bill stankiewicz copy american shipper report 20012 web

Published November 2010

Written By: James Blaeser Publisher

Sponsored by:

ITMS Benchmark Study: Technology Meets The Challenge of an Unanticipated Freight Volume Rebound

In partnership with

International Transportation Management Systems | Benchmark Report: 2010

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American Shipper surveyed more than 250 supply chain managers on their international transportation management practices, processes, human resources and the technologies that support them. This report is the second annual study on this subject produced in conjunction with the Retail Industry Leaders Association (RILA).

For the purposes of this study, the focus is placed specifically on the stages involving planning through event management and the visibility into each leg of the process. Procurement and settlement are purposely set aside to focus on the “blocking and tackling” of international logistics management—planning, order management, tendering and event management.

American Shipper’s benchmarking initiatives seek to parse out compa-nies which are succeeding at any particular function and examine why they are successful. These “winners” are the top tier of respondents based on their answers to a set of questions that are seeded in the questionnaire. With respect to this survey the winners meet three key criteria:

1. Report that they are capable of sending an electronic purchase order (PO) (such as an EDI 850 file) to a logistics service provider (LSP).

2. Have five or more days advance notice of the specific details of their shipments before they arrive at overseas origin. These details include the number of cartons, dimensions and total cube of the shipment.

3. Meet or exceed the targets provided to them by their transportation procurement function.

Using these measures, winners account for 47 respondents to this benchmarking survey. This is the top 15 percent of the class, so to speak. Similar to last year, winners tend to be larger companies ($1 billion or more in annual sales) and include heavy representation from the retail/ wholesale segment.

Executive Summary

Winners


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Functionality

Roughly 20 percent of survey respondents categorized their interna-tional transportation management platform as mainly manual; same as 2009. Small companies are five-times more likely to manage this function manually. Overall the mixed – or hybrid – approach, where shippers and 3PLs are using systems and outsourcing in conjunction with some manual-based processes, is the most popular ITM platform, especially for large companies.

The average company that reports using a system to manage interna-tional transportation is actually using roughly four and a half applica-tions. This makes sense in a highly fragmented market where specific functionality is required to manage different geographies, transportation modes, and products or commodities. A shipper managing interna-tional ocean, air freight, and cross-border trucking might have an application for each of these modes.

It is interesting to see that winners actually use more technology to manage international transportation; at least one more application than the study average. However, this should not be construed as a best practice as there is a good explanation for this phenomenon. Winners tend to be bigger companies with presumably more complex supply chains, which would demand more applications given that there is no single solution providing functionality required by every industry segment. Winners employ more systems because automation is a winning practice. If they could use fewer applications for more func-tions, they presumably would.

Comparing available functions versus those that are critical shows in general terms shippers are only scratching the surface of what ITMS is capable of providing. Basic functions that are the most widely available are also considered the most important. Sophisticated functions, such as mode and route optimization, appear out of reach for most respondents.

3PLs, on the other hand, have more robust systems providing more key functionality. In many cases, connectivity and optimization function-ality are twice as prevalent among 3PLs as they are among shippers.

Patchwork of Systems


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Business Challenges

Productivity

Managers can only optimize what they see. In the case of winners, they can “see” their freight (i.e.—understand the important details such as cube size and weight) about five days earlier than the average. Bear in mind these figures will vary among industry segments, or even within individual segments, based on the type of freight and the shipper’s business model requirements. But in general terms, those supply chain managers with five days of extra notice—a business week—can make adjustments to schedules, routes and modes to create bottom-line savings in terms of decreased freight rates and related shipping costs. That additional visibility allows shippers to carry less inventory, while ensuring their freight gets to market on-time and reduces the impact of lost sales due to lack of stock.

In 2009, freight volumes plummeted and logistics departments responded by shedding staff to save cost. In 2010, volumes rebounded more than expected, but those logistics departments have not re-staffed. This requires them to do more with less. This trend is evident showing a jump in productivity levels across all segments.

Winners, most of which are automated, show an increase in produc-tivity greater than 12 percent. Clearly automation plays a role in enhancing the logistics operation, allowing firms to handle more volume on a nominal basis in addition to scaling up greater capacity.

