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  • 1. In partnership withITMS Benchmark Study:Technology Meets The Challenge of anUnanticipated Freight Volume ReboundWritten By:James BlaeserPublisher Sponsored by:Published November 2010
  • 2. Executive Summary American Shipper surveyed more than 250 supply chain managers on their international transportation management practices, processes, human resources and the technologies that support them. This report is the second annual study on this subject produced in conjunction with the Retail Industry Leaders Association (RILA). For the purposes of this study, the focus is placed specifically on the stages involving planning through event management and the visibility into each leg of the process. Procurement and settlement are purposely set aside to focus on the “blocking and tackling” of international logistics management—planning, order management, tendering ii and event management. Winners American Shipper’s benchmarking initiatives seek to parse out compa- nies which are succeeding at any particular function and examine whyEXECUTIVE SUMMARY they are successful. These “winners” are the top tier of respondents based on their answers to a set of questions that are seeded in the questionnaire. With respect to this survey the winners meet three key criteria: 1. Report that they are capable of sending an electronic purchase order (PO) (such as an EDI 850 file) to a logistics service provider (LSP). 2. Have five or more days advance notice of the specific details of their shipments before they arrive at overseas origin. These details include the number of cartons, dimensions and total cube of the shipment. 3. Meet or exceed the targets provided to them by their transportation procurement function. Using these measures, winners account for 47 respondents to this benchmarking survey. This is the top 15 percent of the class, so to speak. Similar to last year, winners tend to be larger companies ($1 billion or more in annual sales) and include heavy representation from the retail/ wholesale segment. International Transportation Management Systems | Benchmark Report: 2010
  • 3. Patchwork of Systems Roughly 20 percent of survey respondents categorized their interna- tional transportation management platform as mainly manual; same as 2009. Small companies are five-times more likely to manage this function manually. Overall the mixed – or hybrid – approach, where shippers and 3PLs are using systems and outsourcing in conjunction with some manual-based processes, is the most popular ITM platform, especially for large companies. The average company that reports using a system to manage interna- tional transportation is actually using roughly four and a half applica- tions. This makes sense in a highly fragmented market where specific functionality is required to manage different geographies, transportation iii modes, and products or commodities. A shipper managing interna- tional ocean, air freight, and cross-border trucking might have an application for each of these modes. EXECUTIVE SUMMARY It is interesting to see that winners actually use more technology to manage international transportation; at least one more application than the study average. However, this should not be construed as a best practice as there is a good explanation for this phenomenon. Winners tend to be bigger companies with presumably more complex supply chains, which would demand more applications given that there is no single solution providing functionality required by every industry segment. Winners employ more systems because automation is a winning practice. If they could use fewer applications for more func- tions, they presumably would.Functionality Comparing available functions versus those that are critical shows in general terms shippers are only scratching the surface of what ITMS is capable of providing. Basic functions that are the most widely available are also considered the most important. Sophisticated functions, such as mode and route optimization, appear out of reach for most respondents. 3PLs, on the other hand, have more robust systems providing more key functionality. In many cases, connectivity and optimization function- ality are twice as prevalent among 3PLs as they are among shippers. International Transportation Management Systems | Benchmark Report: 2010
  • 4. Business Challenges Managers can only optimize what they see. In the case of winners, they can “see” their freight (i.e.—understand the important details such as cube size and weight) about five days earlier than the average. Bear in mind these figures will vary among industry segments, or even within individual segments, based on the type of freight and the shipper’s business model requirements. But in general terms, those supply chain managers with five days of extra notice—a business week—can make adjustments to schedules, routes and modes to create bottom-line savings in terms of decreased freight rates and related shipping costs. That additional visibility allows shippers to carry less inventory, whileiv ensuring their freight gets to market on-time and reduces the impact of lost sales due to lack of stock. ProductivityEXECUTIVE SUMMARY In 2009, freight volumes plummeted and logistics departments responded by shedding staff to save cost. In 2010, volumes rebounded more than expected, but those logistics departments have not re-staffed. This requires them to do more with less. This trend is evident showing a jump in productivity levels across all segments. Winners, most of which are automated, show an increase in produc- tivity greater than 12 percent. Clearly automation plays a role in enhancing the logistics operation, allowing firms to handle more volume on a nominal basis in addition to scaling up greater capacity. International Transportation Management Systems | Benchmark Report: 2010
