Transportation management strategy - Fundamental components for achieving success

Optimize your supply chain by leveraging strategic transportation planning and advanced technology. 

Modern supply chain leaders need to juggle countless responsibilities, starting from cost optimization to on-time delivery to profitability. Your transportation management plan discreetly takes the front stage among the turbulence and is important for your success. Unbelievably, almost 10% of your total revenue can be swallowed by transportation expenses. That's such a sizable portion! Furthermore, the global transportation management system market size was evaluated at USD 13.61 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 17.4% from 2024 to 2030. These figures present a convincing narrative whereby effective transportation management is not only a smart move but also a necessary action. 

But it goes beyond mere numbers. It's about making each consumer satisfied every single time. In today's competitive market, where customer expectations are sky-high, your hidden weapon could be seamless transportation planning. According to studies of organizations with high-performing supply chains, 79% say their sales growth exceeds the industry average. That is evidence of the strength of well-oiled logistics. 

But how do we achieve this? 

In this article, we'll discuss the fundamental elements of a winning transportation management strategy. We'll go right into the nitty-gritty of freight procurement, transportation planning, flawless transportation execution, and exhaustive freight audits and payments. We will learn how to use cutting-edge technology and best practices to fine-tune your supply chain operations and keep pace with the competition. Let's get started from the basics.

What is transportation management?

Transportation management is the planning, implementation, and optimization of the actual physical movement of commodities across several modes, such as air, train, road, and ocean. It manages end-to-end transportation operations or handles the whole procure-to-pay life cycle of transportation to enable the inbound and outbound transit of commodities over the supply chain. It guarantees the effective delivery of products while balancing cost, emissions, and service quality. 

Transportation management goes beyond simple product movement from Point A to Point B. It involves combining data analytics, real-time visibility, and automation to handle supply chain complexity and keep your business agile and competitive.

Importance of a transportation management strategy

You risk inefficiencies, delays, and unhappy customers without a planned approach. On the other hand, with better on-time delivery rates and streamlined transportation policies, you save significant logistics expenses. When supported by a robust transportation management system, your transportation management strategy offers several benefits as follows:

• Improved visibility: AI/ML-based data-driven decisions and strategies create a single source of truth for all users and enable your business to achieve shorter lead times, faster delivery, and enhanced customer experiences.
• Cost control: The right transportation management strategy reduces empty miles, maximizes freight capacity, and pays only for services performed, therefore automating manual tasks and increasing cost efficiencies. In this regard, consolidating shipments and choosing the best transportation method help you further lower fuel expenditures.
• Boost customer satisfaction: With an effective strategy, you stand tall on accurate delivery schedules, real-time freight visibility, and minimized delivery delays through exact route planning. That aids in customer satisfaction.
• Data-driven decisions: A robust transportation management strategy is backed by comprehensive data analytics and insights to optimize freight procurement and carrier management decisions while also simplifying transportation operations.

Four essential components of an effective transportation management strategy 

Creating a robust freight procurement strategy takes years of experience. However, focusing on the following key components during the initial phase can easily give you a competitive advantage. 

1. Freight procurement: Freight procurement is the strategic acquisition of transportation services from carriers and logistics providers to move products efficiently and cheaply. It's vital because it provides timely and cost-effective transportation, affecting supply chain performance and profitability. First and foremost, focus on selecting the right carriers and negotiating contracts to guarantee dependability and cost. End-to-end Transportation Management Systems (TMS) automate bidding, evaluate carrier performance, and optimize shipment planning and execution for freight procurement. Imagine a retailer shipping plenty of holiday products. A TMS lets the organization automate bidding to select the cheapest and most reliable carriers. The TMS evaluates proposals on cost, delivery time, and carrier reliability. This automation saves time and gets the organization the greatest shipping rates, resulting in cost savings and timely deliveries. 

2. Transportation planning: The goal of transportation planning is to effectively and economically transport commodities from one place to another while ensuring on-time delivery. A well-planned transportation system has a direct impact on supply chain efficiency, cost savings, and consumer satisfaction, making it an essential factor. Transportation management systems (TMS) offer load planning, and route optimization capabilities, which greatly aid transportation planning. Imagine a manufacturing company that has to ship its items to different stores. On-time product delivery to stores at affordable transportation costs is possible with the help of a TMS that optimizes delivery routes to save fuel costs and trip time. 