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Table of Contents

Executive Summary ......................................................................................................................................................... ii

Section I: Introduction ..................................................................................................................................................... 3

> Background ............................................................................................................................................................. 3

> Winners .................................................................................................................................................................... 4

> Terminology ............................................................................................................................................................. 4

> Hypothesis ............................................................................................................................................................... 5

Section II: Demographics ............................................................................................................................................... 5

Section III: The State of ITMS ......................................................................................................................................... 9

Section IV: The Case for Automation ........................................................................................................................... 19

Section V: The Future of ITMS ...................................................................................................................................... 22

Section VI: Winners ....................................................................................................................................................... 27

Appendix A: About Our Sponsors ................................................................................................................................ 28

> GT Nexus ............................................................................................................................................................... 28

> Management Dynamics, Inc. ................................................................................................................................. 28

Appendix B: About Our Partner .................................................................................................................................... 29

> Retail Industry Leaders Association (RILA) ........................................................................................................... 29


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Figures

F I G U R E 1 : Industry Segments Represented ......................................................................................................... 5

F I G U R E 2 : Company Sizes ..................................................................................................................................... 6

F I G U R E 3 : Job titles represented .......................................................................................................................... 6

F I G U R E 4 : Transportation Modes Managed ......................................................................................................... 7

F I G U R E 5 : Percent of revenue spent on IT ........................................................................................................... 8

F I G U R E 6 : Percent of IT Budget Dedicated to ITMS ............................................................................................ 8

F I G U R E 7 : International Transportation Management Platform ......................................................................... 9

F I G U R E 8 : International Transportation Management Platform ....................................................................... 10

F I G U R E 9 : Satisfaction with Current ITMS ......................................................................................................... 11

F I G U R E 1 0 : Return on Investment from ITMS ................................................................................................... 11

F I G U R E 1 1 : The State of ITMS—Study Average ................................................................................................ 12

F I G U R E 1 2 : The State of ITMS—Winners ......................................................................................................... 12

F I G U R E 1 3 : Number of ITMS Applications Currently Employed ...................................................................... 13

F I G U R E 1 4 : Use of SI’s and Consultants Related to ITMS ............................................................................... 14

F I G U R E 1 5 : Is Your Company Capable of Sending An Electronic Purchase Order to LSPs? ........................ 15

F I G U R E 1 6 : Current vs. Critical Functionality .................................................................................................... 17

F I G U R E 1 7 : Functionality—Shippers vs 3PLs .................................................................................................... 18

F I G U R E 1 8 : Visibility to Shipment Details—Days Prior to Arrival at Origin .................................................... 19

F I G U R E 1 9 : Purchase Orders per Year, per FTE—2009 vs. 2010 .................................................................... 20

F I G U R E 2 0 : Has Your Procurement Department Established Metrics for Measuring Savings Targets? ..... 21

F I G U R E 2 1 : How Effectively Did your Company Perform Compared to Procurement Targets?................ 22

F I G U R E 2 2 : Plans to Buy/Upgrade/Replace ITMS ............................................................................................ 23

F I G U R E 2 3 : Plans to Buy/Upgrade/Replace ITMS ............................................................................................ 23

F I G U R E 2 4 : Delivery Model of Future ITMS ...................................................................................................... 24

F I G U R E 2 5 : Inhibitors to Buy/Upgrade/Replace ITMS .................................................................................... 25

F I G U R E 2 6 : Drivers to Adoption ......................................................................................................................... 26

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Section I: Introduction

B A C K G R O U N D

During the third quarter of 2010, American Shipper surveyed more than 250 supply chain managers on their international transportation management practices, processes, human resources and the technologies that support them. This report is the second annual study on this subject produced in conjunction with the Retail Industry Leaders Association (RILA—www.RILA.org).

For many, a transportation management system (TMS) is an encom-passing term that covers the full cycle of transportation activity, including procurement, planning, order management, tendering, event manage-ment, and financial settlement. For the purposes of this study, the focus is placed specifically on the stages involving planning through event management and the visibility into each leg of the process. Procurement and settlement are purposely set aside to focus on the “blocking and tackling” of international logistics management—planning, order management, tendering and event management.

It is also critical to understand that this benchmarking initiative strictly pertains to international and cross-border transportation management; what American Shipper refers to as International Transportation Manage-ment Systems or ITMS. Qualified respondents represent a variety of industry segments, including retail, manufacturing, materials, and third party logistics. Likewise, these respondents run the gamut of size based on annual sales. (Responses from carriers, consultants, technology vendors and other unqualified respondents are not included in the aggregate data presented in this report.)

