State of Transportation Report Analyzes Automation Vision

State of Transportation: Where Are We on the
Vision of Automation?
11/7/2012

By Lora Cecere
Founder and CEO

Supply Chain Insights LLC

Contents
Research ................................................................................................................................... 2

Disclosure .................................................................................................................................. 2

Research Methodology and Overview ........................................................................................ 2

Executive Overview ................................................................................................................... 3

Current State ............................................................................................................................. 4

Gaps Between What the Business Wants to Buy and What Transportation Providers Sell ......... 7

Corporate Social Responsibility: The New Horizon. ................................................................... 9

Recommendations ..................................................................................................................... 9

Conclusion ................................................................................................................................12

Appendix ...................................................................................................................................13

About Supply Chain Insights LLC ..............................................................................................15

About Lora Cecere ....................................................................................................................15

Copyright © 2012 Supply Chain Insights LLC Page 1

Research
This research was developed with input from JBF Consulting. The development of the final
report is based on quantitative and qualitative research from the team at Supply Chain Insights.

This report is intended for you to read, share and use to improve your supply chain decisions.
All we ask for in return is attribution when you use the materials in this report. We publish under
the Creative Commons License Attribution-Noncommercial-Share Alike 3.0 United States and
you will find our citation policy here.

Disclosure
Your trust is important to us. As such, we are open and transparent about our financial
relationships and our research processes.

Research Methodology and Overview
For the purpose of this report, transportation management is defined as technologies that
automate and improve decision making in domestic and international logistics.

This report is based on a quantitative study conducted between August 16th, 2012 and October
9th, 2012. The summary reflects responses from 75 respondents from 55 companies active in
transportation freight decisions. The goal of the study was to understand how business
complexity and maturity have affected the deployment and development of supply chain
technologies to improve transportation management. The study contrasts the views of line-of-
business transportation solution users and providers of the technologies.

The quantitative study results are enriched with insights from Supply Chain Insights’ work on
supply chain ratios and interviews with business leaders to validate and clarify the results.


Executive Overview
Fuel prices are rising. Customer service levels are escalating and data abounds. The good
news is that users of transportation planning systems feel that their solutions are aligned with
the mission. They have a higher satisfaction with their solutions than other application areas.
The primary areas of opportunity are in data analytics, business-to-business (B2B) connectivity
and supply chain visibility.

The disconnect is in solution selling. What line-of-business buyers want and what solutions
sellers are marketing is vastly different. Providers are driving a message of deeper optimization
while line-of-business users are asking for better analytics. The great news is the advancement
of in-memory analytics makes this an easy gap to close.


Current State
Supply chain management is three decades old. As shown in figure 1, the first two decades
experienced little volatility in the price of oil. The last decade has seen both rising prices and
extreme volatility. Therefore, it should be no surprise that the overwhelming issue for logistics
managers is the rising cost of fuel.

Figure 1. Rising Cost of West Texas Intermediate Crude Oil

Transportation leaders are feeling the squeeze. Costs are increasing to run trucks. Fuel prices
are uncertain and customer expectations for on-time delivery have increased at about the same
rate as fuel prices. Most companies are also straddling increasing expectations for corporate
social responsibility and rising governmental compliance. Post-recession companies are
experiencing increased issues with equipment and driver availability. The severity of these
issues is shown in figure 2:

When compared to parallel studies, there is a distinctive difference in business pain between
transportation management users and supply chain planners. While the supply chain planning
teams struggle with management understanding of supply chain fundamentals, this is not the
case for the transportation management team. For this team, the mission is clear. The data is
not.


Figure 2. Top Three Concerns of Users of Solutions for Domestic Freight

In the face of rising costs and increasing expectations, logistics managers cannot translate data
into action. Despite the myriad of project implementations, and twenty years of system
implementations, data is everywhere, but it is not actionable.

Figure 3. Individual Business Pain of Transportation Management Line-of-Business Users


The self-ratings of users of transportation management solutions are outlined in figure 4. The
maturity of teams on the use of systems for transportation optimization is much more mature
than the use of the data in supply chain financials, supply chain visibility or cost-to-serve
analysis. The traditional definition of transportation management has focused on optimization
without a tighter connection of transportation optimization to total costs. The promise of an
integrated planning system is not today’s reality for most companies. Instead, transportation
management has been implemented as a focused project for the transportation team without
process integration to trade-off transportation costs and constraints with those in manufacturing,
warehousing and procurement.

The limited scope of these deployments to not include transportation decision making into more
holistic supply chain decision making is the Achilles’ heel for most companies. As a result, the
self-ratings on total costs and cost-to-serve analysis are much lower.

Figure 4. Self-assessment of Users of Transportation Management Solutions

In general, transportation planning users are happy. As shown in figure 5, the gaps in the design
of transportation solutions and the actual performance are small. While line-of-business users
would like to see enhanced capabilities for benchmarking, supply chain visibility, inbound freight
and B2B connectivity, the users of transportation management solutions are much happier with
these solutions than their cohorts are in the areas of supply chain planning.