  • 5. Table of ContentsExecutive Summary......................................................................................................................................................... ii .Section I: Introduction..................................................................................................................................................... 3 . > Background.............................................................................................................................................................. 3 > Winners. ................................................................................................................................................................... 4 . > Terminology.............................................................................................................................................................. 4 > Hypothesis. .............................................................................................................................................................. 5 .Section II: Demographics................................................................................................................................................ 5Section III: The State of ITMS. ........................................................................................................................................ 9 . 1Section IV: The Case for Automation........................................................................................................................... 19 .Section V: The Future of ITMS. ..................................................................................................................................... 22 . TA B L E O F C O N T E N T SSection VI: Winners........................................................................................................................................................ 27Appendix A: About Our Sponsors................................................................................................................................. 28 > GT Nexus. .............................................................................................................................................................. 28 . > Management Dynamics, Inc................................................................................................................................... 28Appendix B: About Our Partner.................................................................................................................................... 29 . > Retail Industry Leaders Association (RILA) ........................................................................................................... 29 International Transportation Management Systems | Benchmark Report: 2010
  • 6. Figures F I G U R E 1 : Industry Segments Represented. ........................................................................................................ 5 . F I G U R E 2 : Company Sizes...................................................................................................................................... 6 F I G U R E 3 : Job titles represented........................................................................................................................... 6 F I G U R E 4 : Transportation Modes Managed.......................................................................................................... 7 F I G U R E 5 : Percent of revenue spent on IT............................................................................................................ 8 F I G U R E 6 : Percent of IT Budget Dedicated to ITMS............................................................................................ 8 . F I G U R E 7 : International Transportation Management Platform.......................................................................... 9 2 F I G U R E 8 : International Transportation Management Platform........................................................................ 10 F I G U R E 9 : Satisfaction with Current ITMS.......................................................................................................... 11 F I G U R E 1 0 : Return on Investment from ITMS.................................................................................................... 11FIGURES F I G U R E 1 1 : The State of ITMS—Study Average. ............................................................................................... 12 . F I G U R E 1 2 : The State of ITMS—Winners ......................................................................................................... 12 F I G U R E 1 3 : Number of ITMS Applications Currently Employed. ..................................................................... 13 . F I G U R E 1 4 : Use of SI’s and Consultants Related to ITMS................................................................................ 14 F I G U R E 1 5 : Is Your Company Capable of Sending An Electronic Purchase Order to LSPs?......................... 15 F I G U R E 1 6 : Current vs. Critical Functionality. ................................................................................................... 17 . F I G U R E 1 7 : Functionality—Shippers vs 3PLs. ................................................................................................... 18 . F I G U R E 1 8 : Visibility to Shipment Details—Days Prior to Arrival at Origin..................................................... 19 F I G U R E 1 9 : Purchase Orders per Year, per FTE—2009 vs. 2010 ..................................................................... 20 F I G U R E 2 0 : Has Your Procurement Department Established Metrics for Measuring Savings Targets?. .... 