Distribution channels for the 27-question benchmarking survey included American Shipper’s Website, e-mail list, and newsletters. In addition, members of RILA were invited to participate via e-mail promotions directly from RILA. As a policy, American Shipper does not share any individual survey responses. All data is displayed in aggregate form only.

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W I N N E R S

American Shipper’s benchmarking initiatives seek to parse out companies which are succeeding at any particular function and examine why they are successful. These “winners” are the top tier of respondents based on their answers to a set of questions that are seeded in the questionnaire. With respect to this survey the winners meet three key criteria:

1. Report that they are capable of sending an electronic purchase order (PO) (such as an EDI 850 file) to a logistics service provider (LSP).

2. Have five or more days advance notice of the specific details of their shipments before they arrive at overseas origin. These details include the number of cartons, dimensions and total cube of the shipment.

3. Meet or exceed the targets provided to them by their transporta-tion procurement function.

Using these measures, winners account for 47 respondents to this benchmarking survey. This is the top 15 percent of the class, so to speak. Similar to last year, winners tend to be larger companies ($1 billion or more in annual sales) and include heavy representation from the retail/ wholesale segment.

T E R M I N O L O G Y

Many of the data points illustrated in these pages break down the differences between companies that “automate” international trans-portation management versus those that handle this “manually.” In the context of this study “automated” companies are those that employ at least one software application to support their international transportation function. However, “automated” does not mean human interaction has been entirely eliminated. Likewise, “manual” does not mean these firms do not use e-mail, faxes, and other technologies. The study assumes that basic computing power is ubiquitous in the transportation management field.

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H Y P O T H E S I S

Based on last year’s study results, transportation industry trends, and events that have occurred since that time, a number of hypotheses were tested in this study. These include:

1. An automated approach to managing international transportation would be more prevalent than last year’s study showed. This proved inconclusive as illustrated in section four.

2. Shippers and 3PLs would consolidate the number of applications they use to manage international transportation—the “patch-work” would be shrinking. Section four demonstrates that this was not the case.

3. Low staffing levels coupled with asomewhat unexpected rise in freight volumes would cause productivity levels to increase. This proved to be true and is clearly illustrated in section five of this report.

4. The sudden increase in freight rates compared to last year would cause more shippers to miss their procurement targets. Section five shows this was true but not to the degree that was expected.

Section II: DemographicsStudy participants represent a range of business segments, including discrete and process manufacturing (34 percent), retail/wholesale (25 percent), and third party logistics providers (3PL) (34 percent).

Discrete manufacturing

Process manufacturing

Engineering/Construction

Raw materials/Commodities

Retail/Wholesale

3PL/Forwarder/NVOCC/Intermediary

18%

16%

5%

25%

34%

1%

F I G U R E 1 : Industry Segments Represented

294 total respondents

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C-Level (CEO,CIO,CFO, etc)

Executive (SVP, VP, GM, etc.)

Director

Manager

Staff

Other

8%

13%

19%

46%

12%

2%

F I G U R E 3 : Job titles represented


Less than $100 million

$100 million to $1 billion

Greater than $1billion33%

28%

39%

F I G U R E 2 : Company Sizes


Companies of all sizes are represented in this study . Large companies with more than $1 billion in annual revenue are slightly over repre-sented at 39 percent of the whole. Medium-sized firms with annual revenue between $100 million and $1 billion are slightly under repre-sented at 28 percent. Large companies by this definition tend to be retailers and manufacturers, while smaller firms with less than $100 million in annual revenue tend to be 3PLs.

Survey responses include all levels of the enterprise but mid-level manage-ment, which is commonly charged with transportation management, is best represented with 19 percent directors and 46 percent managers. Slightly more than 20 percent of respondents are vice president or above; these executives typically represent the 3PL segment of respondents.

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F I G U R E 4 : Transportation Modes Managed


0% 20% 40% 60% 80% 100%

Other, please specify

Ocean (non-containerized)

Cross-border rail/intermodal

Parcel/package

Cross-border truck

LCL Ocean

Airfreight

FCL Ocean 85%

78%

65%

63%

60%

31%

28%

11%

Survey respondents are responsible for managing an array of transporta-tion modes, which is important to bear in mind when reviewing the study results. Shippers with different products and service requirements will favor different modes of transportation to meet their demands. This study looks at multimodal transportation management instead of focusing on any one specific mode.

