2016 will be a defining year for the logistics industry, and transportation management practices must adapt to these changes. Some of these transportation management trends reflect real worries for the logistics industry. However, logistics providers and shippers are starting to understand how to best combat each of these problems through the application of transportation management technologies. But, first, so we are all on the same page, let’s define transportation and logistics management and how they compare. Then, we will discuss the top trends we see in transportation and logistics for 2016.
What is Transportation and Logistics Management?
According to Wikipedia, transportation is defined as the movement of people, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline and space. The field can be divided into infrastructure, vehicles and operations. Transport is important since it enables trade between people, which in turn establishes civilizations.
I find it an interesting point that transportation is an enabler of civilization, but this makes sense, as it enable the ability to trade and communicate.
According to the APICS dictionary, logistics is defined as 1) In an industrial context, the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities. 2) In a military sense (where it has greater usage), its meaning can also include the movement of personnel.
The Council of Supply Chain Management Professionals (CSCMP) defines logistics as the process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. This definition includes inbound, outbound, internal, and external movements.
After Asking “What is Transportation and Logistics Management?” Do you Think They are the Same Thing?
If you have read the above academic definitions, you will see that that after Asking “What is Transportation and Logistics Management” it seems rather easy to see the difference between the two. Transportation is the driver of logistics, but logistics is the race car driver in the seat of transportation. In fact, it’s easy to see from that sentence alone, the pure difference. Logistics requires planning, transportation is just the mode to execute the planning, when getting freight from point A to point B. Clearly, they are not the same thing, but transportation is just simply a part of logistics. When it comes to logistics, logistics executives must make further decisions beyond the mode of transportation to include:
- Importing and Exporting Regulations
- Freight Damage Claims
- Working & collaborating with other executives within the supply chain
- Managing vendors and partners
- Responsible for mitigating risk and mitigating expenditures
This is another reason it is vital within the logistics departments of both small and large businesses, that executives don’t see software, such as transportation management system software, as the end all be all of logistics management. TMS software is helpful, but as you can see, beyond transportation procurement and management via software, there are many things a logistics executive faces.
Often, outsourcing logistics to an expert provider, who can not only offer software, such as a transportation management system, but also integrated services to deal with accounting, claims, and building custom inbound freight programs will allow logistics executives to have more meaningful collaborations with others in the supply chain and company at large. Rather than focusing on all of the details and complexity of both transportation and logistics management, it allows the logistics executive to really focus on results and strategy for further optimization, as opposed to tactics. When you can focus on results, and have a trusted partner help you, often both hard and soft costs savings are realized at a much more efficient and quicker pace.
Top 6 Transportation and Logistics Management Trends for 2016
- Increasing Focus on Regulatory Oversight and Easing Trucker/ Shipper Responsibilities
As watchdog groups and public-perception have grown more powerful over how businesses operate, 2016 will be a year in which the focus of the logistics industry shifts towards increased oversight regulations and easier trucker or shipper responsibilities. At first, many of the regulatory measures, such as electronic logging devices (ELDs), can seem extensive and overreaching. These newer technologies and regulations are designed to enhance the overall workflow for truckers and shippers, which will improve safety and reduce the potential, negative impacts from incidents or accidents.
For example, a given trucker who drives beyond the hours of service in the ELD could incur stiff penalties and fines from oversight agencies. However, imagine what financial remuneration could be assessed on a given logistics provider if the trucker were to operate a vehicle beyond the limitations and cause a fatality. Ultimately, these new recommendations work to reduce the workload and risk in the logistics industry.
2. Outsourcing of Freight Data and Payment Management
Historically, the transportation management system of a given logistics provider has been the sole resource and method for data processing and managing the payment of all fees, duties, tariffs, and other charges for a shipment. As explained by John Schultz, many modern shippers are moving towards the outsourcing of big data analysis and increasing collaboration between different logistics providers to enhance payment management. Software-as-a-service (SaaS) systems help shippers meet the same criteria in terms of the data analysis, analytics, and payment management. Essentially, many of these processes can be reduced in cost by outsourcing them to a dedicated agency, who is fully responsible and knowledgeable about the needs of the respective organization, as well as the logistics industry.