21 . F I G U R E 2 1 : How Effectively Did your Company Perform Compared to Procurement Targets?................ 22 F I G U R E 2 2 : Plans to Buy/Upgrade/Replace ITMS............................................................................................. 23 F I G U R E 2 3 : Plans to Buy/Upgrade/Replace ITMS............................................................................................. 23 F I G U R E 2 4 : Delivery Model of Future ITMS....................................................................................................... 24 F I G U R E 2 5 : Inhibitors to Buy/Upgrade/Replace ITMS..................................................................................... 25 F I G U R E 2 6 : Drivers to Adoption.......................................................................................................................... 26 International Transportation Management Systems | Benchmark Report: 2010
  • 7. Section I: IntroductionBACKGROUNDDuring the third quarter of 2010, American Shipper surveyed morethan 250 supply chain managers on their international transportationmanagement practices, processes, human resources and the technologiesthat support them. This report is the second annual study on thissubject produced in conjunction with the Retail Industry LeadersAssociation (RILA—www.RILA.org).For many, a transportation management system (TMS) is an encom-passing term that covers the full cycle of transportation activity, includingprocurement, planning, order management, tendering, event manage-ment, and financial settlement. For the purposes of this study, the focus 3is placed specifically on the stages involving planning through eventmanagement and the visibility into each leg of the process. Procurementand settlement are purposely set aside to focus on the “blocking andtackling” of international logistics management—planning, order S ection I : I ntroductionmanagement, tendering and event management.It is also critical to understand that this benchmarking initiative strictlypertains to international and cross-border transportation management;what American Shipper refers to as International Transportation Manage-ment Systems or ITMS. Qualified respondents represent a variety ofindustry segments, including retail, manufacturing, materials, and thirdparty logistics. Likewise, these respondents run the gamut of size basedon annual sales. (Responses from carriers, consultants, technology vendorsand other unqualified respondents are not included in the aggregate datapresented in this report.)Distribution channels for the 27-question benchmarking surveyincluded American Shipper’s Website, e-mail list, and newsletters.In addition, members of RILA were invited to participate via e-mailpromotions directly from RILA. As a policy, American Shipper doesnot share any individual survey responses. All data is displayed inaggregate form only. International Transportation Management Systems | Benchmark Report: 2010
  • 8. WINNERS American Shipper’s benchmarking initiatives seek to parse out companies which are succeeding at any particular function and examine why they are successful. These “winners” are the top tier of respondents based on their answers to a set of questions that are seeded in the questionnaire. With respect to this survey the winners meet three key criteria: 1. Report that they are capable of sending an electronic purchase order (PO) (such as an EDI 850 file) to a logistics service provider (LSP). 2. Have five or more days advance notice of the specific details of their shipments before they arrive at overseas origin. These details include the number of cartons, dimensions and total cube of the shipment. 4 3. Meet or exceed the targets provided to them by their transporta- tion procurement function. Using these measures, winners account for 47 respondents to thisS ection I : I ntroduction benchmarking survey. This is the top 15 percent of the class, so to speak. Similar to last year, winners tend to be larger companies ($1 billion or more in annual sales) and include heavy representation from the retail/ wholesale segment. TERMINOLOGY Many of the data points illustrated in these pages break down the differences between companies that “automate” international trans- portation management versus those that handle this “manually.” In the context of this study “automated” companies are those that employ at least one software application to support their international transportation function. However, “automated” does not mean human interaction has been entirely eliminated. Likewise, “manual” does not mean these firms do not use e-mail, faxes, and other technologies. The study assumes that basic computing power is ubiquitous in the transportation management field. International Transportation Management Systems | Benchmark Report: 2010
  • 9. HYPOTHESISBased on last year’s study results, transportation industry trends, andevents that have occurred since that time, a number of hypotheses weretested in this study. These include: 1. An automated approach to managing international transportation would be more prevalent than last year’s study showed. This proved inconclusive as illustrated in section four. 2. Shippers and 3PLs would consolidate the number of applications they use to manage international transportation—the “patch- work” would be shrinking. Section four demonstrates that this was not the case. 3. Low staffing levels coupled with asomewhat unexpected rise in freight volumes would cause productivity levels to increase. 5 This proved to be true and is clearly illustrated in section five of this report. 