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None

Less than 1 percent

1 to 2 percent

3 to 5 percent

More than 5 percent

24%

30%

26%

19%

2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

More than15 percent

11 to 15percent

5 to 10 percentLess than5 percent

None

Retail

Manufacturing

3PL

27%

20%16%

62%

55%

38%

7%

21%26%

4%0%

12%

0%5%

9%

F I G U R E 5 : Percent of revenue spent on IT

F I G U R E 6 : Percent of IT Budget Dedicated to ITMS



Most respondents spend at least 1 percent of annual revenue on informa-tion technology in general. About 45 percent could be considered aggressive spenders, with 3 percent or more of revenue dedicated to IT. Typically, the average enterprise spends between 1 and 3 percent of annual revenue on IT.

Budget dedicated to buying and supporting international transportation management systems are relatively modest across industries. Under-standably the 3PL segment spends more than their customers from the manufacturing and retail segments. Nearly half of 3PLs polled report they spend 5 percent or more of their IT budget on ITMS investments.

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Section III: The State of ITMSRoughly 20 percent of survey respondents categorized their interna-tional transportation management platform as mainly manual; same as 2009. Small companies are five-times more likely to manage this function manually. Overall the mixed—or hybrid—approach, where shippers and 3PLs are using systems and outsourcing in conjunction with some manual-based processes, is the most popular ITM platform, especially for large companies.

Large

Medium

Small

0% 10% 20% 30% 40% 50% 60% 70% 80%

None of these

A mix or hybrid of all of these

Remote via a system orplatform provided by a

technology vendor

3PL(s) represent us in foreigncountries and manage

most/all of the activities

Manual, we handle our entireinternational supply chain

with phones/faxes/email

7%

23%

35%

21%

25%

11%

2%

3%

6%

63%

43%

39%

6%

7%

10%

F I G U R E 7 : International Transportation Management Platform


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Retail

Manufacturing

3PL

0% 10% 20% 30% 40% 50% 60%

A mix or hybrid of all of these

3PL(s) represent us inforeign countries and manage

most/all of the activities

Manual, we handle our entireinternational supply chain

with phones/faxes/email

None of these

Remote via a system orplatform provided by a

technology vendor

0%

2%

15%

3%

5%

15%

20%

23%

18%

30%

16%

0%

48%

53%

52%

F I G U R E 8 : International Transportation Management Platform


The hybrid platform is the most popular across all industry segments as well. Thirty percent of retailers polled—roughly twice as likely as manufacturers—use one or more 3PLs to manage their end-to-end international moves.

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0%

10%

20%

30%

40%

50%

60%

Very PoorPoorFairGoodExcellent

Study Average ‘10

Study Average ’09

Winners ‘10

10%13%

19%

53%49%

60%

31%26%

18%

4%9%

3%1%

3%0%

F I G U R E 9 : Satisfaction with Current ITMS


Satisfaction rates in 2010 on average remain relatively high and are steady as compared to 2009 results. As expected, winners report noticeably higher levels of satisfaction with nearly 80 percent calling their ITMS “good” or “excellent.” Admittedly satisfaction is a soft measurement, but it does help provide a context through which the other results may be viewed.

Overall, more than 70 percent of respondents graded the return on investment (ROI) for their ITMS as average or better. 3PLs are consider-ably more impressed with the ROI their systems provide. More than 80 percent of 3PLs rated their IT ROI average or better, which makes sense since these systems are the heart of these operations. Also bear in mind that 3PLs spend considerably more on ITMS than their customers do.

0%

10%

20%

30%

40%

50%

N/APoorFairAverageGoodExcellent

14%

6%

20%

34%

17%

47%

21%

34%

13%

7%

13%

7% 7% 6%4%

17%

23%

9%

Retail

Manufacturing

3PL

F I G U R E 1 0 : Return on Investment from ITMS


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0%

20%

40%

60%

80%

100%

VisibilityEvent MgmtBooking/TenderingOrder MgmtPlanning

5%8%3%7%5%

56%

36%

3%

33%

56%

4%

43%

37%

17%

46%

38%

8%

34%

51%

10%Manual

Automated

Outsourced

N/A

F I G U R E 1 1 : The State of ITMS—Study Average

In 2009, this study looked to characterize the nature of ITM as auto-mated, outsourced or manual, and that point was revisited in 2010 (see figs. 7 and 8). However, this view may be an over-simplification of a complex process that requires a mix of approaches. That point is supported by the number of respondents who called their ITM platform a hybrid. Figs. 11 and 12 look a bit deeper at the individual functions that create an ITMS and examine the nature of each.

