routing rates and load planning. These considerations compel businesses to more closely examine their freight practices and, subsequently, target solutions to better manage their transportation operations. Logistics managers are additionally challenged to ensure that shipments are accurate and on-time, that costs and staffing are resourcefully managed, risks are minimized and that real-time visibility is attained to make possible functions such as trace-and-track as well as payment and invoicing status. We need greater online visibility of freight invoices and more connectivity between the payment company and the carriers. Logistics, Distribution, Operations ; Automotive & Transportation equipment; Spend $100M - $249.9M Logistics MercuryGate Page 5

6 Transportation Systems % of resp. Primary Challenge How companies will address challenge 27% Route optimization Use/implement a TMS solution. Greater systems integration. Better coordination with suppliers and customers. We are centralizing the planning and execution of our Inbound transportation through a TMS solution to provide more control and visibility of our freight collect shipments coming into our factories. Logistics, Distribution, Operations ; Consumer Products; Spend $50M $99.9M We re establishing valid rates for each opportunity, lane, mode and improved use of technology to identify transactional opportunities for optimization. Sr. Supply Chain ; Retail; Spend $500M + Use of a TMS system will provide visibility into scheduling loads. Collecting inbound origin information will be a critical start of improved routing. Logistics, Distribution, Operations ; Retail; Spend $100M $249.9M 18% Ensuring the best Adopt and upgrade technology solutions (GPS; CRM and ERP). Better advance planning. Bid out to more carriers and rate for each shipment better RFQ process. Improve rate comparison data. Outsource to a 3PL. Consolidate to one shipper. Benchmark and keep up-to-date with industry info. We will be implementing a TMS in 2011 to help with mode selection and accurate ratings. Logistics, Distribution, Operations ; Pharmaceuticals; Spend $25M $49.9M We are looking at a TMS that would get several quotes at one time rather than pulling them individually. Logistics, Distribution, Operations ; Air Filters; Spend $10M $24.9M 13% Electronic communication Evaluate software apps such as TMS, WMS, CRM. Greater collaboration with suppliers and customers. with customers & carriers Better integration of EDI system. Better track and trace information for customers. We are looking to establish a better system - software to connect with carrier and customers and to have real-time status of consignments. Logistics, Distribution, Operations ; Automotive Equipment; Spend $25M $49.9M 11% Track and trace Work more closely with carriers to gain better access to data. Use EDI. Install GPS systems and other tracking devices. We are looking for a TMS provider who has a program covering ocean shipments that is as robust as their domestic program. Logistics, Distribution, Operations ; Wholesale Trade; Spend $10M $24.9M 10% Integration with ERP Add software, middleware. Improve systems integration/connectivity. Implementing a WMS solution. or WMS We are making the investment to connect our WMS with our TMS. We already have it connected to our ERP purchase orders to manage the inbound. Sr. Supply Chain ; Computers & Electronics; Spend $100M $249.9M Our company has five divisions with five different ERPs. We are researching TMS providers to find a solution. Logistics, Distribution, Operations ; Fabricated Metals; Spend $100M $249.9M 7% Carrier KPIs Greater accountability, better training, generating better data and reporting capabilities. Implement software and management tools. 7% Freight invoice audit Outsource to a freight payment provider. and payment 2% Customer invoicing Evaluate new/improved TMS. Our particular system does not allow for certain KPI tracking, such as on time delivery, load tender rejections. Logistics, Distribution, Operations ; Healthcare; Spend $10M $24.9M We have several customers that are not up to speed with EFT and/or EDI billing. Implementation of a new TMS will assist us to cut carrier billing time and allow us to invoice our clients quicker. This will allow additional time to receive and process invoices from the clients to lessen the impact of outstanding invoices. Logistics, Distribution, Operations ; 3PL; Spend $250M $499.9M Logistics MercuryGate Page 6