4. The sudden increase in freight rates compared to last year would S ection I I : D emographics cause more shippers to miss their procurement targets. Section five shows this was true but not to the degree that was expected.Section II: DemographicsStudy participants represent a range of business segments, includingdiscrete and process manufacturing (34 percent), retail/wholesale (25percent), and third party logistics providers (3PL) (34 percent).FIGURE 1: Industry Segments Represented Discrete manufacturing 18% Process manufacturing 34% Engineering/Construction 16% Raw materials/Commodities Retail/Wholesale 5% 3PL/Forwarder/NVOCC/Intermediary 1% 25% 294 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 10. Companies of all sizes are represented in this study . Large companies with more than $1 billion in annual revenue are slightly over repre- sented at 39 percent of the whole. Medium-sized firms with annual revenue between $100 million and $1 billion are slightly under repre- sented at 28 percent. Large companies by this definition tend to be retailers and manufacturers, while smaller firms with less than $100 million in annual revenue tend to be 3PLs. FIGURE 2: Company Sizes Less than $100 million 6 $100 million to $1 billion 33% 39% Greater than $1billionS ection I I : D emographics 28% 217 total respondents Survey responses include all levels of the enterprise but mid-level manage- ment, which is commonly charged with transportation management, is best represented with 19 percent directors and 46 percent managers. Slightly more than 20 percent of respondents are vice president or above; these executives typically represent the 3PL segment of respondents. FIGURE 3: Job titles represented 2% 8% 12% C-Level (CEO,CIO,CFO, etc) 13% Executive (SVP, VP, GM, etc.) Director Manager 19% Staff 46% Other 206 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 11. FIGURE 4: Transportation Modes Managed FCL Ocean 85% Airfreight 78% LCL Ocean 65% Cross-border truck 63% Parcel/package 60% Cross-border rail/intermodal 31% Ocean (non-containerized) 28% Other, please specify 11% 7 0% 20% 40% 60% 80% 100% 219 total respondents S ection I I : D emographicsSurvey respondents are responsible for managing an array of transporta-tion modes, which is important to bear in mind when reviewing thestudy results. Shippers with different products and service requirementswill favor different modes of transportation to meet their demands. Thisstudy looks at multimodal transportation management instead offocusing on any one specific mode. International Transportation Management Systems | Benchmark Report: 2010
  • 12. Most respondents spend at least 1 percent of annual revenue on informa- tion technology in general. About 45 percent could be considered aggressive spenders, with 3 percent or more of revenue dedicated to IT. Typically, the average enterprise spends between 1 and 3 percent of annual revenue on IT. FIGURE 5: Percent of revenue spent on IT 2% 19% None 24% Less than 1 percent 1 to 2 percent 3 to 5 percent 8 26% More than 5 percent 30%S ection I I : D emographics 188 total respondents Budget dedicated to buying and supporting international transportation management systems are relatively modest across industries. Under- standably the 3PL segment spends more than their customers from the manufacturing and retail segments. Nearly half of 3PLs polled report they spend 5 percent or more of their IT budget on ITMS investments. FIGURE 6: Percent of IT Budget Dedicated to ITMS 80% Retail 70% 62% Manufacturing 60% 55% 50% 3PL 38% 40% 30% 27% 26% 20% 21% 20% 16% 12% 9% 10% 7% 5% 4% 0% 0% 0% None Less than 5 to 10 percent 11 to 15 More than 5 percent percent 15 percent 190 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 13. Section III: The State of ITMSRoughly 20 percent of survey respondents categorized their interna-tional transportation management platform as mainly manual; sameas 2009. Small companies are five-times more likely to manage thisfunction manually. Overall the mixed—or hybrid—approach, whereshippers and 3PLs are using systems and outsourcing in conjunctionwith some manual-based processes, is the most popular ITM platform,especially for large companies.FIGURE 7: International Transportation Management PlatformManual, we handle our entire 7% Large 9 international supply chain 23% with phones/faxes/email Medium 35%3PL(s) represent us in foreign 21% Small S ection I I I : T he S tate of I T M S countries and manage 25% most/all of the activities 11% Remote via a system or 2% platform provided by a 3% technology vendor 6% 63%A mix or hybrid of all of these 43% 39% 6% None of these 7% 10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 220 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 14. The hybrid platform is the most popular across all industry segments as well. Thirty percent of retailers polled—roughly twice as likely as manufacturers—use one or more 3PLs to manage their end-to-end international moves. FIGURE 8: International Transportation Management Platform Remote via a system or 0% Retail platform provided by a 2% technology vendor 15% Manufacturing 3% 3PL None of these 5%10 15% Manual, we handle our entire 20% international supply chain 23% with phones/faxes/email 18%S ection I I I : T he S tate of I T M S 3PL(s) represent us in 30% foreign countries and manage 16% most/all of the activities 0% 48% A mix or hybrid of all of these 53% 52% 0% 10% 20% 30% 40% 50% 60% 220 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 15. FIGURE 9: Satisfaction with Current ITMS 60% 60% 53% Study Average ‘10 49% 50% Study Average ’09 40% 31% Winners ‘10 30% 26% 19% 18% 20% 13% 10% 9% 10% 4% 3% 3% 1% 0% 0% Excellent Good Fair Poor Very Poor 255 total respondents 11Satisfaction rates in 2010 on average remain relatively high andare steady as compared to 2009 results. As expected, winners report S ection I I I : T he S tate of I T M Snoticeably higher levels of satisfaction with nearly 80 percent callingtheir ITMS “good” or “excellent.” Admittedly satisfaction is a softmeasurement, but it does help provide a context through which theother results may be viewed.Overall, more than 70 percent of respondents graded the return oninvestment (ROI) for their ITMS as average or better. 