Spotlight on transportation management and logistics

Rising freight rates, fuel costs, and constrained capacity account for the newfound interest in transportation management systems (TMS). So says a recent report out of Boston-based Aberdeen Group. Of even greater importance to 83 percent of executives surveyed is the impact transportation has on overall supply chain performance.

"Best-in-class companies want to reduce freight costs [while enabling] easy access to information," says Beth Enslow, Aberdeen's senior VP of enterprise research. "We are seeing a major shift to viewing transportation management systems as information hubs for synchronizing inbound shipments management."

Nearly 55 percent of respondents offer access to online transportation costs and status information to multiple departments—up from 31 percent in a 2004 study. This trend is reflected in increased budgets for TMS software. A copy of Aberdeen Group's Transportation Management Benchmark Report can be obtained online at www.aberdeen.com.

IBM is expanding its original consulting services role with UPM, a paper products company based in Helsinki, to complete development of the company's global supply chain delivery model.

"The bulk of the work to date has been putting together the blueprint," says Juha Hulkkonen, global business services country manager for IBM Finland. "Now we're executing against that plan."

The implementation will integrate SAP financials, Oracle transportation management, and i2 Technologies supply chain applications, as well as other application development and support to complete the UPM Supply Chain Application Centre. UPM, with operations in 22 countries, anticipates final rollout of the project by the end of 2007. The project was initiated in 2003.

As overall production costs rise along with labor costs in China, companies are expected to turn to outsourced logistics as a means of cost containment, according to a study by London-based Transport Intelligence.

According to the report, the market for outsourced logistics grew 30 percent from 2004 to 2005, and is projected to continue at that pace through 2009.

"A big reason for basing manufacturing in China was cheap labor, but as labor and other costs rise—like that for land in developed coastal commercial centers—the logistics element of overall costs grows more important," says John Manners-Ball, chief analyst, Transport Intelligence.

With the government wanting manufacturers to base operations more remotely in less congested areas, transportation will become more critical to moving goods to ports for shipment.

"At the moment, there is a big black hole from outside the manufacturers' gates as to how they will get to ports," claims Manners-Ball.

Less than a year after acquiring G-Log, Oracle delivered on its commitment to continue transportation management system (TMS) innovation with release of Oracle Transportation Management 5.5 in September. The new release integrates and streamlines global transportation planning and execution, and provides integrated multimode freight payment and business process automation, dock appointment scheduling, and a 3D load modeling tool.

"Two important areas of focus in the release are carrier collaboration and cost control," says Derek Gittoes, senior director of product strategy for transportation. "With a shortage in transportation capacity, the pendulum has swung in favor of carriers, where shippers now want to ensure they're easy to do business with. Dock appointment scheduling, using a scheduling optimization algorithm, for example, eliminates the wait time of drivers needing to load or unload," he says.

According to Adrian Gonzales, research director at Dedham, Mass.-based ARC Advisory Group, "One concern when G-Log was acquired was whether Oracle would continue the pace of innovation of the product. They've done this. A key differentiator in this release is the 3D load creation tool integrated with optimization to ensure fit for maximum load."