3. Transportation execution: The term "transportation execution" refers to the steps used to manage and coordinate the actual movement of commodities from one place to another. Transportation management demands precision in shipment tracking, carrier coordination, and exception handling. A robust transportation management system (TMS), integrated with real-time visibility, ensures seamless monitoring of goods at every stage. This approach eliminates transit disruptions, driving efficiency and operational excellence. For example, picture a store that has to ship items to clients in different parts of the world. To improve the consumer experience, retailers can use TMS to schedule shipments, monitor delivery statuses in real-time, and connect with carriers. This ensures that products arrive on time and in good condition.

4. Freight audit and payment: The purpose of a freight audit and payment is to confirm the correctness of freight bills and to pay carriers on time. As per the American Journal of Transportation, approximately one quarter (25%) of freight bills have some sort of mistake, leading companies to overspend by 13% per year. By automating invoice matching, discrepancy identification, and payment approvals, a powerful Transportation Management System (TMS) may simplify this procedure. Implement automated freight audit and payment (FAP) systems to guarantee accuracy, spot differences, and quickening of payment cycles.  By utilizing a TMS, companies can streamline the process of matching carrier invoices with shipment records, swiftly detect overcharges, and expeditiously approve payments—all while minimizing errors and saving time.

Addressing key challenges in transportation management strategy implementation 

Developing a robust freight sourcing strategy requires strategic focus and expertise. In this regard, prioritizing the following key components ensures a streamlined approach that delivers a competitive edge. 

• Conduct market analysis: Examine your transportation network to find underperforming carriers, expensive routes, or inefficiencies. Build your strategy based on this information. TMS can perform this activity efficiently and quickly, providing a deep understanding of the market.
• Understand customer demands: Research delivery speed, accuracy, and flexibility preferences of your clients. Unbelievably, 84% of customers won't come back following a bad delivery experience. Understanding modern customer needs, such as quick delivery without any error, updated delivery status etc can refine your approach.
• Optimize transportation modes and routes: Combining several modes of transportation, like rail, road, ocean, and air, helps to optimize routes and lower emissions and expenses. By evaluating data and offering the most efficient and cost-effective solutions for transporting goods, a TMS optimizes transportation modes and routes.
• Carrier selection and management: Crucially, carrier selection and management should be based on performance criteria, including on-time delivery and cost-efficiency. Developing solid ties with important carriers can improve the dependability and quality of services. Additionally, By analyzing performance metrics and cost-effectiveness, a TMS helps with carrier selection and management, making sure the best choices are made for reliable and efficient shipment.
• Demand planning and forecasting: Plan better by leveraging advanced forecasting technologies that help you predict transportation demand accurately. This enables you to allocate transportation resources effectively, avoiding underuse or overextension.
• Leverage advanced data analytics: Take advantage of advanced and predictive analytics to gain real-time insights and minimize risks. TMS tools like Pando's analytics engine can help you make smarter, data-driven decisions.
• Implementing lean logistics principles: Adopt lean logistics principles to reduce waste and improve efficiency in your operations. Keep refining your transportation management plan with continuous improvement to ensure your processes remain optimized.

Role of technology in modern transportation management 

The field of logistics is changing massively due to the digital revolution. 

Did you guys know that, according to a McKinsey report, companies that jumped early into AI-enabled supply chain management have slashed their logistical costs by a whopping 15 percent? And that’s not all—they’ve also cut down inventory levels by 35 percent and boosted service levels by 65 percent compared to their less tech-savvy competitors. 

Did you know that, according to a McKinsey report, early adopters of AI-enabled supply chain management have been able to reduce logistical costs by 15 percent, inventory levels by 35 percent, and service levels by 65 percent, all relative to slower-moving competitors? Blockchain, artificial intelligence (AI), and machine learning (ML), among other advanced technologies, improve visibility and decision-making capacity. Let's see how AI and machine learning, Blockchain, and cloud platforms are making this possible. 