7 Transportation Systems Freight Transportation Process Handling Interestingly, a low percentage of companies have automated these critical business tasks. Roughly one out of three have automated the majority of these processes. Invoicing and tracking are commonly automated functions but shipment consolidation is still handled manually by most. Of similar proportion, approximately one-third are still handling these procedures manually. Roughly four out of ten have yet to automate potentially labor-intensive tasks such as rating, load tendering and carrier management. Of the jobs still being done by hand, however, a few are earmarked to be automated. Most who now track shipments and invoice using manual procedures expect to automate these jobs in the near future. Nevertheless, the consequences for not automating business-critical procedures can be steep. Non-automated processes and information are apt to be disorganized which can result in tracking errors and shipping delays. Poor quality control can lead to partial load shipments, underutilized assets, and unproductive man hours or substandard productivity. Failures in these competencies can mean higher costs and wasted spending, missed opportunities and lost revenues, or dissatisfied customers. Automated Manual/ Moving to No plans to Paper-based automate automate Freight invoice audit & payment 44% 31% 18% 7% Shipment tracking 42% 29% 22% 7% Transportation data analysis 36% 36% 20% 8% Load tendering 35% 37% 13% 15% Carrier data management 34% 39% 17% 10% Finding carriers & best rates 33% 41% 16% 10% Shipment consolidation 30% 40% 16% 14% Use and Adoption of Transportation Software (TMS) Solutions To best address issues related to freight transportation, solutions such as multi-modal transportation management software (TMS) are being evaluated and adopted as they afford shippers a tool enabling improved transportation operations efficiencies. The perceived benefits of a TMS implementation are continually being recognized by logistics operations. While roughly one-third are already running a TMS solution, nearly one-half are moving to adopt or evaluate a TMS application within the next 12 months. Usage And Adoption Of TMS Solutions Implementing now/outsourcing, etc... Now evaluating for adoption Plan to invest, upgrade current app 4% 23% 21% Currently running 33% 19% Running/implementing/ upgrading/adopting: (net 81%) Not Running Criteria Considered Most Important When Evaluating TMS Solutions Logistics MercuryGate Page 7 Capabilities/Robustness 49% Control over processes 43%

8 19% Transportation Systems Running/implementing/ upgrading/adopting: (net 81%) Not Running pend Criteria Considered Most Important When Evaluating TMS Solutions Features that decision-makers most strongly consider when evaluating a multi-modal TMS solution for purchase include product capabilities, ability to better control processes, cost of the application and the return on Capabilities/Robustness 49% investment, and compatibility and integration with other ERP applications. Control over processes 43% 8% Criteria Considered ROI Most Important When Evaluating TMS Solutions Ease of implementation Capabilities/RobustnessEase of integration 33% Control over processes ROI Cost of entry 27% 38% 43% Mentioned by 25%+ Ease of implementation 37% Ease of integration 33% 38% 37% 49% Other Cost of entry 27% Mentioned by 25%+ Those claiming that ROI is a decisive factor in their evaluation estimate it will take about a year before they ll see any payback on their investment. There are some, however, who feel it may take longer, and even others who are uncertain of the timeline. 63% in TMS Deployment The research shows that the majority of companies are currently hosting their TMS application on-site. Alternatively, a growing percent of these shippers have opted to run a TMS solution as an internet-based, on-demand application 59% (27%). We Host Our TMS We Host Our TMS 59% Method Of TMS Deployment Method Of TMS Deployment Other 14% Using An SaaS TMS Solution 27% Using An SaaS TMS Solution 27% Corporate Managemen ty Business Benefits Attained Through TMS TMS solutions have produced numerous business-critical benefits. Through the use of technology, shippers Other and freight service providers claim they are 14% equipped to better manage costs, improve transportation process efficiencies, improve customer service, enable real-time visibility into their supply chain and achieve greater process efficiencies. % of resp. Controlling costs 69% Improve process efficiencies 64% Improve customer service 61% Provide real-time visibility into supply chain and transportation operations 54% Automate processes that were manual 53% Generate real-time data 48% Enable real-time visibility 47% Supply chain reliability 46% Improve asset utilization 37% Reduce labor costs 32% Becoming a more agile enterprise 32% Reduce on-hand inventory 23% Becoming green/environmentally responsible 23% Asset tracking 22% Reducing scrap and waste 12% Logistics MercuryGate Page 8