3PLs are consider-ably more impressed with the ROI their systems provide. More than 80percent of 3PLs rated their IT ROI average or better, which makes sensesince these systems are the heart of these operations. Also bear in mindthat 3PLs spend considerably more on ITMS than their customers do.FIGURE 10: Return on Investment from ITMS 50% 47% Retail 40% Manufacturing 34% 34% 3PL 30% 23% 20% 21% 20% 17% 17% 14% 13% 13% 9% 10% 6% 7% 7% 7% 6% 4% 0% Excellent Good Average Fair Poor N/A 126 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 16. In 2009, this study looked to characterize the nature of ITM as auto- mated, outsourced or manual, and that point was revisited in 2010 (see figs. 7 and 8). However, this view may be an over-simplification of a complex process that requires a mix of approaches. That point is supported by the number of respondents who called their ITM platform a hybrid. Figs. 11 and 12 look a bit deeper at the individual functions that create an ITMS and examine the nature of each. Overall, winners leverage more technology in every category. Planning, in particular, stands out as an area where winners are nearly twice as likely to employ an application as their counterparts. FIGURE 11: The State of ITMS—Study Average12 5% 7% 3% 8% 5% 100% Manual 3% 17% 4% 10% 36% 8% 56% Automated 51%S ection I I I : T he S tate of I T M S 80% 38% 37% Outsourced 60% 56% N/A 46% 40% 43% 33% 34% 20% 0% Planning Order Mgmt Booking/Tendering Event Mgmt Visibility FIGURE 12: The State of ITMS—Winners 100% Manual 32% 18% 26% 23% 12% 68% Automated 80% 70% 60% 45% Outsourced 57% 60% N/A 40% 23% 20% 15% 5% 6% 12% 6% 6% 6% 5% 5% 0% Planning Order Mgmt Booking/Tendering Event Mgmt Visibilty International Transportation Management Systems | Benchmark Report: 2010
  • 17. In 2009, American Shipper found that the average shipper or 3PLleveraging a systems-based approach to international transportationmanagement employed between three and five applications to get thejob done. We called this the “patchwork ITM applications.” In 2010,this study aimed to further refine the concept.The average company that reports using a system to manage internationaltransportation is actually using roughly four and a half applications. Thismakes sense in a highly fragmented market where specific functionalityis required to manage different geographies, transportation modes, andproducts or commodities. A shipper managing international ocean, airfreight, and cross-border trucking might have an application for each ofthese modes.It is interesting to see that winners actually use more technology to 13manage international transportation; at least one more applicationthan the study average. However, this should not be construed as a bestpractice as there is a good explanation for this phenomenon. Winnerstend to be bigger companies with presumably more complex supply S ection I I I : T he S tate of I T M Schains, which would demand more applications given that there isno single solution providing functionality required by every industrysegment. Winners employ more systems because automation is a winningpractice. If they could use fewer applications for more functions, theypresumably would.FIGURE 13: Number of ITMS Applications Currently Employed Winners 5.7 3PL 5.2 Average 4.6 Manufacturing 4.3 Retail 4.1 0 1 2 3 4 5 6 112 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 18. As complexity grows, the need for expertise grows with it. So it makes sense that shippers and 3PLs look for systems integrators (SI) to make sense of the multitude of applications they use for ITM. Compared to 2009, penetration rates have grown, but only modestly. Forty-one percent of the 2010 study average report employing an SI for ITM- related work, compared to just 34 percent in 2009. 3PLs and winners—with their large web of applications—are notably more likely to employ an SI. FIGURE 14: Use of SI’s and Consultants Related to ITMS 100% No 71% 58% 47% 50%14 Yes 80% 60%S ection I I I : T he S tate of I T M S 53% 50% 40% 42% 29% 20% 0% Retail Manufacturing 3PL Winners 203 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 19. “Leveraging ITMS applications further upstream has given retailers better visibility into their supply chains, enabling more accurate planning, increased flexibility and responsiveness, and a greater ability to align inventory levels with market demand.” — Casey Chroust, executive vice president of retail operations, Retail Industry Leaders Association (RILA)The ability to send an electronic PO to LSPs is a key criterion fordividing winners and average performers. In 2010, the number ofrespondents who report they have this capability remains even at 67 15percent. This capability lends itself to companies who automate ITMand, as fig. 7 illustrates, that penetration rate did not change year-over-year. Likewise, large companies that have automation in place tend S ection I I I : T he S tate of I T M Sto be capable of exchanging electronic POs where small companiesare less likely.FIGURE 15: Is Your Company Capable of Sending An Electronic Purchase Order to LSPs? 100% Yes No 80% 81% 73% 60% 50% 50% 40% 27% 20% 19% 0% Large Cos Medium Cos Small Cos. 255 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 20. Survey respondents were asked to select all the functionality “After years of false starts, 3PLs are finally their system provides (current) acknowledging that they can—and must— and then select the three most provide robust ITMS capabilities to their important functions to their operation (critical). Like 2009, customers by integrating off-the-shelf, best-of- track-and-trace, order manage- breed solutions—particularly those that are ment and electronic shipping cloud based—faster, better and cheaper than documentation rank as the top building their own solutions from scratch.” three available functions. — Bob Bowser, director SCM practice, Track-and-trace and order Cognizant Technology Solutions management rank as the top two critical functions in both16 2009 and 2010. In 2010, analytics replaces electronic shipping documentation as the third most important function. Comparing available functions versus those that are critical shows in general terms shippers are only scratching the surface of what ITMS isS ection I I I : T he S tate of I T M S capable of providing. Basic functions that are the most widely available are also considered the most important. Sophisticated functions, such as mode and route optimization, appear out of reach for most respondents. 