Overall, winners leverage more technology in every category. Planning, in particular, stands out as an area where winners are nearly twice as likely to employ an application as their counterparts.

0%

20%

40%

60%

80%

100%

VisibiltyEvent MgmtBooking/TenderingOrder MgmtPlanning

5%5%6%6%6%

32%

57%

5%

18%

70%

6%

26%

45%

23%

23%

60%

12%

12%

68%

15%

Manual

Automated

Outsourced

N/A

F I G U R E 1 2 : The State of ITMS—Winners

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In 2009, American Shipper found that the average shipper or 3PL leveraging a systems-based approach to international transportation management employed between three and five applications to get the job done. We called this the “patchwork ITM applications.” In 2010, this study aimed to further refine the concept.

The average company that reports using a system to manage international transportation is actually using roughly four and a half applications. This makes sense in a highly fragmented market where specific functionality is required to manage different geographies, transportation modes, and products or commodities. A shipper managing international ocean, air freight, and cross-border trucking might have an application for each of these modes.

It is interesting to see that winners actually use more technology to manage international transportation; at least one more application than the study average. However, this should not be construed as a best practice as there is a good explanation for this phenomenon. Winners tend to be bigger companies with presumably more complex supply chains, which would demand more applications given that there is no single solution providing functionality required by every industry segment. Winners employ more systems because automation is a winning practice. If they could use fewer applications for more functions, they presumably would.

F I G U R E 1 3 : Number of ITMS Applications Currently Employed


5.7

5.2

4.6

4.3

4.1

0 1 2 3 4 5 6

Retail

Manufacturing

Average

3PL

Winners

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As complexity grows, the need for expertise grows with it. So it makes sense that shippers and 3PLs look for systems integrators (SI) to make sense of the multitude of applications they use for ITM. Compared to 2009, penetration rates have grown, but only modestly. Forty-one percent of the 2010 study average report employing an SI for ITM-related work, compared to just 34 percent in 2009. 3PLs and winners—with their large web of applications—are notably more likely to employ an SI.

0%

20%

40%

60%

80%

100%

Winners3PLManufacturingRetail

29%

71%

42%

58%

53%

47%

50%

50% No

Yes

F I G U R E 1 4 : Use of SI’s and Consultants Related to ITMS


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The ability to send an electronic PO to LSPs is a key criterion for dividing winners and average performers. In 2010, the number of respondents who report they have this capability remains even at 67 percent. This capability lends itself to companies who automate ITM and, as fig. 7 illustrates, that penetration rate did not change year-over-year. Likewise, large companies that have automation in place tend to be capable of exchanging electronic POs where small companies are less likely.

Yes

No

0%

20%

40%

60%

80%

100%

Small Cos.Medium CosLarge Cos

81%

19%

73%

27%

50% 50%

F I G U R E 1 5 : Is Your Company Capable of Sending An Electronic Purchase Order to LSPs?


“Leveraging ITMS applications further upstream has given retailers better visibility into their supply chains, enabling more accurate planning, increased flexibility and responsiveness, and a greater ability to align inventory levels with market demand.”

— Casey Chroust, executive vice president of retail operations, Retail Industry Leaders Association (RILA)

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Survey respondents were asked to select all the functionality their system provides (current) and then select the three most important functions to their operation (critical). Like 2009, track-and-trace, order manage-ment and electronic shipping documentation rank as the top three available functions.

Track-and-trace and order management rank as the top two critical functions in both 2009 and 2010. In 2010, analytics replaces electronic shipping documentation as the third most important function.

Comparing available functions versus those that are critical shows in general terms shippers are only scratching the surface of what ITMS is capable of providing. Basic functions that are the most widely available are also considered the most important. Sophisticated functions, such as mode and route optimization, appear out of reach for most respondents.

3PLs, on the other hand, have more robust systems providing more key functionality. In many cases, connectivity and optimization function-ality are twice as prevalent among 3PLs as they are among shippers.

“After years of false starts, 3PLs are finally acknowledging that they can—and must—provide robust ITMS capabilities to their customers by integrating off-the-shelf, best-of-breed solutions—particularly those that are cloud based—faster, better and cheaper than building their own solutions from scratch.”

