Importance of Transportation in Supply

Chain Excellence
Transportation is the least complex, yet most critical component of the supply chain. It
creates value by ensuring product is available when and where it is requested by
customers – as quickly, cost effectively, and consistently as possible, from point of
origin to point of consumption. And if that isn’t enough to create a bias, maybe these
well-known facts will:
* Transportation costs represent the biggest slice of the supply chain cost pie (nearly 60
percent of every supply chain dollar is spent on transportation), and transportation costs
can represent 3-12 percent of revenue or more depending on the product type and
industry.
* The important role of a transportation manager today. It is very important for
transportation managers to know to how to get involved further upstream in the supply
chain (think cost avoidance of doing things sub-optimally) and downstream (think cost
reduction by driving continuous improvement into processes/decisions made upstream)
to ensure transportation delivers supply chain excellence for their organizations.

Given that transportation managers are responsible for enabling excellence in transport

operations, how should they proceed and get started? And how do they achieve the end
state of having a transportation function that is fully assimilated and contributing to an
overall synchronized supply chain?

To begin with, transportation managers need to personally understand where and how

transportation impacts supply chain performance, and they need to educate their
supply chain peers on what impacts transportation the most (remember those cost
statistics cited earlier). So how does a transportation manager fulfill his/her role as an
enabler of excellence to the fullest? Consider these things:

1-The transportation manager’s role in a retailer or wholesaler in designing an Omni-

channel strategy? Is it more than providing estimated transportation rates by mode for
each prospective ship point? Yes. They must also support, for example, the Marketing
Department and understand the company’s customer segments and e-commerce
strategy.
2- The transportation manager’s role in effectively supporting a global sourcing
strategy? Is it more than just calculating landed cost and measuring supplier compliance
with ready-to-ship and complete orders? Yes. They must also work with their Sourcing
Department to provide input on mode selection, risk management, and appropriate
sourcing terms.
3-And what is the transportation manager’s role in working with Product Management to
evolve from product and package designs for marketability and production toward
designs that also incorporate “ship-ability” considerations?

The further they can work upstream with functional areas such as Product Management
and Packaging Engineers, the more they will enable excellence in the delivery of
products downstream.

4-The transportation manager’s role in collaborating on the design and implementation

of customer shipping programs? Is it more than ensuring dwell time is minimized at
pick-up and delivery? Yes. They need to participate in sales and operations planning to
properly forecast and budget transportation needs.

And what operational strategies should transportation be putting forth in their companies
to best anticipate the unfolding digital world? Is it as simple as identifying all historical
deliveries less than x distance from the ship point and less than xx lbs. that could ship
via drone?
If transportation is to continue to be the great enabler of supply chain excellence, it’s
time to go beyond just thinking about capacity and rates in a silo and proactively start
working with internal and external supply chain peers further upstream and downstream
in the company’s supply chain. This will help companies compete more effectively in a
complex and changing market and ensure optimized cost and service outcomes.