Considering how long TMS has been around for, there has been poor uptake in automotive. But that is changing, and now it is being applied to both in- and outbound movements with obvious success
At Subaru of America, outbound logistics processes are carefully choreographed by Oracle’s Transportation Management System (TMS) application–one of almost a dozen Oracle applications that the business deploys across its operations.
The system, explains Subaru’s Brian Simmermon, is responsible for automating the scheduling of some 185,000 vehicles a year to nearly 600 dealers right across the USA.
Aligning shipments with production schedules, it is credited with improving customer satisfaction by delivering vehicles as forecast to dealers–despite the inevitable hiccups along the way–and enabling the use of track-and-trace capabilities to accelerate priority shipments, optimise loads, and improve on-time delivery.
“Oracle’s TMS provided an automated, easy-to-use system,” says Simmermon. “As a result, we are shipping more full loads, and are able to prioritise car shipments as needed. We also provide our dealerships with more accurate delivery schedules.”
Impressive stuff, to be sure. But look more closely, and Subaru stands out as a surprisingly rare example of such excellence. Despite the seemingly obvious attractions of a TMS, in short, uptake is decidedly variable.
“On the whole, the automotive industry is lagging behind current best practice in its use of TMS: some companies are actually pretty capable at using it, some are pretty mediocre–and some are very bad,” says Paul Bender, an independent advisor with extensive experience of TMS within the automotive industry. “Among those classed as ‘state of the art’, Ford and Toyota stand out. BMW are reasonably good, for instance, while VW and GM are catching up.”
Talk to others close to the industry, and a similar picture emerges. In short, despite a pedigree stretching back to the early 1990s and beyond, the industry’s adoption of TMS is patchy and inconsistent.
Sovereign’s Richard Barker, for instance, is scathing in his criticism of apparently “state of the art” automobile manufacturing plants, which turn out to be inadequately supported by poorly-planned transport capabilities.
“There’s a huge amount of waste in terms of postmanufacture vehicle movement and storage,” he charges. “You can have highly-efficient manufacturing environments–at times with standards of housekeeping and cleanliness that can be better than in many office environments–but at outbound gate release, it all falls apart.”
But why, exactly, is this the case? Why have industries such as grocery and fashion retailing–not to mention sections of the logistics services market–seen TMS as a competitive differentiator, while the automotive sector remains stuck in the past? One reason, it appears, is structural. Look at industries where TMS has established more of a beachhead, and you’ll typically see cutthroat competitive conditions where cost and transit time are competitive differentiators.
Cutthroat conditions nurture TMS uptake
In Europe’s grocery retailing industry, for example, supermarket delivery times that are planned to the hour have become a means for eliminating vast swathes of inventory, while simultaneously offering consumers extensive ranges of fresh and chilled food with extensive in-store shelf life remaining. UK-headquartered supermarket giant Tesco, for instance, has featured in Gartner-AMR’s global ‘Supply Chain Top 25’ for over a decade.
For with tight retail margins, the efficient use of transport assets–both in terms of miles travelled and cubic utilisation– can have a major impact on profitability. Look to boost on-time deliveries while minimising distance travelled and maximising cubic utilisation, in short, and you’ll soon wind up peering under the hood of a TMS.
Likewise, step back a link in the supply chain, and supermarket suppliers are under pressure that is no less intense to deliver to retailers’ distribution centres in a timely and efficient manner. For them, too, a TMS is de rigeur–either that, or the use of a logistics service provider that already possesses TMS capabilities.
But within the automotive industry, such imperatives are much reduced. Or at least, had been much reduced, prior to the 2008 global financial crisis and the ensuing recession which saw automakers driven to bankruptcy and serious restructuring. As a result, the pressures to adopt TMS capabilities were less intense.
Outbound finished vehicle logistics processes, for example, have largely internal customers as their final delivery destinations–national sales organisations, dealer groups and the like.
Deliver late, in short, and you aren’t at risk of losing the business. And to the extent that cost has been an issue, what has been seen as important are chiefly the direct and explicit costs associated with transport–freight charges, damage and so forth–rather than the less visible and more implicit costs such as the financing of inventory.
Similarly, TMS on the inbound logistics side is also hampered by structural issues. Here, at least, the commercial imperatives for slicker transport processes are clear–at least so far as timely deliveries are concerned, if not necessarily cubic utilisation and other efficiency measures. The reality, though, is different.
For one thing, there is a structural reliance on placing much of the burden of inbound logistics planning and optimisation on tier one suppliers. Transport is a issue, goes the logic, but the responsibility for getting it right lies with suppliers–and their logistics service providers–rather than the OEMs themselves.
“Pirelli hasn’t operated a TMS in over ten years,” notes John Godfrey, director of logistics at Pirelli Tire North America. “We outsource our logistics to 3PLs, and it’s the 3PLs who have the TMS capabilities.”
