Global Transportation System 101

What is Global Transportation Management? 

You may be forgiven for confusing Transportation Management (TM) with Supply Chain- or Logistics Management. However, while not entirely unrelated to Supply Chain Management, Transportation Management is a distinct subset within the industry. 

To better understand what TM is, it's important to understand what it's not. Cornell University defines supply chain management as "the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally."

Conversely, Bitpipe defines transportation management as "the management of transportation operations of all types, including tracking and managing every aspect of vehicle maintenance, fuel costing, routing mapping, warehousing, communications, EDI implementations, traveler and cargo handling, carrier selection and management, [and] accounting."

Put simply, if SCM creates and controls the infrastructure necessary to generate net value, TM manages the needs and requirements to physically transport goods across that infrastructure.

So, while similar, TM has its own set of unique challenges (and solutions) that every shipping exporter should be aware of! 

New call-to-action

Challenges of Global Transportation

Ned Blinick, Chief Product Officer at 3rdwave, reports that "there have been 4 fundamental areas where global transportation is challenged." He notes that, while new, the fourth area, Political Disruption, is of growing importance and concern. These challenges include: 

  • Information Accessibility 
  • Transportation Cost Management 
  • Delivery Performance 
  • Political Disruption

As we've already seen in 2022, supply chain disruptions have impacted delivery performance, war and political turmoil have resulted in tariffs and trade disputes, and transportation costs across the board are at an all-time high. 

 

Global transportation management

 

Information Accessibility

Notice we didn't say Information Availability--that's because shippers today struggle to manage, capture, and access an overwhelming amount of information. 

Overall, visibility into supplier activity is what transportation teams desperately need. In many instances, from the moment a purchase order (PO) is executed to the supplier, the transportation team has little to no visibility of the PO or its execution. This breakdown of control in early stages of the transportation process ripples through across supply chains, creating significant challenges to inventory management and optimization. 

To make matters worse, many systems rely on information from external systems. The harmonious coordination of reporting, analysis, and communication between these systems--oftentimes comprised of suppliers, carriers, freight forwarders, regulatory databases, etc.--relies heavily on the availability of quality information. 

Without visibility or accurate information, what needs to be an efficient, well-rehearsed orchestra becomes a costly medley of discordant notes. 

Transportation Cost Management

Unsurprisingly, most TMS studies reveal cost to be the leading challenge for transportation professionals. However, it may be surprising to hear that the greatest reductions in cost come from improvements to visibility and analysis, rather than negotiation or execution.

To better illustrate this concept, consider this: if the cost of a finished product includes the negotiated price of raw materials and the costs associated with moving a product across the supply chain, the most massageable costs are the ones where innovation breeds efficiency—the price of raw materials is a hard cost. Now, that’s not to say that negotiations aren’t crucial, but transportation optimization usually lends itself to greater leverage and negotiating power.

For example, carrier freight invoicing errors are costly but difficult to audit effectively. Better rate negotiation tactics won’t solve the underlying problem: more effective management of invoices would require greater man hours at a higher cost. In this situation, integrating an automated invoice auditing solution would reduce the costs associated with invoicing errors by optimizing the transportation process.

New call-to-action

Delivery Performance

The insidiousness of the traditional challenges is their interconnectivity. Supply chain visibility (or a lack thereof) has a direct impact on delivery performance. In response, some businesses outsource their transportation planning to 3rd party providers. In other situations, freight forwarders (or 3PLs) are tasked with monitoring suppliers and arranging shipments from vendors. Unfortunately, both businesses in these scenarios will likely experience diminished performance capabilities because they can’t directly monitor their global supply chain activity.

Another obstacle to timely delivery experienced by many shippers is border delays. Of course, for businesses without an automated export system, holdups at customs prove difficult to resolve—never mind if visibility is compromised! To stay compliant and avoid delays and penalties, savvy transportation teams adopt automated export systems (AES) to navigate international shipping regulations.

Once past the border (or even at the local warehouse), your customer’s package still needs to reach its destination. When it comes to last-mile delivery, finding the right carrier is a matter of finding available trucks within strict budgets and timelines. The challenge is efficiently comparing rates across a broad spectrum of carriers. Again, many businesses turn to multi-carrier rate shopping solutions for parcel delivery to automatically compare rates from one platform.

Political Disruption

While ever-present but increasingly impactful, political disruptions—more specifically tariffs and sanctions—have far-reaching implications in a globalized world. Tariff and non-tariff barriers have been weaponized by countries amid trade disputes. The resulting shift in the trade landscape demands that businesses remain agile, and react swiftly to developing situations.

For example, British withdrawal from the European Union (Brexit), had an enormous impact on international shipping processes, most notably to changes in shipping compliance. Because it’s less predictable than traditional transportation challenges, Political Disruption is best met with a holistic approach. “Digital Transformation” has become a buzzword in the supply chain & logistics community, but it has some warranted weight: companies who’ve invested in large-scale digital transformations have been better prepared to weather the onslaught of storms since COVID began.

 

global transportation system-international currency

 

Overcoming Challenges with a Global Transportation Management System (TMS) 

So, we’ve identified the major challenges that plague TM and hinted at some solutions, but what is a Transportation Management System and how does it overcome the above challenges?

Transportation software solutions provide visibility—visibility into:

  • Day-to-day transportation operations
  • Trade compliance
  • Import/export documentation
  • Carrier rates
  • And more

The most effective solutions consolidate these processes on one platform to reduce labor, maximize efficiency, and increase profit.

Industries that Benefit from TMS

While primarily used by businesses that spend $100 million+ annually on freight, TMS solutions have been adopted by small businesses (SMBs) thanks to the advent of more affordable, cloud-based options.

Global transportation management may seem like a collection of disjointed systems, and, to a degree, it is. Fortunately, ShipERP has 15+ years of expertise in bringing the pieces together. Whether you use SAP or any other ERP system, ShipERP can consolidate and optimize your transportation processes with solutions designed to overcome the challenges outlined above (and much more), including:

  • ShipERP Corereduce labor, save costs, and automate shipment processing for your SAP-enabled business
  • ShipERP Cloudmanage rate shopping, multi-carrier shipping, parcel tracking, and export documentation—all in one space—with a true platform agnostic, cloud-native multi-carrier solution
  • AuditERPmonitor and control transportation costs with the freight audit solutions that reviews line-haul charges, weight surcharges, oversize charges, assessorial charges, fuel charges, and drayage fees (to name a few)
  • ShipAESensure export compliance and eliminate manual filing with the SAP-integrated automated export system
  • SupplierPORTALstandardize your supplier communication and enable greater collaboration between trading partners to gain better visibility and control over your freight costs
  • CarrierPORTALconnect with shipping carriers in real-time to receive carrier delivery statuses and customer e-signatures with the easy-to-use SAP web portal

Free downloadable resources button

Back to Blog

Related Articles

SAP Supply Chain Management (SCM): Features & Benefits

What do you need to know about SAP Supply Chain Management? It’s a supply chain software within SAP...

Step Up Your SAP SCM Game in 2021 (Courses & Certifications)

You've learned and adapted to the supply chain technology challenges last year, but it's now time...

3 Steps to Supply Chain Management Mastery

Supply chain professionals are in high demand, and the world is taking notice! As the sharp...