Transport managers to build successful transportation improvement strategies


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A practical guide for Transport Managers to build successful Transportation Improvement Strategies

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Transport managers to build successful transportation improvement strategies

  1. 1. Whitepaper A Practical Guide for Transport Managers to Build Successful Transportation Improvement Strategies Abstract Supply Chain and Transport Managers generate initiatives to improve transportation and delivery services, but often find it challenging to get these initiatives accepted and funded. This paper puts together a step-by-step practical approach on how Supply Chain and Transport Managers can build successful transportation improvement strategies. Published on : September 2012 Author : Naval Sabharwal, Head of Advanced Solutions Group, Transportation and Logistics© Hexaware Technologies. All rights reserved.
  2. 2. Whitepaper A Practical Guide for Transport Managers to Build Successful Transportation Improvement Strategies Table of Contents Introduction 03 Acknowledge that you are different 03 Create your transportation plans 04 Prioritize your initiatives 05 Build your business case 05 Link your initiatives to operational performance 06 Change management: the game changer 07 Measure and report positively 07 Institutionalize continuous improvement 07 Conclusion 07© Hexaware Technologies. All rights reserved. 2
  3. 3. Whitepaper A Practical Guide for Transport Managers to Build Successful Transportation Improvement Strategies 1 Introduction The cost of carrying inventory and transporting goods accounts for A transport manager under pressure from his sales team for more than half the expenses in a supply chain. In spite of this, delayed and incorrect deliveries scouted for solutions by initiatives to improve performance and reduce costs in these areas – inviting a off-the-shelf application solution providers to help especially in the area of transportation – are not met with the solve his problem. After going through a number of sales enthusiasm that would be expected. presentations, he shortlisted two solutions on the premise This contradiction is influenced by multiple factors. An inability to that these solutions had proven themselves in similar industry recognize the strategic importance of transportation, the intricacies of verticals. He didn’t appreciate that his transportation needs transportation operations, and historical failures of past projects to were different. The solution providers did not have enough deliver results, all contribute to the lack of support for new initiatives. knowledge of his business, and the possibility of a sale kept In this difficult environment, transportation managers have been them blind to the real needs. The company depended on the forced to stretch resources beyond their limits, learning to put out fires transport manager’s judgment and went ahead with the and "somehow" deliver results. Paradoxically, this can send a investment. The effort and cost was under-assessed and the message to coworkers and superiors that new initiatives are project did not deliver. The transport manager made a wrong unnecessary, even though in the long term such shortcuts can impact assumption that his transportation model would be similar to both costs and services. other companies in the industry vertical. The sales team’s complaints have not reduced and the CFO refuses to entertain The real question that we need to confront is: How do transport any transport improvement projects -- even the genuine ones. managers create foolproof cases to convince decision-makers to invest in improvement projects that could achieve savings and improve services? Transportation managers are busy planning and executing, responding to the market realities of costs, budgets and complex daily operations as well as vying for attention within the supply chain and other departments. It is within this complex environment that transportation-related projects need to be strategized, opportunities grasped and results delivered. Yet transportation managers know that the journeys of improvement projects are fraught with obstacles such as resource availability, cross-functional process challenges and Before developing your even a basic struggle for respect for their function. transportation strategy, be sure that you understand your Acknowledge that you are different company’s overall strategy. The transportation model of an organization evolves based on the needs of the business, sourcing locations, customers’ locations, their Transport managers need to density, service levels, inventory planning efficiency, carrier market their services internally availability and performance. Improvement projects undertaken in similar industries can act as guides, but should not be taken as a as providing a competitive perfect fit. Once you acknowledge that you are different you start edge to the business. viewing solutions in a different perspective and don’t attempt to force-fit “proven” solutions merely because they worked somewhere else. The problem needs to fit to the solution and not the solution to the problem. This understanding makes it easier to create a bullet proof case.© Hexaware Technologies. All rights reserved. 3