John Begg agrees. “I regard a TMS as a core competency of a logistics provider, rather than our own core competency, so we always try to engage with providers that have a TMS–and what’s more, an up-to-date TMS,” he says.
“And it’s not just the TMS itself that I’m looking for: I also want them to have the skills and analysts to use it. I’ve a small department of ten people or so, of whom two might be regarded as skilled at using a TMS’s modelling capability. Lose one of those people, and you’ve lost 50% of your TMS skills. It’s important that we have access to TMS capabilities–but it’s not important that we ourselves possess those capabilities.”
Similarly, a structural reliance on supplier parks, supplier proximity to assembly plants, and milk runs has served to minimise the need for transport planning and optimisation by imposing physical conditions on supply contracts. From an overall cost perspective, a supplier park or milk run may not be an optimal solution–but the impact on transport planning is undeniable. For with virtually nothing to plan, whiteboards and spreadsheets can shoulder the burden: the hi-tech algorithms of a TMS aren’t required.
And if the automotive industry’s structural imperatives have reduced the take-up of TMS, the industry’s cultural norms have only reinforced the message.
“Management haven’t always appreciated what a TMS can offer,” says independent advisor Bender. “The people running the companies are automotive engineers, and they have prioritised investment in new engines and transmissions.”
Organisation structures, too, have led to a fragmented perception of the opportunity, adds Sovereign’s Barker.
“Post-manufacture, responsibility is split between too many functions–there’s a complete absence of what the supermarkets call ‘command and control’. There’s nobody looking at the supply chain as a whole, and instead, management simply relies on optimising the chain one link at a time.”
Bender agrees. “Ford and Toyota tend to stand out, because they are taking a true supply chain perspective to transport management–and using genuine optimisation to do so, rather than ‘seat of the pant’ heuristics,” he says.
“But elsewhere, people are often talking about just TMS, rather than the supply chain, or logistics, and as a result they’re missing out on the end-to-end perspective. There’s a huge opportunity, but companies are just looking at the transport dimension, and not seeing the inventory impacts and all the other trade-offs that the use of a TMS can unlock.”
So what, exactly, does a TMS offer? And how, precisely, does it deliver its benefits?
Simply put, says Bala Subramanian at ITC Infotech, a TMS offers “the real-time advanced transportation planning and execution tools that are needed to accurately build, route, assign and track shipments.”
And specifically, in short, a TMS does two things. First, it plans and optimises routes so as to reduce fleet miles and journey times while simultaneously maximising customer due-date performance. And second, it optimises loads and load planning–perhaps to reduce picking time, unloading time, or en route damage.
“Organisations want to seamlessly manage freight in the most efficient way possible, while maximizing and tracking profit,” explains Subramanian. “A TMS will aid in minimising the impact of shorter lead time requirements, and in responding in real time to sequence or location changes. In doing so, it should be able to handle exceptions and last-minute changes dynamically, while permitting users to see the cost and service ramifications of these changes and exceptions.”
And the returns can be considerable. A Forrester study in 2008, for instance, highlighted that companies adopting TMS can expect savings of 8% in terms of total freight spend.
Where do those bottom line savings come from? In short, from right across the transport landscape. Reduced expedited order costs through better planning; increased load consolidation; better asset utilisation; optimised mode selection; lower administrative costs–and even top line sales growth, through more accurate customer delivery information.
That said, emphasises Adrian Weiler of Inform–which offers its own TMS, SyncroTESS–the nature of transport optimisation is itself deceptively complex.
‘Qualitative’ transport optimisation, in Weiler’s terminology, is concerned with the optimisation of either single stages in a process, or single items of shipments. ‘Quantitative’ optimisation, on the other hand, is concerned with process stages or shipments in multiples greater than one–the correct sequencing of hundreds of trucks within an assembly plant over a period of time, for instance.
The difference may appear abstract, he stresses, but is absolutely fundamental–and of the two types of optimisation, he adds, quantitative optimisation undoubtedly represents the bigger opportunity.
“Most TMS solutions are focused on qualitative optimisation, because it’s a more straightforward problem to solve,” he says. “But in optimising a single shipment, they’re overlooking the potential that exists to cut down on the numbers of trucks, people or transportation orders that are required, by looking at the opportunity for combining loads, or identifying situations where return loads exist.”
Equally, the planning and optimisation carried out by a TMS requires close links with other enterprise applications such as ERP and warehouse management systems (WMS)– even when the TMS or WMS in question is operated by a 3PL. The situation at Pirelli Tire North America, for instance, is not untypical of what is called for.
“When we create a delivery requirement in our SAP ERP system, it’s fed via EDI to the relevant 3PL’s WMS, which in turn feeds the 3PL’s TMS,” says Pirelli’s Godfrey. “The TMS then gives a confirmation back to the WMS, which in turn passes it to the ERP system.”