3PLs, on the other hand, have more robust systems providing more key functionality. In many cases, connectivity and optimization function- ality are twice as prevalent among 3PLs as they are among shippers. International Transportation Management Systems | Benchmark Report: 2010
  • 21. FIGURE 16: Current vs. Critical Functionality 61% Tracking & tracing 67% 32% Order management 60% 31% Analytics 42% Critical Connectivity to customers, 29% vendors, partners, etc 40% Current Electronic shipping 25% documentation 45% 24%Freight invoice management 42% 23% Shipment scheduling 43% Transportation network 20% optimization 25% 17 20%Route/schedule optimization 27% 18% Event management 38% S ection I I I : T he S tate of I T M SCollaborative transportation 16% management 31% 16% Electronic booking 41% 15% Mode optimization 19% 14% Financial settlement 31% 7% Dynamic rate engine 16% 7% Parcel shipping 20% 6% Network design 10% 4% Freight exchange 12% 2% Claims management 18% 0% 10% 20% 30% 40% 50% 60% 70% 80% International Transportation Management Systems | Benchmark Report: 2010
  • 22. FIGURE 17: Functionality—Shippers vs 3PLs 79% Tracking & tracing 62% 60% Order management 60% Electronic shipping 56% 3PLs documentation 39% 40% All Shippers Event management 38% 54% Shipment scheduling 38% 58% Analytics 35% Freight invoice 58% management 35% 56% Electronic booking 34%18 Connectivity to customers, 54% vendors, partners, etc 33% 37% Financial settlement 28%S ection I I I : T he S tate of I T M S Collaborative transpor- 40% tation management 27% Transportation network 31% optimization 22% Route/schedule 38% optimization 21% 21% Parcel shipping 19% 23% Mode optimization 16% 33% Claims management 11% 15% Freight exchange 11% 29% Dynamic rate engine 10% 13% Network design 8% 0% 10% 20% 30% 40% 50% 60% 70% 80% International Transportation Management Systems | Benchmark Report: 2010
  • 23. Section IV: The Case for AutomationBased on this comparison of winners versus average respondents, it isclear that winners leverage systems as a means to successfully managethe complexity of international transportation. In this case, success canbe measured in three key areas: increased visibility, productivity gainsand cost savings.Managers can only optimize what they see. In the case of winners, theycan “see” their freight (i.e.—understand the important details such ascube size and weight) about five days earlier than the average. Bear inmind these figures will vary among industry segments, or even withinindividual segments, based on the type of freight and the shipper’sbusiness model requirements. But in general terms, those supply chainmanagers with five days of extra notice—a business week—can make 19adjustments to schedules, routes and modes to create bottom-linesavings in terms of decreased freight rates and related shipping costs.That additional visibility allows shippers to carry less inventory, whileensuring their freight gets to market on-time and reduces the impact S ection I V : T he C ase for A utomationof lost sales due to lack of stock.FIGURE 18: Visibility to Shipment Details—Days Prior to Arrival at Origin Winners 12.8 Shippers (ex 3PL) 10.7 3PLs 9.3 Study Average (ex Winners) 7.5 0 3 6 9 12 15 222 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 24. In 2009, freight volumes plum- meted and logistics departments “During the recession, leading retailers not only responded by shedding staff focused on increasing efficiencies in their supply to save cost. In 2010, volumes chains and cutting bottom line costs, but also rebounded more than expected, positioned themselves to scale operations quickly but those logistics departments have not re-staffed. This requires when the economy turns around and inventory them to do more with less. volumes begin rise.” This trend is evident in fig. 19 showing a jump in productivity — Casey Chroust, executive vice president of retail levels across all segments. operations, Retail Industry Leaders Association (RILA) Automated shippers claim more than 10 percent improvement from 2009 as measured by the number of purchase orders managed20 per full-time equivalent (FTE) employee per year. Compare that with manual shippers, who show about 8 percent improvement. Winners, most of which are automated, show an increase in produc- tivity greater than 12 percent. Clearly automation plays a role inS ection I V : T he C ase for A utomation enhancing the logistics operation, allowing firms to handle more volume on a nominal basis in addition to scaling up greater capacity. Third party logistics providers improved their productivity by 150 percent, the largest improvement measured in this study. It appears that shippers turned to their 3PLs to manage the unexpected volume increases and thus 3PLs responded by squeezing more out of their current staff and systems, but not necessarily adding significant resources. FIGURE 19: Purchase Orders per Year, per FTE—2009 vs. 2010 1398.3 2010 Winners 1243.5 2009 1362.3 Automated (ex 3PL) 1235.0 320.4 Manual (ex 3PL) 294.5 207.0 3PLs 82.7 0 300 600 900 1200 1500 222 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 25. Study respondents indicatethere is some improvement in “PO/FTE productivity results demonstrate thatconnecting the procurement companies can scale global operations withoutfunction to ITM in the last adding significant cost. ITMS platforms provideyear. On the whole, 65 percent sustainable benefits as companies expand theirof respondents to the 2010survey hold ITM accountable to global markets and the transportation networksprocurement targets compared they require.”with only 53 percent in 2009.Retailers remain ahead of the —Ed Sands, global practice leader,class in this respect with roughly logistics, ICG Commercethree quarters of respondentssubscribing to this practice. Keep in mind this trait is a prerequisite forconsideration as a winner, so naturally all winners follow this guideline. 