By Mike Skinner, Vice President, CLX Logistics
Let’s face it, IT (the information technology department) is either the enabler or the gate-keeper for all-too-many of our good ideas. Unfortunately, when it comes to prioritizing IT budgets and resourcing, Logistics all too often takes a back seat to Finance, Sales, Customer Service and Manufacturing – i.e. everybody else. As a result, logistics technology projects such as a Transportation Management System (TMS) are often underfunded and/or understaffed, and therefore prone to project delays and missed go-live dates – which results in greater difficulties delivering ROI.
So what is a logistics/supply chain manager to do in convincing senior management to give us some love – to prioritize and properly fund these projects? Let’s start with, why are logistics projects, say for instance the implementation of a world-class TMS, so important?
Why Specialized Transportation Solutions Matter
It’s pretty simple really: transportation costs account for 3-8 percent of your company’s total revenues, and transportation represents the first and final leg of your ever so important supply chain. Automating and optimizing transportation activities can drive huge savings. Providing predictability and visibility to shipments both inbound to manufacturing and outbound to customers can drive step changes in the effectiveness of the end-to-end supply chain. This has been proven over and over again by shippers of everything from yogurt to roof-top HVAC systems. These improvements matter …… a lot…… to nearly every department in your company, to your customers and to bottom lines!
The obstacles that companies tend to encounter in pursuing such improvements stem from the fact that logistics and transportation IT decisions get lumped in with decisions to buy and implement enterprise resource planning (ERP) software. ERP solutions from companies like SAP, Oracle and Microsoft offer transportation modules, which are typically sold at a steep discount as part of the whole ERP package. So in acquiring ERPs, companies are too quick to determine that Transportation’s needs will be met in the course of implementing the ERP. The problem with this thinking is that transportation activities are a lot more nuanced and complex than companies realize. During the ERP assessment and deployment, far too little time and consideration are given to addressing the complexities of actives such as: transportation contracts and rates, customer delivery requirements, load planning and optimization, carrier integration/connectivity, and freight cost accounting/settlement.
The result? Too little attention is paid to whether the ERP can actually address your company’s transportation requirements, and only the bare basics are developed and implemented. More often than not your company’s fancy new ERP might even make your job harder than it was before!
4 IT Challenges Logistics Organizations Face
Now that your company has spent many millions to implement the ERP, and your transportation requirements remain unmet, what next? Decisions to find and implement the right TMS are going to fall on you. And, although IT is a critical player in finding and deploying your TMS, IT is now entirely consumed with just keeping the ERP wheels turning for everyone else. You have some major hurdles to overcome, including:
- Resourcing: The needs of the logistics organization are often deemed lower priority than the needs of other departments, despite Transportation’s cost footprint and important touch points to customers and manufacturing.
- Business case development: Even though savings and service improvements are often significant, developing a baseline and ROI for IT projects is a complex challenge.
- Communication: Logistics managers often struggle to get senior management attention and to articulate their needs sufficiently to get attention on logistics projects.
- Capacity to staff projects: Logistics is often one of the hardest hit departments when it comes to head-count reductions, resulting in understaffed organizations that struggle to man improvement projects.
4 Steps to Getting the Buy-In You Need
So what can you do to better ensure that IT buys into the project and is held accountable for deadlines? And how can IT be made to feel like a strategic partner rather than a service provider? Here are a few ideas:
- Build a compelling ROI: Remember, over and over again shippers have delivered substantial savings from TMS implementations. Work with a TMS vendor, and engage your finance team to calculate and present the business case. TMS can pay for itself within the year, and pay large ongoing dividends.
- Engage IT early in the discussion: Once there is a business case, IT needs to be engaged in order to help identify a solution that will work. IT should be closely involved in evaluating the business case, scoping and designing the solution, and selecting the solution provider.
- Understand the project complexities: To implement a successful project, you need to be realistic about expectations and timelines. These projects are not easy – do not let technology vendors convince you otherwise. They need proper attention, professional project management, and sufficient resources in Logistics, Operations, Customer Service, Accounting, and IT.
- Demand sufficient funding and resourcing: Enough said.
The bottom line? Logistics IT projects matter. They drive big-time improvements. But they are not easy. Don’t let yours go underappreciated and underfunded.
Mike Skinner is the vice president of CLX Logistics. He is responsible for strategic development, marketing and deployment of CLX Logistics technology-based solutions and services. Skinner leverages his experience in supply-chain consulting, information systems and operations management to help shippers design and deploy world-class technology solutions in their efforts to reduce costs and improve service.