No wonder, perhaps, that vendors offering pre-integrated TMS capabilities are reporting a growing interest.
“We’re a lot more visible within the automotive supply chain than we were five years ago,” says Oracle’s Dominic Regan.
In particular, he says, there is a growing awareness that all three aspects of automotive industry logistics activity– inbound, outbound and parts supply–may each be able to benefit, albeit in different ways, from TMS capabilities.
“The industry has tended to view these three areas in isolation,” he notes, echoing others’ observations on the industry’s organisational myopia when it comes to TMS and supply chain issues. “But what we’re seeing is companies saying to us that the core process is the same, even though what is being transported differs–so what opportunities exist to combine the three, under a single TMS?”
Volkswagen Mexico’s finished vehicle logistics–covering the Audi, Bentley, Porsche, Seat and Volkswagen marques, and totalling some 440,000 vehicles a year–is controlled and optimised by Inform’s SyncroTESS TMS. It’s a challenge that is deceptively complex, involving imports from Europe as well as exports to Europe, and embracing both built-to-order and built-to-stock methodologies–the former mostly for exports to Europe, and the latter for the Golf, New Beetle and Jetta models produced at the company’s Puebla plant and exported to the United States and Canada.
The TMS must cover three distinct operations: the yard at the plant in Puebla–which produces some 400,000 vehicles a year–as well as an operation for import and export in the port of Veracruz, and an export operation in Acapulco.
The yard in Puebla has a capacity of 11,500 cars, bolstered by some 8,000 spaces in external yards close to the plant, and the yards of export ports such as Veracruz, which must also handle vehicles arriving from Europe and South America. And the need to constantly ship vehicles out of the yards to their final destination is crucial to the success of the operation, explains Volkswagen management.
“We ship about one train per day with 600 export cars to North America, and one train to the port in Veracruz”, says Hector Romero, the manager responsible for yard management at Puebla. On top of that, about 80 to 100 large ‘Madrina’ trucks, with a capacity of up to 15 vehicles, are despatched each day–either to Mexican dealers, or also to the ports.
Integration with Tomcads
Integrated with Volkswagen’s self-built Tomcads system, which contains vehicle-specific shipment information such as route, destination and VIN number, the SyncroTESS TMS then plans every single process step, both inside the Mexico yards and between them.
“After receiving a car in SyncroTESS, the system generates automatically the correct workflow and creates the different jobs such as inspections, moves, loading, maintenance and so forth–and does so in the right sequence,” explains Björn Beckmann, VW Mexico. Optimisation algorithms then set to work to deliver sought-for efficiencies.
“Only a computer system with highly sophisticated algorithms is capable of optimising these complex processes in an efficient way,” says Matthias Berlit, the Inform executive responsible for the system’s introduction in Mexico. “Similar optimisers are used by SyncroTESS for ground handling at airports, and to plan the movements of containers inside a container terminal.”
The optimisation also covers the planning of the best possible transport routes, to ensure the efficient and on schedule delivery of vehicles.
“Apart from the special requirements imposed by some dealers or cars, the general rules for the optimisation of dealer delivery trips are ‘as short a journey as possible’, and ‘utilise the trucks as much as possible’,” says Beckmann. “For example, we have a capacity of 17 cars in our rail wagons. But if the cars are loaded in the wrong order, we the lose capacity, or have to rearrange the sequence manually to find a car. Using pre-stored load configurations SyncroTESS triggers ‘move orders’ exactly in the required sequence.”
And the industry’s recent economic travails have only hastened the process, he adds.
“One of the features of the global recession has been to incentivise automakers to look harder for savings in transportation,” says Regan. “The industry used to be quite conservative when it came to transportation, but that’s no longer the case. And if that means acquiring TMS capabilities, so be it.”
That said, he emphasises, Oracle is careful to acknowledge that its own TMS capabilities might not necessarily provide a total solution.
“There are certainly points in the finished vehicle logistics supply chain where you might need industry-specific capabilities–compound management, for instance,” Regan says. “We have no aspirations in that area: our role is to provide visibility from gate release through to the dealer, and to integrate with other applications where those applications can add value.”
And in simple terms, he adds, “We aim to plan and control movement through the supply chain, with WMS and similar systems controlling the vehicle when it’s stationary, or having non-transport related work performed. We plan end-to-end, and exchange data with other applications at nodes along the way.”
And despite the industry’s recent problems–not to mention organisational and cultural challenges–Regan is optimistic about the future of TMS within the automotive industry.
“The fact that it’s cars or components doesn’t make the planning and optimisation problem a different one, or any more difficult,” he asserts. “What’s important is retaining control and visibility throughout the supply chain.”
And that, in short, is a lesson that the grocery industry learned 15 years ago.