21Survey respondents performed only slightly worse in 2010 as comparedto 2009, which is surprising and encouraging considering the size andfrequency of opportunistic rate increases seen across many major trade S ection I V : T he C ase for A utomationlanes in the past year. In 2009, 85 percent of survey respondents metor outperformed their procurement targets, while in 2010 that numberdropped 11 points to 76 percent.For that 11 percent of respondents, this is certainly a painful trend,but it is not as severe as had been hypothesized, suggesting that manyshippers had prepared themselves for the rebound and adjusted theirbudgets accordingly.FIGURE 20: Has Your Procurement Department Established Metrics for Measuring Savings Targets? 100% No 26% 36% 43% Yes 80% 74% 60% 64% 57% 40% 20% 0% Retail Manufacturing 3PL 209 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 26. “In our experience, centralization of ocean procurement and carrier management activities enables shippers to identify and drive continuous and sustainable efficiencies in the larger supply chain, and to balance the cost and service equation of transportation. More specifically, centralization allows us to efficiently integrate and maximize IT platforms that manage trade, visibility and settlement. It also gives our team credibility with carriers that we can deliver on our commitments when expectations are met.” — Patrick Halloran, director global logistics, Cardinal Health (a participant in this study whose responses qualified his company as a “winner”)22 How Effectively Did your Company Perform Compared to FIGURE 21: Procurement Targets?S ection V : T he F uture of I T M S 2% 5% Outperformed procurement targets by a considerable margin 22% 17% Outperformed procurement targets Met our procurement targets Slightly behind our procurement targets Missed procurement targets by a noticeable margin 54% 125 total respondents Section V: The Future of ITMS The market for ITMS appears to be cooling slightly in 2010 with two thirds of respondents claiming that they are not in the market to buy, upgrade or replace their systems. While buyers that are relatively close to a buying decision (budgeted within next 12 months) remain steady at 9 percent, the number of potential buyers entering the buy process (budgeted 12 to 24 months) dropped four points to 10 percent. International Transportation Management Systems | Benchmark Report: 2010
  • 27. It appears the action for ITMS vendors in the next 12 months is morelikely to come from the manufacturing sector. 3PLs appear less certainabout their plans, with 21 percent reporting that an ITMS investmentis on their five-year plan, which is a noncommittal answer at best. Ifthe freight market is beginning a prolonged rebound, this makes senseas many 3PLs prefer to build their own systems when they have themoney to invest. Further, these 3PLs have been asked to do more withtheir resources, as seen in fig. 19, so they may be concerned aboutdisrupting the most important piece of their operational portfolioat a crucial time.FIGURE 22: Plans to Buy/Upgrade/Replace ITMS 23 9% 2009 Average Budgeted within the next 12 months 9% 2010 Average S ection V : T he F uture of I T M S 14%Budgeted within the next 12–24 months 10% 28% On our company’s 5-year plan 15% 50% No plans to replace 66% 0% 10% 20% 30% 40% 50% 60% 70% 80% 208 total respondentsFIGURE 23: Plans to Buy/Upgrade/Replace ITMS 80% Retail 69% 70% 65% 62% Manufacturing 60% 3PL 50% 40% 30% 21% 20% 15% 13% 11% 13% 8% 10% 10% 5% 7% 0% Budgeted within Budgeted within the On our company’s No plans to replace the next 12 months next 12–24 months 5-year plan 208 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 28. Systems providers should be comforted to see that roughly two-thirds of buyers will seek a third party system instead of building or customizing their own. That figure is comparable to last year’s data. One-third of 3PLs say they will build their own systems when they address their ITMS needs, which could be seen as surprisingly low based on historical trends. Manufacturers still prefer the traditional licensed and installed software model with 38 percent choosing that route. Software as a service appears to be gaining ground in the retail segment with 28 percent of the vote. FIGURE 24: Delivery Model of Future ITMS24 16% Built in-house or custom built 31% Customized package (Heavily customized packaged software)S ection V : T he F uture of I T M S Software provided by 3PL, carrier or other logistics service provider 16% Software as a service provided by an outside vendor Licensed software purchased from outside vendor 20% 17% 64 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 29. Apathy remains the largest inhibitor to ITMS adoption with morethan 40 percent of respondents who are not in the market for a system,claiming the current system meets their needs. Only 1 percent of therespondents claim they do not have the technical ability to make achange, while only 2 percent claimed