• AI and ML: With the help of AI-driven data analytics, companies can drive better freight procurement strategies, predict possible challenges, perform route optimization and save extra expenses by performing freight audits and payments. Modern Prediction analytics made possible by artificial intelligence and machine learning lets businesses proactively handle possible interruptions.
• Blockchain: By providing safe and transparent transaction records, blockchain technology completely transforms transportation management. A tamper-proof ledger records every transaction or modification in the supply chain, improving traceability and lowering the risk of fraud. This transparency improves accountability and confidence in logistics operations by giving all parties involved (shippers, carriers, etc.) a consistent and trustworthy picture of the supply chain's condition.
• Cloud-based platforms: By facilitating seamless communication among stakeholders and providing real-time data access, cloud-based solutions are essential in modern transportation management. More effective and coordinated operations are made possible by these platforms' integration of diverse logistical tasks, such as cargo tracking, route planning, and carrier selection. With the help of cloud computing, companies can streamline their logistical operations, adapt rapidly to new circumstances, and make cost- and efficiency-saving data-driven decisions. Pando and other cloud-based platforms help to enable effective process automation, real-time tracking, and smooth cooperation. 

Speaking of Pando, it’s a modern unified TMS platform that’s designed around these advanced technologies. With AI co-pilots, it’s not just about managing transportation; it’s about automating it to save costs—think 12% savings on freight costs. 

Overcoming Challenges in Implementation 

Using transportation presents certain difficulties. Common obstacles consist of: 

• Integration issues: Inefficiencies and disjointed decision-making processes result from many companies' struggles with data consolidation from several platforms. This problem can be solved with the help of Pando's Advanced Transportation Management System (TMS), which integrates seamlessly with your current software and ERP systems. Through this integration, all pertinent data is consolidated and made accessible through intuitive dashboards.
• Resistance to change: It is essential to have effective change management in place since people tend to be resistant to new procedures or technologies and want to stick to what they know. We can overcome this reluctance by implementing thorough training programs that will educate stakeholders with the knowledge and skills they need to confidently embrace the changes. It is also critical to communicate the changes, their advantages, and the implementation process clearly and consistently so that everyone is on the same page.
• Data quality: To ensure a successful deployment, it is necessary to ensure that the data is of good quality. Poor data can lead to severe issues post go-live. To get around this problem, you need to set up solid procedures for validating data and clean and update your data sources often. Reliable analysis and decisions rely on accurate and consistent data, which can be achieved through the use of automated data quality techniques.
• Stakeholder buy-in: For an implementation to be successful, it is crucial to have the support of key stakeholders. Aligning the project with stakeholders' interests and company goals is essential, but so is effectively communicating the project's value and benefits. Involve stakeholders in decision-making and engage them early on in the planning process to gain their trust and commitment.
• Customization needs: Customizing the system to meet unique business objectives can be difficult. Collaborate closely with consumers to learn about their specific wants and requirements. Make sure the solution is well-tailored and satisfies all user expectations by using agile development approaches that enable iterative testing and feedback.

The future of transportation management 

It's an exciting time in the transportation management industry! Thanks to some groundbreaking tech, we're on the cusp of some pretty big changes. Imagine having machines that learn on the job and AI to pick the best routes. And with predictive analytics, we'll start making smarter decisions before problems even arise. Plus, IoT technology will give us a live peek into how our supply chains are doing. 

Agentic AI, the futuristic model of artificial intelligence, is expected to be the next revolution in transportation management by enabling autonomous decision-making, dynamic route optimization, and real-time fleet coordination. Though it is in a nascent stage, it will surely enhance efficiency, reduce costs, and improve customer satisfaction with the integration of IoT and autonomous vehicles. Agentic AI will drive sustainable, future-ready logistics operations, faster deliveries, lower emissions, and a seamless transportation ecosystem. 

Another technology that will uncover the blind spots is Ambient invisible intelligence. Allows for low-cost, real-time tracking and sensing of items, which increases visibility and efficiency. It also opens the door to unforgeable provenance and new ways for objects to tell their identity, past, and properties. 

And there's more on the way! Blockchain is going to make logistics more transparent and secure. As for deliveries, get ready for drones and self-driving cars to take care of those tricky last-mile jobs. Also, with a stronger focus on green practices, we'll see more electric and alternative fuel vehicles, helping cut down on carbon emissions. 

With all these advancements working together, we’re looking at a future where managing transportation is not only more efficient and cost-effective but also a lot kinder to our planet. 

Wrapping up 

Strategizing an effective transportation management plan is necessary for success in the competitive market. In this regard, Pando provides access to innovative solutions that simplify freight purchases, improve planning, and automate freight audits. 

Are you ready to adopt an all-new advanced transportation management system or wish to upgrade your existing one? Discover Pando's products and review client success stories. Learn how top companies have produced amazing outcomes. Book a free demo today.