At Torrance, California-headquartered Toyota Logistics Services – the outbound logistics and vehicle processing arm of Toyota Motor Sales USA – a recently-implemented Oracle transport management system (TMS) is helping to optimise the routing of both imported and North America-built vehicles to dealerships right across the US and Canada.
Just as critically, the TMS also plays a role in calculating the correct amount that should be paid to the dozen or so third party logistics partners which between them handle about 85% of vehicle deliveries to dealers.
Previously, it transpires, Toyota used an average rate-per-vehicle, meaning that a shipment involving a high number of smaller vehicles could see the third-party provider being overpaid, while a shipment containing a disproportionate number of larger vehicles could see the provider underpaid.
Now, the TMS enables Toyota to work out a more accurate rate, by breaking the manufacturer’s model range into tiers. The result is not only more accurate payments, but the company has also reported significant savings in the overall level of payments.
It’s an example of how carmakers have begun to use TMS beyond the usual bounds of transport routing and efficiency into financing and procurement decisions. In the best case, such systems make sense of huge amounts of data to help OEMs make more informed decisions in their distribution.
“The one thing that we’re not short of in supply chains is data. The focus is increasingly on making better sense of that data, and using it to construct better plans, and make better decisions,” observes Dominic Regan, senior director for value chain execution at Oracle. “Transportation finance is very much part of that focus, in two key respects. First, at the vehicle transport planning stage, there’s a desire to make best use of applicable rate agreements and contracts; and second, at a transportation transaction level, it makes sense to use a TMS for processes such as invoice matching and reconciliation.”
Another example is for the Volkswagen Group, where a TMS comprises a vital component of the carmaker’s in-house developed order management and distribution system, explains Jan Bures, executive vice-president of group aftersales and services at Volkswagen Group of America. The focus: delivery-date planning and promising, which is part of the customer proposition in a build-to-order business model. Nor is this a theoretical requirement, he points out: even in North America’s inventory-centric vehicle retailing environment, built-to-order vehicles are a significant proportion of sales for some premium brands.
“If a customer orders a car at a dealer, then he or she makes a down-payment, and naturally wants to know when they can get the car,” he points out. “Around 20-25% of Audi sales are built-to-order. The customer is being very specific about the vehicle that they want, and expects us to be equally specific about when they can take delivery of it.”
Similarly, at UK-based vehicle haulier Brit European, a TMS from specialist systems provider Mandata also provides route planning and vehicle delivery capabilities. This time, the system tracks the delivery of vehicles to dealers from the port compounds and factories of automotive manufacturers such as ‘high-and-heavy’ construction equipment producer JCB.
But Brit European’s TMS handily offers a few more capabilities, some of which are well removed from the usual clutch of TMS capabilities. Take its innovative workshop maintenance module, which leverages the handheld devices issued to drivers that allow the company and its customers to create paperless manifests and electronic invoicing.
As part of the TMS functionality, the results of drivers’ daily vehicle inspections are captured on these devices – including any relevant photographs – and sent automatically to Brit European’s transporter maintenance workshop. If repairs need to be undertaken, the vehicle is then booked in, with route planners similarly made aware that a given transporter will be temporarily off the road. Likewise, in the case of ‘trade plate’ deliveries of single vehicles, driver expenses are added via a hand-held device after each vehicle delivery, before being automatically saved to job sheets within the TMS and added to the client’s final invoice.
“As expenses are calculated automatically and tied to the job sheet, there’s no seepage and every expense is accounted for from start to finish,” sums up Andrew Shore, Brit European’s IT administrator. “This also means we can easily report on costs, giving us the true cost of a job, as well as the true margin that makes up the job. This alone has saved us 20 man hours a week, and also helped us to maximise the profitability of jobs.”
It is, says Mandata’s chief executive Mark Norcliffe, part of an ongoing evolution that he sees in TMS functionality, as customers shift their focus away from the traditional one of route optimisation and planning, and look to TMS technology as a way of providing operational capabilities, including paperless processes, ‘track and trace’ load visibility, and operational efficiencies.
In other words, he points out, using a TMS has not only enabled Brit European to re-engineer its time-consuming manual processes and automate repetitive yet necessary tasks, but also helped to improve customer service, grow market share and boost profits, all without needing to employ more staff. Wages and expenses are automatically calculated, while invoices are sent by email once a load has been delivered, saving time and mailing costs in the process.
These represent a source of gains and efficiencies far removed from TMS’s traditional role of helping businesses to meet customers’ delivery expectations, while simultaneously scheduling vehicles so as to minimise miles travelled, fuel consumed, tyre rubber burned, and driver hours used.