Similarly, the method of determining the rate of shipping will change in 2016. Previously, rates were determined by freight classification. However, many of today’s shipments do not fit into this decades-old methodology, asserts Peter Moore. There is a call to move towards pricing by shipping density, otherwise known as “dimensional pricing.” As a result, modern logistics providers must determine a new way to assess the cost of shipping a product. For example, the shipper may review the shipments size, weight, length of transit, demand, and availability. In addition, the shipper must determine if all of the criteria can be met cost-effectively in-house or if an outsourced or collaborative effort must be taken that would still bring in a profit for both organizations.
3. Addressing the Truck Driver Shortage
Of all the transportation management trends, it is the Truck Driver Shortage we all must deal with either by technology solving the issue, or continuing to have a strategic approach to logistics. In a report by the American Truckers Association, the driver shortage is expected to grow in 2016. By 2024, the shortage may reach a height of 1750,00 missing drivers. Unfortunately, some research indicates the number of drivers needed could easily increase by nearly 1 million drivers in this time. Inherently, 2016 seems to be yet another year of dealing with the driver shortage. However, modern transportation management systems are looking to change this trend.
The truck driver shortage seems to stem from a conglomeration of too many shipments, not enough drivers, inefficient routes, decreased access and use of intermodal methods of transport, and the retiring of aging drivers. However, The IoT and increasing reliance and collaboration between logistics and shipping providers could potentially overcome the shortage as newer technologies, such as autonomous vehicles, increase in popularity and use. Essentially, the driver shortage seems to be only getting worse. Yet, a true analysis cannot possibly fathom how increases and advancements in technology will improve the truck driver shortage. As a result, the IoT will play a major factor in helping to fix the truck driver shortage.
4. Using the IoT to Fix Problems in Today’s Logistics Industry
The IoT is listed in many of our trends articles and it is no different as one of the leading forces of these transportation management trends. Today’s logistics industry and transportation management systems are considered marvels of efficiency. However, each system often works independently and as a cohesive measure of a given provider’s efficiency. Unfortunately, many of these systems do not consider how collaboration between providers could help to overcome the problems faced by the industry.
For example, the IoT has been used extensively in improving warehouse processes. Yet, the IoT can be extended into the electronic logging devices, work reports, hours of service, and nearly any other metric that can be tracked for drivers, as explained by Gary Wollenhaupt. Ultimately, the IoT could be a potential solution and increasing the response to the driver shortage, as well as ensuring the overall efficiency of the shipping provider as it relates to the FAST Act, other regulatory measures, changes in freight data management and payment processing, and the inter-management of transportation management systems.
5. Focus on Implementation of the FAST Act
In late 2015, President Obama signed the Fixing America’s Surface Transportation Act (FAST Act). As explained by the US Department of Transportation, the Fast Act provides a source of long-term funding for surface transportation in the US. This is one of the most important transportation management trends over the next decade. In other words, more capital will be available to improve highways, transit lines, and collaboration between regulatory agencies and shipping providers.
Transportation management systems will need to take these measures into consideration in the creation of new routes, prioritization of shipments, and rates. Ultimately, an increase in fund availability naturally lends itself to an increase in taxes across the spectrum of businesses and individuals, which poses major implications in determining rates and working with other shipping providers.
6. Increasing Collaboration and Inter-management of Transportation Management Trends
It seems like collaboration and data analysis seem to constantly crop up in logistics articles. However, if you take the time to understand how the collaboration in inter-management of transportation management systems truly affects the logistics industry, you will see a trend towards increasing profitability across the industry. At heart, the inter-management achievement of a TMS refers to the joint effort between multiple, competing parties to achieve a greater return on investment and lower shipping rates for the end user.
Although this could appear counterproductive, it helps to address the problems faced by the logistics industry.
For example, the increasing number of deliveries on single route may not be reasonably achievable by a given provider. However, another provider may use less-than-truckload shipments to meet this demand by outsourcing some services to other parties. This sounds like the definition of a third-party logistics provider, but this definition explains how third-party logistics providers will need to grow increasingly reliant on one another to achieve a strong return on investment for all parties involved.
Modern business is changing, and the logistics industry is no exception. In 2016, logistics providers will need to make serious changes to transportation management processes and standard operating procedure in order to survive the problems faced by the industry and these 6 transportation management trends.
From an increasing focus on meeting the demands of compliance and regulatory measures to executing IoT deployment m trucks as a means of improving and reducing the impact of the driver shortage, each of these trends will help refocus transportation management to the “big picture,” not the individual picture.
The author of this post is Steve Norall. http://cerasis.com