Transportation Management Software’s Critical Gaps When It Comes to Local Delivery
Enterprises with any complexity or volume in their supply chain have long used technology to improve efficiency and better collaborate with their partners. It’s no surprise, then, that, according to a recent Gartner analyst’s estimate, more than 50 percent of large shippers have a transportation management system/software (TMS). When integrated across transportation providers and populated with contracts and rates across modes, a TMS offers a huge potential return on investment, primarily from optimizing shipments for speed and cost. Unfortunately, enterprises are finding that when it comes to managing last mile logistics and local delivery, their TMS can have significant gaps.
Although a TMS allows shippers to optimize among the better-known last mile modes of small parcel carriers (FedEx and UPS), truckload (TL), and LTL carriers, they don’t handle shipments through local carriers (aka couriers) and independent contract local drivers. These gaps have been around since the beginning, and the majority of enterprises have been forced to close them through inefficient and ineffective manual processes or by building systems in house. Both a growing focus on improving the customer experience and the inevitable emergence of same-day delivery, storefront delivery, and other similar programs, which only local carriers and independent contract drivers are able to provide, are starting to shine a spotlight on these problems and make them a top priority for most shippers.
How do existing TMS offerings fall short for local delivery?
1) TMS providers are not integrated with local carriers. In fact, even the EDI networks / VANs, which many enterprises rely upon to connect them to their carriers, are not integrated with local carriers. This is a huge challenge with seemingly no solution, since there are thousands of local carriers in the United States alone, and by some estimates, nearly 60 percent have proprietary software.
2) Unlike the small-parcel, TL, and LTL industries, local carriers tend not to be technology enabled. They don’t have CRM / issue management or standard APIs for data exchange, and, in many instances, they do not have driver-level information. Driver-level information is critical when it comes to managing the customer experience, as drivers are often an enterprise shipper’s face to the customer.
3) There are no standard service definitions and rate structures in place for local delivery today. There is no CzarLite. To one carrier, a “same-day” delivery could mean pickup and delivery within 90 minutes, whereas to another, it’s pickup by noon and delivery by 6 pm. These differences make pricing and cost optimization very difficult.
TMS providers have no choice but to tackle these challenges as the last mile increases in importance. I expect to see standardization emerge (service level definitions, pricing, and APIs) in the industry, along with a set of emerging TMS providers focused on the last mile. Every TMS provider needs to address these challenges now, or they may fall prey to the “local delivery TMS gap” in their next sales cycle.