— Bob Bowser, director SCM practice, Cognizant Technology Solutions

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F I G U R E 1 6 : Current vs. Critical Functionality

Critical

Current

0% 10% 20% 30% 40% 50% 60% 70% 80%

Claims management

Freight exchange

Network design

Parcel shipping

Dynamic rate engine

Financial settlement

Mode optimization

Electronic booking

Collaborative transportationmanagement

Event management

Route/schedule optimization

Transportation networkoptimization

Shipment scheduling

Freight invoice management

Electronic shippingdocumentation

Connectivity to customers,vendors, partners, etc

Analytics

Order management

Tracking & tracing 61% 67%

32% 60%

31% 42%

29% 40%

25% 45%

24% 42%

23% 43%

20% 25%

20% 27%

18% 38%

16% 31%

16% 41%

15% 19%

14% 31%

7% 16%

7% 20%

6% 10%

4% 12%

2% 18%

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F I G U R E 1 7 : Functionality—Shippers vs 3PLs

3PLs

All Shippers

0% 10% 20% 30% 40% 50% 60% 70% 80%

Network design

Dynamic rate engine

Freight exchange

Claims management

Mode optimization

Parcel shipping

Route/schedule optimization

Transportation network optimization

Collaborative transpor-tation management

Financial settlement

Connectivity to customers,vendors, partners, etc

Electronic booking

Freight invoicemanagement

Analytics

Shipment scheduling

Event management

Electronic shippingdocumentation

Order management

Tracking & tracing 79% 62%

60% 60%

56% 39%

40% 38%

54% 38%

58% 35%

58% 35%

56% 34%

54% 33%

37% 28%

40% 27%

31% 22%

38% 21%

21% 19%

23% 16%

33% 11%

15% 11%

29% 10%

13%8%

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Section IV: The Case for AutomationBased on this comparison of winners versus average respondents, it is clear that winners leverage systems as a means to successfully manage the complexity of international transportation. In this case, success can be measured in three key areas: increased visibility, productivity gains and cost savings.

Managers can only optimize what they see. In the case of winners, they can “see” their freight (i.e.—understand the important details such as cube size and weight) about five days earlier than the average. Bear in mind these figures will vary among industry segments, or even within individual segments, based on the type of freight and the shipper’s business model requirements. But in general terms, those supply chain managers with five days of extra notice—a business week—can make adjustments to schedules, routes and modes to create bottom-line savings in terms of decreased freight rates and related shipping costs. That additional visibility allows shippers to carry less inventory, while ensuring their freight gets to market on-time and reduces the impact of lost sales due to lack of stock.

F I G U R E 1 8 : Visibility to Shipment Details—Days Prior to Arrival at Origin


12.8

10.7

9.3

7.5

0 3 6 9 12 15

Study Average(ex Winners)

3PLs

Shippers (ex 3PL)

Winners

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In 2009, freight volumes plum-meted and logistics departments responded by shedding staff to save cost. In 2010, volumes rebounded more than expected, but those logistics departments have not re-staffed. This requires them to do more with less. This trend is evident in fig. 19 showing a jump in productivity levels across all segments.

Automated shippers claim more than 10 percent improvement from 2009 as measured by the number of purchase orders managed per full-time equivalent (FTE) employee per year. Compare that with manual shippers, who show about 8 percent improvement.

Winners, most of which are automated, show an increase in produc-tivity greater than 12 percent. Clearly automation plays a role in enhancing the logistics operation, allowing firms to handle more volume on a nominal basis in addition to scaling up greater capacity.

Third party logistics providers improved their productivity by 150 percent, the largest improvement measured in this study. It appears that shippers turned to their 3PLs to manage the unexpected volume increases and thus 3PLs responded by squeezing more out of their current staff and systems, but not necessarily adding significant resources.

F I G U R E 1 9 : Purchase Orders per Year, per FTE—2009 vs. 2010


0 300 600 900 1200 1500

3PLs

Manual (ex 3PL)

Automated (ex 3PL)

Winners

2010

2009

1398.3

1243.5

1362.3

1235.0

320.4

294.5

207.0

82.7

“During the recession, leading retailers not only focused on increasing efficiencies in their supply chains and cutting bottom line costs, but also positioned themselves to scale operations quickly when the economy turns around and inventory volumes begin rise.”

— Casey Chroust, executive vice president of retail operations, Retail Industry Leaders Association (RILA)

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Study respondents indicate there is some improvement in connecting the procurement function to ITM in the last year. On the whole, 65 percent of respondents to the 2010 survey hold ITM accountable to procurement targets compared with only 53 percent in 2009. Retailers remain ahead of the class in this respect with roughly three quarters of respondents subscribing to this practice. Keep in mind this trait is a prerequisite for consideration as a winner, so naturally all winners follow this guideline.