“Right now, there are diminishing relative returns to be had from traditional resource scheduling, especially as businesses look to outsource and subcontract delivery work,” sums up Norcliffe. “Businesses still look to efficient resource utilisation in order to make sure that their assets are working as they can, but increasingly the real prize is seen as being capabilities such as improved visibility, and paperless processing.”
Automating the supply chain
Talk to those close to the use of TMS technology with finished vehicles supply chains, and the same broad themes repeatedly emerge. Basic planning functionality is now taken for granted: what users are looking to TMS technology to deliver is an end-to-end, ‘full service’ capability, delivering efficiency improvements across a wide spectrum stretching from load optimisation to transaction handling, and from ‘track and trace’-style visibility to event management and expediting.
In part, this reflects a new realism regarding the limits of effective planning, says Stephan Freichel, professor of distribution logistics at Cologne University of Applied Sciences, and a 20-year automotive veteran with stints at General Motors, ZF Friedrichshafen, and logistics service provider Logwin.
“A major problem for TMS technology today is poor data quality, leading to people chasing vehicles that have already been shipped, or which aren’t where they are supposed to be,” he points out. “Which is surprising, because every vehicle has a VIN, and in theory, logistics service providers know production and shipping schedules well in advance. But schedules get changed, rework has to be carried out, ships don’t arrive on time, and ports get congested. In the real world, effective planning is difficult: you can plan, but it’s not always meaningful planning.”
Yet if planning isn’t always meaningful, automation and cost reduction rarely lack meaning to manufacturers – especially in an automotive industry where the drastic cutbacks of 2008-2009 still resonate. And clearly, despite the ongoing push for paperless transactions, the industry still has ample scope to deliver further process automation, says Alistair Newton, director of supply chain and logistics at TMS provider Sovereign Business Integration Group.
“There’s still a huge amount of manual work going on in finished vehicle supply chains,” he explains. “And despite the industry’s conservative attitude to information technology, there’s a continual push to try and automate some of this work.”
“And if that logistics service provider is located in, say, India, what happens with VAT? A TMS can provide a consistent tool for delivering such processes,” he adds.
Garth Parker, chairman of TMS provider ProAct International, is another industry insider pointing to a growing demand for TMS tools to enable logistics service providers to collaborate and share data.
“Once there’s an integrated plan, then you need integrated execution, especially today, where supply chains are much more complex, much more global, and much faster-moving,” he asserts. “And as the ‘lead logistics service provider’ model becomes more prevalent, we’re seeing more requests for integrated billing and journaling, so as to ensure invoice accuracy, and a proper build-up of the landed cost. It’s the lead logistics service provider who pays the bills, and who therefore needs to ensure that the invoices truly reflect actual volumes and performances that have been achieved.”
Similarly, there is also recognition that capturing accurate data from more extensive supply chain processes opens the door to more than just the efficiencies arising from process automation. Efficiency-boosting analytics beckon, too, and the TMS is the most logical place to derive the data from which to carry out those analyses.
“Most of the industry is experimenting with technologies such as electronic proof of delivery, handheld driver e-logs, and GPS-based track-and-trace technologies,” says Barry Williams, vice-president of operations at US vehicle haulier Hansen & Adkins Auto Transport. “Yes, they drive efficiencies, but they also help to provide metrics on such things as driver productivity, truck miles-per-gallon, and trucks’ empty-versus-loaded mileage. But we’re looking for a single system, not three or four separate systems.”
Journey of complexity
“Right now, load optimisation is ‘hot’,” says Matthias Berlit, vice-president for manufacturing and logistics at automotive logistics optimisation software and TMS specialist Inform. “Optimising the flow of vehicles on the so-called ‘last mile’ to the end dealer is a complex mathematical problem. While it’s intuitively obvious that it’s sub-optimal for a fully-laden transporter to travel a short distance to a nearby dealer before depositing half its load and then travelling hundreds of miles to another dealer to deliver the rest of the vehicles, it’s much more difficult to figure out how to optimise real flows of vehicles in the real world, minimising costs while maximising on-time delivery performance. And that’s where load optimisation comes in.”
From its early roots as a basic planning and costing system, TMS technology has come a long way. The journey, though, is far from over, especially in the finished vehicle supply chain, where its role now incorporates the management of purchasing, expenses, damage claims and other functions. And in an industry where data continue to pile up, there are likely to be further innovations in automating this information, and turning it into intelligence.