  4. 4. Whitepaper A Practical Guide for Transport Managers to Build Successful Transportation Improvement Strategies Align your Strategy to the Strategy of the Company • Procurement • Vendor Management Transportation teams often get caught up in the tactics of running • Network Design operations to meet the daily demands of the business and tend to shy • Technology deployment away from building their strategy. Every transport manager should • Intra and Inter Company Cross-functional Dependency develop and document a strategy which should be in alignment with • Planning & Execution the stated mission of the organization. If you don’t know what the • Transportation Spend transport strategy should be, make the current strategy the starting • Modes used point. Start by creating a mission and promise statement . Involve your second level leadership to develop the mission statement. The Answering the questions below will help you identify your most promises are goals that you would achieve to accomplish the mission important initiatives: statement. 1. Do we have enough exposure to the transport services and costs in the market? Are we fully leveraging our freight spend in the Sample Mission and Promise Statement various transportation marketplaces? Our “Transportation Services mission is to select the right 2. Is the network we operate optimal? mode to provide safe, economical transportation to achieve an 3. Can we centralize our planning to derive cost savings? On time Delivery at constantly reducing costs to the business. 4. Are there potential areas of optimization that can be further To fulfill this mission, Transportation division promises to : exploited? 5. Are there factors beyond the transportation’s division control and • Acquire the right mode of transportation to reduce costs advanced visibility that can improve control? • Acquire the right size fleet to reduce costs 6. What can be done to improve the existing execution processes? • Ship all shipments on the same day to achieve on -time 7. Could better mode selection and carrier management processes deliveries or combinations of modal and network changes lower overall • Select service providers who can achieve on time in full costs, while maintaining or improving service? deliveries 8. Can technology application perform repetitive tasks, thereby • Think competitively to obtain the best ratio of dollars spent reducing time and improving planning and accuracy? to cost of product 9. Can we drive savings through other means rather than focusing • Reduce the ratio of dollars spent to cost of product every only on rate reductions? quarter 10. What are the current skill set gaps within my organization and • Investigate all delays and deviations within 24 hours and partner organizations? take remedial actions Once a set of initiatives has been identified, each of these initiatives can be prioritized using tools like Quality Functional Deployment The mission and the promise should be shared with all the (QFD). Simple measurement parameters like High, Medium and Low stakeholders including the finance team, to get their approval. While can be used in the absence of “perfect” measurement techniques. this may not be a straightforward task, it creates alignment with all the The initiatives that have the highest impact on the promise are given stakeholders. The message should then be shared with your team the highest Promise Impact Priority rating. When considering which and external partners who provide the logistics services. Team initiatives to take on, you should take into account both the degree of meetings should be held regularly and the mission and promise difficulty and the anticipated resourcing level. Initiatives with a high statements reiterated. Visual boards with the mission and promise degree of difficulty and a high Promise Impact Priority may need should be placed at vantage points. A number of other communication additional detailing in terms of savings and costs to get a buy-in from means could also be used, for example desktop themes, mail the management (covered in the Build your business case section headers etc below). Create Your Transportation Plan The transport manager of a retail company had a number of With a mission statement and promise in place, you can then create a ideas to improve his transportation services. He used a base strategy that is aligned with your goals. Transport managers get QFD table (see figure below) and listed the promises that he had bogged down with a number of activities that make building strategy made to his organization. He conducted brain storming sessions documents a challenge. Don’t attempt to build a bulky and detailed with his team members (including external partners), and strategy document; instead, identify initiatives that you think you mapped the impact of each initiative to the promise. He used a would like to pursue. simple metric of High, Medium and Low to assess their impact, and worked out a Promise Impact Priority for each initiative. The Examine each aspect of your operation as listed below for selection of resourcing level needs and difficulty of implementation were initiatives assessed and the overall priority was determined for execution of the initiative • Contract Management© Hexaware Technologies. All rights reserved. 4
  5. 5. Whitepaper A Practical Guide for Transport Managers to Build Successful Transportation Improvement Strategies Initiative Initiative Initiative Initiative Prioritize Opportunities Promise One Two Three Four Once initiatives are prioritized based on the promise impact factor and Acquire the right mode of transportation H M H L degree of difficulty, it is unlikely that you will be able to manage all Acquire right size and number of fleet H L L L your proposed initiatives at once. Therefore, it’s necessary to Ship out all shipments on the same day H M M M prioritize the opportunities. The first step in the prioritization process Think competitively to obtain the best ratio of is to separate initiatives into short and long-term opportunities. dollars spent to cost of product M M M M Short-term initiatives could have a duration of less than three months Reduce ratio of dollars spent to cost of M L L L and need low resources. Long-term initiatives would take longer than product every quarter three months or require planning and preparation before realizing any Promise Impact Priority 1 3 2 4 gains. The transport manager should take every opportunity to Resourcing Level / Degree of difficulty L L H M implement a short-term project to build credibility. For long-term Overall Priority 1 2 3 4 initiatives, create a single page road map diagram depicting a step-by -step transition from the current state to the desired state. Below each This exercise will help identify initiatives that can enhance the step identify the RACIS (Responsible, Accountable, Consulted, company’s competitive advantage and help in fulfillment of Informed, Sourcing) possibilities both insourced and outsourced. As a stakeholder needs. rule, the transport manager should keep himself