Supply chain digitization madness
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Albert Einstein famously stated that “the definition of insanity is doing the same thing over and over again and expecting different results”. Yet this is how often various supply chain digitization initiatives end up.
Perhaps you have also experienced some project where the latest technology solution promised to transform certain business activity and after months of implementation, you wonder why things are exactly as they used to be?
There are many internal reasons why companies fail to transform anything through digitization.
Transportation is particularly resistant to digitization. This deceptively straightforward activity spans across multiple individuals, teams, and companies, often with conflicting agendas. As a result complex manual black-box processes prevail.
Simply digitizing all existing practices results in endless customizations to accommodate processes and exceptions that are often of unclear value, purpose and historical origin results in blown up budgets and timelines and sometimes outright failures. It’s a very expensive, slow and redundant way to keep status quo.
You can’t expect technology to deliver any meaningful value if you don’t re-examine your legacy processes.
At oTMS we’ve been at the forefront of digitizing deliveries for major manufacturers and retailers. We launched in 2013 as the first cloud-based transport platform in China to power real-time, end-2-end shipment workflow: from tendering & dispatch through track & trace, digital POD to freight billing & performance metrics. oTMS connects & enables all supply chain parties from shipper through carriers to drivers and even consignees. Our vision is to make transport simpler and save money for our customers.
We define our success when digitization simplifies core shipping processes in order to make the supply chain run faster, with more transparency leading to quantifiable service and cost improvements. Unfortunately, we have also worked on projects where changes were only skin deep, like lipstick on a proverbial pig.
Since we’ve worked with over 100 large manufacturers & retailers across all major industries we’ve gained good insights on what makes digitization project successful.
In our experience, the foundation of success is always a clear and strong vision of supply chain executive of how the transformation will look like. We must set quantifiable, hard goals for direct cost reduction & specific service level KPIs measured against a well-defined baseline. Skip this step, or settle for vague aspirations like “increase customer satisfaction”, “digitize manual processes” and “improve productivity” and your digitization project will almost certainly disappoint.
Transportation transformation may never be high on your CEO agenda but CFOs are increasing pressure on cost management in as the Chinese economy slows down. Going forward most supply chain executives won’t be able to pursue nice-to-have initiatives with unclear return on investment. Neither they will be able to afford to do nothing.
The good news is that transport digitization unlocks significant cost saving and service improvement opportunities not possible before. But you need to go after an elephant in the room: how you procure and manage your carriers.
Some of our customers used oTMS to redefine their carrier procurement & management practices and saw direct transport savings of 5-20% and same time improved on-time delivery rates.
oTMS customers, who got the best results and achieved them fast, from the outset decided to make their carriers compete for the business not just during annual tender but during ongoing operations. In our experience, the strongest incentive for carriers to support transport digitization occurs when we link directly their performance with revenue & income. We achieve this through dynamic volume re-allocation and various penalty and reward methods. Digitization then has a very direct and practical purpose.
Such carrier gamification approach is very effective as it accelerates overall digitization rollout and improves supply chain resilience with more sustainable savings and service levels.
This really works. We have multiple client best practice references backed by years of efforts of fine-tuning our approach, including product initiatives that failed. It’s not an easy task for supply chain executives who may juggle multiple projects and priorities. We recognized this and went beyond SaaS (software-as-service) model to help customers get results faster and easier than through software implementations.
oTMS Orange is a transport management solution we launched in late 2017. oTMS takes overall, contractual responsibility for cost savings and service improvements. We start with historical data analysis to establish a baseline and guaranteed minimum savings level. We jointly set performance goals & carrier allocation mechanisms that we execute with our technology and our transport professionals. oTMS compensation comes from savings, therefore, Orange clients do not need separate IT budgets and business case approvals with uncertain ROIs. A growing number of our customers select Orange over SaaS.
Don’t let your challenges make you mad. We are here to help you succeed, drop me a note if you want to know more.