Survey respondents performed only slightly worse in 2010 as compared to 2009, which is surprising and encouraging considering the size and frequency of opportunistic rate increases seen across many major trade lanes in the past year. In 2009, 85 percent of survey respondents met or outperformed their procurement targets, while in 2010 that number dropped 11 points to 76 percent.

For that 11 percent of respondents, this is certainly a painful trend, but it is not as severe as had been hypothesized, suggesting that many shippers had prepared themselves for the rebound and adjusted their budgets accordingly.

0%

20%

40%

60%

80%

100%

3PLManufacturingRetail

74%

26%

64%

36%

57%

43%No

Yes

F I G U R E 2 0 : Has Your Procurement Department Established Metrics for Measuring

Savings Targets?


“PO/FTE productivity results demonstrate that companies can scale global operations without adding significant cost. ITMS platforms provide sustainable benefits as companies expand their global markets and the transportation networks they require.”

—Ed Sands, global practice leader, logistics, ICG Commerce

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Section V: The Future of ITMSThe market for ITMS appears to be cooling slightly in 2010 with two thirds of respondents claiming that they are not in the market to buy, upgrade or replace their systems. While buyers that are relatively close to a buying decision (budgeted within next 12 months) remain steady at 9 percent, the number of potential buyers entering the buy process (budgeted 12 to 24 months) dropped four points to 10 percent.

Outperformed procurement targets by a considerable margin

Outperformed procurement targets

Met our procurement targets

Slightly behind our procurement targets

Missed procurement targets by a noticeable margin

17%

5%

54%

22%

2%

F I G U R E 2 1 : How Effectively Did your Company Perform Compared to

Procurement Targets?


“In our experience, centralization of ocean procurement and carrier management activities enables shippers to identify and drive continuous and sustainable efficiencies in the larger supply chain, and to balance the cost and service equation of transportation. More specifically, centralization allows us to efficiently integrate and maximize IT platforms that manage trade, visibility and settlement. It also gives our team credibility with carriers that we can deliver on our commitments when expectations are met.”

— Patrick Halloran, director global logistics, Cardinal Health (a participant in this study whose responses qualified his company as a “winner”)

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F I G U R E 2 2 : Plans to Buy/Upgrade/Replace ITMS

0% 10% 20% 30% 40% 50% 60% 70% 80%

No plansto replace

On our company’s5-year plan

Budgeted within thenext 12–24 months

Budgeted withinthe next 12 months

2009 Average

2010 Average

9%

9%

14%

10%

28%

15%

50%

66%


0%

10%

20%

30%

40%

50%

60%

70%

80%

No plans to replaceOn our company’s5-year plan

Budgeted within the next 12–24 months

Budgeted withinthe next 12 months

5%

13%

7%11%

8% 10%15% 13%

21%

69%65%

62%

Retail

Manufacturing

3PL

F I G U R E 2 3 : Plans to Buy/Upgrade/Replace ITMS


It appears the action for ITMS vendors in the next 12 months is more likely to come from the manufacturing sector. 3PLs appear less certain about their plans, with 21 percent reporting that an ITMS investment is on their five-year plan, which is a noncommittal answer at best. If the freight market is beginning a prolonged rebound, this makes sense as many 3PLs prefer to build their own systems when they have the money to invest. Further, these 3PLs have been asked to do more with their resources, as seen in fig. 19, so they may be concerned about disrupting the most important piece of their operational portfolio at a crucial time.

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Systems providers should be comforted to see that roughly two-thirds of buyers will seek a third party system instead of building or customizing their own. That figure is comparable to last year’s data.

One-third of 3PLs say they will build their own systems when they address their ITMS needs, which could be seen as surprisingly low based on historical trends. Manufacturers still prefer the traditional licensed and installed software model with 38 percent choosing that route. Software as a service appears to be gaining ground in the retail segment with 28 percent of the vote.