accountable for each and every step. He should meet all the RACIS stakeholders and Armed with the above exercise internal selling to get a buy-in from the update the chart with stars against each name. A single star indicates management and finance team becomes easier. During the process low buy-in and a five star means high buy-in. While devising the of buy-in, develop coaches and champions within your stakeholders. strategy for building the business case and execution plan, the Initiatives that require low resourcing should be taken up by transport transport manager should plan for the three star and below markings managers unilaterally and results delivered. This helps in building with alternate options. For example, if the CIO’s response level is low credibility to get management buy-in for major projects. The mistake due to resource shortages then full out-sourcing of the execution that most transport managers make is that during difficult times they could be planned. Or, if the procurement department has challenges exercise direct rate cost cutting as the only option and tend not to of manpower shortages, the transport manager could involve his identify initiatives beyond it. The company actually is looking for team to help them prepare the back-end documentation and vendor something more from transport managers than just direct cost cuts assessment templates. (which invariably has an adverse impact on service levels). Prioritize projects that can provide incremental and sustainable benefits when you seek resources, rather than projects that may look attractive. The success ratios Taking a logical approach to are higher in long-term projects and it increases the credibility of the transport identifying transportation manager within the organization. initiatives that meet your specific business goals and are Build your own business case sensitive to the current Once you have identified a list of long-term initiatives to be pursued, environment will result in it’s time to build the business case. The most critical aspect of your justification will be the financial analysis. If the project requires capital quicker internal approvals. expenditure or represents a significant change to current operating expenses, stating the offset savings is important. The business case should have just enough information and be kept simple for C-level decision makers to allocate resources. This means your numbers need to be reasonably accurate and believable. Consulting and Technology companies (who could be participants in the implementation of the initiative) can help in providing templates and metrics for the business case and financial metrics. Social media sites and blogs can be used by sharing the broad outline of the initiative without revealing the details of the business and inputs gathered for additional insights. Last but not least, an internet search will invariably give you some high level templates which you can tweak to fit the needs of your business.© Hexaware Technologies. All rights reserved. 5
  6. 6. Whitepaper A Practical Guide for Transport Managers to Build Successful Transportation Improvement Strategies Link your Initiatives to Your Operational Performance After completing the mission and promise statement exercise, a transport manager realized that there were far too many gaps in After identifying the transportation initiatives and ensuring that the his legacy TMS application to enable delivery of his promises. strategy aligns with the corporate mission, the next step is to link the The TMS was not part of the budget and he recognized that he initiatives to your Key Performance Indicators (KPIs). These KPIs will would not get funding purely on the mission and promise help you set the baseline of your current financial and operational statement alone. He interacted with TMS application providers performance. The base KPIs can be your initial benchmarks in the to understand the input costs and areas where savings could absence of external benchmarks which you need to strive to improve accrue. He devised a simple template. (See TMS : Solution upon. Establishing a link between the initiatives that you have Business Case document below.) He identified 12 areas where selected with your KPIs will help you assess the progress of the savings were likely to accrue, and then filtered these down to initiative. This linkage is critical to securing the resources and two areas that were within his control, mainly relating to human cooperation needed to improve transportation services. Through this resources deployed in his business. He also selected two more process the transport manager is able to translate the initiatives into a areas in which his external partners could reduce costs if they language that his team and partners are able to relate to. were equipped with planning tools. The message that he gave to his management and financial team was that he would not just meet the promises to the business, but would also take A transport manager was constantly under pressure to meet direct responsibility for the savings so that the targeted ROI delivery timelines to an external OE production line. He was could be achieved. This strategy, together with the steps incurring high expediting costs and regular escalations from the outlined in the paragraph below (“Link your Initiatives to Your sales and CRM team. Based on discussions with his team and Operational Performance”),further strengthened his proposal. external parties he concluded that he was using the network of The financial sheet was realistic and backed with logical an vendor whose cut-offs for pick-up from his warehouse was reasoning, and it expedited the process of approval. late evening. This added one extra day to the delivery time. The warehouse was not in a position to get the shipments ready in the morning, but could complete the consolidation by early afternoon. Based on a study it was determined that for an TMS : Solution Business Case : (numbers have been changed) afternoon dispatch could be met within the limitations if TMS : Solutions Business Case information flow from the warehouse reached the transport FY10 FY11 FY12 FY13 FY14 Capital Expenditure operations in the