Figure 5. Performance versus Satisfaction with Transportation Solutions

Gaps Between What the Business Wants to Buy
and What Transportation Providers Sell
The traditional provider of transportation solutions is pushing an optimization message and
believes that the market has more opportunity to sell new solutions than is market reality. To
understand this, consider figures 6 and 7 below that contrast the views of technology providers
and line-of-business users.

In general, the technology’s user is satisfied with current solutions. They feel that there are small
gaps to fill in technology solutions. They are seeking advancements in the areas of supply
chain visibility, B2B connectivity, and supply chain benchmarking. In contrast, in figure 7, the
providers of solutions are focused on an integrated optimization message with a belief that there
is a larger gap in the solution capabilities than the user of technology sees. This gap has stalled
market momentum for transportation solutions.

It is time for solution providers to rethink their approach.


Figure 6. Relative Importance vs. Performance of Solutions: Perspective of Line-of-Business
Users

Figure 7. Relative Importance versus Performance of Solutions: Perspective of Transportation
Service Providers


Corporate Social Responsibility: The New
Horizon.
The introduction of corporate social responsibility as a corporate mandate has slowly
transformed transportation planning over the past five years. In our study, 79% of
manufacturers have a CSR policy, and 50% of them are clear on the connection of the CSR
strategy and the impact on transportation planning. This linkage is clearer for line-of-business
users than providers of transportation solutions. The primary opportunity for solution
development is better calculation of the carbon footprint impact in transportation optimization.
This gap is shown in figure 8.

Figure 8. Tactics to Improve Performance against Corporate Social Responsibility Initiatives

Recommendations
Overall, the user of transportation solutions has a high satisfaction level. This is both at an
enterprise and a value network level. The level of outsourcing to a third-party logistics provider
is high, and 68% of line-of-business users are satisfied with these relationships. This study is
confirmation of the data that we reported on user satisfaction in our Voice of Supply Chain Study
in the spring of 2012.


Figure 9. Importance of vs. Satisfaction with Supply Chain Management Systems
from Supply Chain Insights’ Voice of the Supply Chain Leader Survey in March 2012

In summary, the opportunities lie in closing the gaps in analytics and using new techniques for
supply chain visibility. The answer to both of these problems requires education and retooling for
the provider of transportation solutions. Companies want to use enterprise and inter-enterprise
data. They are awash in data, but lack insights. As a result, companies should focus on:

• Driving Value in Integration. The term “integration” is used often with very different
meanings. The line-of-business buyer is seeking integration with order management and
ERP and has a lower priority with Warehouse Management Systems (WMS). While
many solution providers attempt to paint a rosy picture for WMS/TMS integration, the
market momentum is with order management and ERP planning systems.
• Use of In-memory Analytics with Pre-defined Data Models. Transportation
optimization solution providers have been slow to adopt newer forms of in-memory
analytics for improved reporting. This should be the number one goal for companies
buying an integrated data solution from an ERP solution provider like Oracle or SAP.
However, do not take it for granted. Instead, map the requirements for reporting carefully
and test in pilot deployments.


• Deployment of New Forms of Analytics for Supply Chain Visibility. While clients
request “supply chain visibility” solutions, there is no industry standard definition for
visibility. It varies from a simplistic solution like track and trace to a more complex model
for predictive alerting. Getting clarity on the definition is the first step on solving the
company pain shown in Figure 10 for supply chain visibility. Transportation management
is the first place to start to close this business pain.

Figure 10. Primary Considerations for TMS Selection

Figure 11. Company Pain Points


Conclusion
Transportation management solutions are mature with a high satisfaction level with line-of-
business users. The primary opportunity is in the advancement of analytics.


Appendix
Get the complete set of summary charts from this Supply Chain Insights research study.

Quantitative study methodology and demographics:

Figure A. Study Demographics


Figure B. Industry and Company Size of Respondents

Figure C. Experience with Third-party Logistics Systems


About Supply Chain Insights LLC
Supply Chain Insights LLC (SCI) is a research and advisory firm focused on reinventing the
analyst model. The services of the company are designed to help supply chain teams improve
value-based outcomes. Commercial offerings include research-based Advisory Services, a
Dedicated Supply Chain Community and Web-based Training.

About Lora Cecere
Lora Cecere (twitter ID @lcecere) is the Founder of Supply Chain Insights
LLC and the author of popular enterprise software blog Supply Chain
Shaman currently read by 5000 supply chain professionals. Her book,
Bricks Matter, publishes in December 2012.

With over nine years as a research analyst with AMR Research,
Altimeter Group, Gartner Group and now as a Founder of Supply Chain
Insights, Lora understands supply chain. She has worked with over 600
companies on their supply chain strategy and speaks at over 50
conferences a year on the evolution of supply chain processes and technologies. Her research
is designed for the early adopter seeking first mover advantage.


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