the available systems do not meettheir needs. This is surprising considering the under-utilization of keyoptimization and connectivity functions. Perhaps these shippers and3PLs are too close to their own technology to see what exactly isavailable in the market today.FIGURE 25: Inhibitors to Buy/Upgrade/Replace ITMS 1% 2% We do not have the technical expertise to make a change 25 Available systems do not provide the functionality we require 6% We’re in the process of upgrading or replacing our system 10% We recently upgraded or replaced our system S ection V : T he F uture of I T M S 43% Organizational resistance to change 12% Lacks return on investment None of these 13% Current process meets our needs 13% 137 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 30. Overall, the key drivers to ITMS adoption mirror those key benefits of automation outlined in section five, namely efficiency, savings and visibility. 3PLs, as expected, have a slightly different take listing customer demands and operational scale higher than their shipper counterparts. In an environment where 3PLs have been charged with taking up the slack that shippers cannot manage, this makes good sense. FIGURE 26: Drivers to Adoption 83% Improve operational efficiency 83% 86%26 72% Cost savings 75% 71% 61% RetailS ection V : T he F uture of I T M S Visibility 75% 67% Manufacturing 56% Integration, with 3PL vendors and partners 67% 57% 28% Customer demands 50% 71% 56% Integration, internal 42% 43% 17% Increase operational scale/capacity 33% 62% 39% Bring systems in line with industry standards 33% 38% 6% Green initiatives 12% 33% 6% Other, please specify 4% 10% 0% 20% 40% 60% 80% 100% 64 total respondents International Transportation Management Systems | Benchmark Report: 2010
  • 31. Section VI: WinnersOverall, the results that winners are achieving have improved year-over-year but the best practices they are following have not changed much.Here is a brief recap of what our survey winners are doing to besuccessful in today’s ITM market:Automate—Winners leverage applications that automate internationaltransportation management. In particular, winners are considerably morelikely to use systems for planning and visibility than their peers.Advanced functionality—Winners are using systems that provide moreadvanced planning, connectivity, and optimization functionality.Connect procure-to-pay cycle—Winners are not approachingtransportation management as a stand-alone exercise; rather they 27are integrating transportation procurement, execution, and paymentin a tightly closed loop.Tap third party expertise—Winners seek expertise from outside S ection V I : W innerstheir own enterprise to assist them with improving their ITMpractices and systems. “It is clear from the results of the ITMS Study that the winners are the companies who have focused on and received the benefits of a mature ITMS program. This is an operational competitive advantage that cannot be replicated quickly or easily.” — Joseph Macri, client principal transportation ICS, HP Enterprise Services International Transportation Management Systems | Benchmark Report: 2010
  • 32. Appendix A: About Our Sponsors GT NEXUS GT Nexus runs the world’s only industry-backed, on-demand global trade and logistics portal. Today, more than 40,000 registered users, from over 15,000 organizations use a range of capabilities on the portal to optimize the global flow of goods and trade information from order point to final payment. GT Nexus connects the physical and financial supply chains. This allows buyers, sellers, banks and logistics providers to work over a common platform with a core set of information that supports multiple trade and logistics functions. Customers include Nestlé, Xerox, American Eagle Outfitters, Procter & Gamble, Weyerhaeuser and The Home Depot. For information, visit www.gtnexus.com.28 If you would like to see how a Fortune 500 CPG company used GT Nexus ITMS solutions to save $12 million in transportation spend, click here.A P P E N D I X : A B O U T O U R S P O N S O R S A N D PA R T N E R S MANAGEMENT DYNAMICS, INC. Management Dynamics, Inc. is the leading provider of Global Trade Management (GTM) solutions that improve the performance of global supply chains for importers, exporters, logistics service providers, and carriers. Combining an expansive trading partner network, enterprise-class software and specialized trade content resources, our solutions address mission-critical business challenges for all companies involved in global trade. These solutions include automating import and export processes, providing order and ship- ment visibility, calculating tariffs, duties and taxes, ensuring regulatory compliance and simplifying the financing, sourcing and transporting of goods across international borders. Perry Ellis International saved over $220,000 using an International Transportation Management solution from Management Dynamics. Click hear to learn more. International Transportation Management Systems | Benchmark Report: 2010
  • 33. Appendix B: About Our Partner R E TA I L I N D U S T R Y L E A D E R S A S S O C I AT I O N ( R I L A ) RILA is the trade association of the world’s largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and operate more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad. For additional informa- tion visit www.rila.org 29 A P P E N D I X : A B O U T O U R S P O N S O R S A N D PA R T N E R S International Transportation Management Systems | Benchmark Report: 2010
  • 34. 30 Copyright© 2010 by Howard Publications, Inc. All rights reserved. No part of the contents of this document may be reproduced or transmitted in any form or by any means without the permission of the publisher. International Transportation Management Systems | Benchmark Report: 2010

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