morning. This would help them in faster Hardware consolidation and reduce the planning time after the arrival of Servers 0.09 0.06 0 0 0 the shipments from the warehouse. A technology initiative for Tracking Units 0.12 0.12 0 0 0 integration of warehouse operations with the TMS optimization PCs + Printers 0.26 0.35 0 0 0 engine was undertaken. This was expected to reduce the Total Hardware 0.5 0.5 0.0 0.0 0.0 expediting costs by more than 75%, in addition to providing Software + Implementation service level improvements. The operational KPIs were drilled Txms Application 1.34 0.14 0.07 0.04 0.04 Routing Application 0.50 0.30 0.10 0.10 0.10 down to: Track & Trace 0.00 0.00 0.00 0.00 0.00 Total Software 1.84 0.44 0.17 0.14 0.14 1. Orders planned to be shipped vs % covered in the Total Capital Cost 2.31 0.97 0.17 0.14 0.14 advanced optimization exercise before cut off Revenue Expenditure 2. Placement time of providers vehicle measured Txms Application 0.01 0.11 0.12 0.12 0.12 against cut-off Routing Application 0.10 0.16 0.18 0.20 0.22 Track & Trace 3. Vehicle capacity utilization factor 0.02 0.09 0.09 0.09 0.09 Total Revenue Expenditure 0.13 0.36 0.39 0.41 0.43 4. TAT for dock clearance of the vehicle. Business Benefits Ops team Rationalization 0.35 1.28 1.60 2.00 2.50 The operational team members and external partners could Billing & Freight Audit cost reduction 0.17 0.63 0.79 0.99 1.23 relate to the KPIs easily. The initiative was executed and saved Routing 0.15 0.51 0.59 0.68 0.78 more than 90% in expediting costs and improved service levels Track & Trace 0.05 0.17 0.19 0.22 0.25 to > 99%. Total Business Benefits 0.72 2.59 3.17 3.89 4.77 Cost of Capital 0.13 0.19 0.20 0.21 0.21 Cash Flow -1.86 1.08 2.41 3.13 3.99 Cumulative Cash Flow -1.86 -0.78 1.63 4.77 8.75© Hexaware Technologies. All rights reserved. 6
  7. 7. Whitepaper A Practical Guide for Transport Managers to Build Successful Transportation Improvement Strategies Change Management the Real Game Changer Institutionalize Continuous Improvement The easy part is over. The real hurdles start when it comes time to Even when projects deliver the desired results, sustainability poses implementing the changes. For the project to be successful, changes challenges. The ever-changing dynamics of business puts demands must be managed throughout all the functional departments, external on the transport manager to continually improve. It is imperative that parties, and the company at large. Deploy change management continuous improvement is institutionalized in the transportation experts – (and try to budget for this in advance, if your finances permit department, which means deploying tools that are used on a you to do so) – and also deploy the best change management day-to-day basis by the team members. The tools should help to practices. For example, John Kotter, who is a Harvard Business capture the small opportunities for improvement on a daily basis. The School professor and leading thinker on organizational change deployment of such tools automatically increases the number of management, has a model that envisages an 8-Step Process for people who get involved in improvement projects. Continuous Change Management: improvement is a detailed subject and we will publish a paper soon on various approaches and tools that can be deployed in the 1. Increase the sense of urgency for the project. This should be transportation and logistics field. easy, as you have gone through a detailed reasoning to arrive at the need for the project. Conclusion 2. Build the guiding team - Form a cross-functional team with As the initiatives resulting from your strategic realignment and project enough power to lead the change. Commit your best people to it. execution begin to show positive results, it’s important to consolidate Don’t take sides and encourage the group to work as a team. gains and look for ways to leverage your investment in the new strategy. Once you achieve the initial ROI, incremental improvements 3. Use the mission and promises to create the project vision. will yield additional benefits on an ongoing basis. With a clear strategy and better-optimized transportation operations, you are now in a 4. Market the vision through extensive communication within the stronger position to identify and implement more advanced organization and department. Give the project a relevant and transportation concepts that can lead to additional cost savings and catchy name. efficiencies. 5. Empower broad-based action to the guiding team and encourage Hexaware Technologies, Transportation and Logistics – Advanced risk-taking, nontraditional ideas, activities, and actions. Solutions Group (ASG) , designs innovative solutions for the industry. Hexaware’ s ASG team can not only help you to identify and prioritize 6. Generate short-term wins through visible performance your transportation improvement initiatives, but can help you to improvements in the project. execute it, too. 7. Deploy change agents in every functional department. The author can be contacted on 8. Articulate the connections between the new behaviors and organizational success. Measure and Report Incrementally Auditing four areas identified through regular measurement should be an ongoing process • Measurable impact on mission • Measurable impact on promises • Financial parameters committed for the project • Operational Parameters linked to the initiative Communicate the ongoing results with all the stake holders, as well as to the management and finance teams to help build credibility and identify gaps that could slow the progress. Reporting should be done through positive reinforcements; negatively toned reporting should be avoided.© Hexaware Technologies. All rights reserved. 7
  8. 8. Whitepaper A Practical Guide for Transport Managers to Build Successful Transportation Improvement Strategies To learn more, visit 1095 Cranbury South River Road, Suite 10, Jamesburg, NJ 08831. Main: 609-409-6950 | Fax: 609-409-6910 Disclaimer Contents of this whitepaper are the exclusive property of Hexaware Technologies and may not be reproduced in any form without the prior written consent of Hexaware Technologies.© Hexaware Technologies. All rights reserved. 8