9 Transportation Systems Challenges In Implementing a TMS Solution ns 3% 49% TMS Implementation Challenges Cost 36% Hurdles such as system compatibility Compatibility and with integration, current ERP cooperation apps from IT, user resistance and efforts 35% to automate manual tasks, availability of Automating funding manual and procedures resources to implement and manage their 31% application are among the major challenges that Compatibility businesses with existing face platform when evaluating, implementing and operating 31% a TMS application. Having sufficient manpower 30% Lack of funding Challenges In Implementing Working with a ITTMS Solution Not understanding the benefits Getting users to use systemlack of corporate buy-in Questioning whether it Cost fits with business objectives Compatibility with current Determining ERP apps requirements/features Automating manual procedures Compatibility with existing platform Having sufficient manpower Lack of funding Working with IT Not understanding the benefits Lack of corporate buy-in Questioning whether it fits with business objectives Determining requirements/features Getting users to use system 23% 37% 22% 36% 21% 18% 35% 31% 31% In addition, the purchase decision process can also present challenges. Similar to other enterprise applications, the process for evaluating and implementing a TMS solution is likely be complex, prolonged and multifaceted. Managers representing diverse disciplines - corporate management, IT, supply chain management and transportation operations, etc. - each possess formative interests in a TMS implementation. 23% 22% 21% 18% 25% 25% 30% 25% 25% 37% Departments Involved In Decisions For TMS Solutions 63% 60% 52% 43% 33% 33% Corporate IT Supply Chain Transportation/ Fleet Operations Departments Involved In Decisions For TMS Solutions Warehousing, Distribution, Logistics Purchasing 63% 60% 52% Mentioned by 33%+ 43% 33% 33% S Solution Corporate I m currently leading a 5 member cross-functional team consisting of shipping, warehouse, procurement, customer service IT and operations. Supply Chain We re determining Transportation/ where we Warehousing, are and what we Purchasing need to put in place to further automate the process. We are reviewing our current Fleet Distribution, model and route/lanes, intermodal options, a stand-alone Operations Logistics warehousing option and 3PL services to include audit/payment. Our goal is to align our manufacturing plants with a North American traffic solution that is aligned with sales growth. Purchasing ; Paper; Spend $5M $9.9M Mentioned by 33%+ Logistics MercuryGate Page 9

10 Transportation Systems Methodology This research was conducted by Logistics magazine for MercuryGate International, Inc. This study was executed in November, 2010, and was administered over the Internet among subscribers to Logistics. Respondents were qualified for being involved in decisions regarding the evaluation and usage of transportation management software solutions for either their own company or for use in other businesses. The findings are based on information collected among 386 top logistics managers employed with medium and large market companies (defined as spending $5 million plus on transportation and freight solutions). Respondents are predominantly Logistics, Distribution or Operations (46%), Senior Supply Chain (27%), Executive (7%) and Transportation Specialists (9%). A range of companies are represented in the study: one-third (36%) work at businesses with revenues of $1 billion or more, one-third (36%) are at companies in the $100 million to $1 billion range, and 28% are with businesses reporting $100 million or less in revenues. The industries represented in the study include manufacturers of food and beverage, chemicals and pharmaceuticals, medical equipment and supplies, computers and electronics, automotive and transportation equipment, paper products, metals and textiles. Non-manufacturing businesses take into account 3PLs and transportation services as well as those in wholesale and retail trade. About MercuryGate International, Inc. MercuryGate delivers transportation solutions that allow shippers, carriers, freight brokers and third party logistics providers to plan and execute their freight movements, and analyze the performance of all involved. Customers optimize loads, rate and route loads, spot quote through both private and public bid boards, tender freight, track movements, audit carrier freight invoices, and send customer invoices anywhere in the world. Through a customizable workflow engine, MercuryGate customers are able to move the parcel, LTL (less than truckload), and truckload shipments as well as the more demanding multi-leg ocean, air, and rail movements. Customers may then analyze the information gathered as a result of freight moves to provide key performance indicators on their own processes as well as on carriers, suppliers, and all parties in the supply chain. For more information, visit Contact Information: (919) Logistics MercuryGate Page 10

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