Built in-house or custom built

Customized package (Heavily customized packaged software)

Software provided by 3PL, carrier or other logistics service provider

Software as a service provided by an outside vendor

Licensed software purchased from outside vendor

16%

16%

17%20%

31%

F I G U R E 2 4 : Delivery Model of Future ITMS


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Apathy remains the largest inhibitor to ITMS adoption with more than 40 percent of respondents who are not in the market for a system, claiming the current system meets their needs. Only 1 percent of the respondents claim they do not have the technical ability to make a change, while only 2 percent claimed the available systems do not meet their needs. This is surprising considering the under-utilization of key optimization and connectivity functions. Perhaps these shippers and 3PLs are too close to their own technology to see what exactly is available in the market today.

We do not have the technical expertise to make a change

Available systems do not provide the functionality we require

We’re in the process of upgrading or replacing our system

We recently upgraded or replaced our system

Organizational resistance to change

Lacks return on investment

None of these

Current process meets our needs

10%

6%

1% 2%

12%

13%

13%

43%

F I G U R E 2 5 : Inhibitors to Buy/Upgrade/Replace ITMS


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0% 20% 40% 60% 80% 100%

Other, please specify

Green initiatives

Bring systems in linewith industry standards

Increase operationalscale/capacity

Integration, internal

Customer demands

Integration, withvendors and partners

Visibility

Cost savings

Improve operationalefficiency

Retail

Manufacturing

3PL

83%

83%

86%

72%

75%

71%

61%

75%

67%

56%

67%

57%

28%

50%

71%

56%

42%

43%

17%

33%

62%

39%

33%

38%

6%

12%

33%

6%

4%

10%

F I G U R E 2 6 : Drivers to Adoption


Overall, the key drivers to ITMS adoption mirror those key benefits of automation outlined in section five, namely efficiency, savings and visibility. 3PLs, as expected, have a slightly different take listing customer demands and operational scale higher than their shipper counterparts. In an environment where 3PLs have been charged with taking up the slack that shippers cannot manage, this makes good sense.

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Section VI: WinnersOverall, the results that winners are achieving have improved year-over-year but the best practices they are following have not changed much. Here is a brief recap of what our survey winners are doing to be successful in today’s ITM market:

Automate—Winners leverage applications that automate international transportation management. In particular, winners are considerably more likely to use systems for planning and visibility than their peers.

Advanced functionality—Winners are using systems that provide more advanced planning, connectivity, and optimization functionality.

Connect procure-to-pay cycle—Winners are not approaching transportation management as a stand-alone exercise; rather they are integrating transportation procurement, execution, and payment in a tightly closed loop.

Tap third party expertise—Winners seek expertise from outside their own enterprise to assist them with improving their ITM practices and systems.

“It is clear from the results of the ITMS Study that the winners are the companies who have focused on and received the benefits of a mature ITMS program. This is an operational competitive advantage that cannot be replicated quickly or easily.”

— Joseph Macri, client principal transportation ICS, HP Enterprise Services


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Appendix A: About Our Sponsors

G T N E X U S

GT Nexus runs the world’s only industry-backed, on-demand global trade and logistics portal. Today, more than 40,000 registered users, from over 15,000 organizations use a range of capabilities on the portal to optimize the global flow of goods and trade information from order point to final payment. GT Nexus connects the physical and financial supply chains. This allows buyers, sellers, banks and logistics providers to work over a common platform with a core set of information that supports multiple trade and logistics functions. Customers include Nestlé, Xerox, American Eagle Outfitters, Procter & Gamble, Weyerhaeuser and The Home Depot. For information, visit www.gtnexus.com.

If you would like to see how a Fortune 500 CPG company used GT Nexus ITMS solutions to save $12 million in transportation spend, click here.

M A N A G E M E N T D Y N A M I C S , I N C .

Management Dynamics, Inc. is the leading provider of Global Trade Management (GTM) solutions that improve the performance of global supply chains for importers, exporters, logistics service providers, and carriers. Combining an expansive trading partner network, enterprise-class software and specialized trade content resources, our solutions address mission-critical business challenges for all companies involved in global trade. These solutions include automating import and export processes, providing order and ship-ment visibility, calculating tariffs, duties and taxes, ensuring regulatory compliance and simplifying the financing, sourcing and transporting of goods across international borders.

Perry Ellis International saved over $220,000 using an International Transportation Management solution from Management Dynamics. Click hear to learn more.


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Appendix B: About Our Partner

R E TA I L I N D U S T RY L E A D E R S A S S O C I AT I O N ( R I L A )

RILA is the trade association of the world’s largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and operate more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad. For additional informa-tion visit www.rila.org


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Documents

winners account

case of winners

event management

order management

air freight

type of freight

freight i

freight volumes