Why successful 3PL companies are using Advanced Planning Systems

1. Does the TMS support your logistic concept?

The Global Transportation Management Benchmark survey, completed by close to 200 logistic managers in Europe, shows that most Transport Management Systems are weak in planning complex operations, like cross-dock, merge-in-transit and last-mile operations. The study also found that these systems typically fail to take detailed planning aspects into account. This functionality is crucial to be able to optimize planning and to create Control Tower Visibility. For the latter, you need to be able to model the end-to-end (multi-modal) chain of an order and its underlying dependencies. The survey concludes that a TMS is an expert planning tool when things are running smoothly. However, not so useful when things go wrong, as they often do in real-world supply chains. So, ask yourself: can your TMS model your company’s logistics concept with its full details? Most likely, your TMS model will be somewhat limited.

2. What are the challenges of running multiple systems?

Over the last years, it’s been policy to reduce the number of IT systems and suppliers and simplify the IT landscape to minimize integration and maintenance costs. However, given new cloud-based technology, the trend has changed towards applying component-based technology stacks, by connecting APIs and standardized formats. These components are recognized by the market as strong add-ons for the system-of-record to deliver robust capabilities without increasing complexity. For the end-user, this hardly hurts. And since there are different personas within the company for order taking, planning, dispatch and reconciliation, each persona has its own designed and dedicated UI to work with.

In other words, the challenges of running multiple systems (a TMS and an Advanced Planning System (APS)) can be overcome with today’s tools.

3. Is the business case for a TMS different from that of an Advanced Planning System?

The short answer is yes. A TMS is designed to improve and automate your staff’s (people working at the office) processes, with cost reductions of 20-30%. The focus of an APS or optimizer-component is to improve resource utilization (that of trucks and drivers in particular).

An APS or Advanced Planning System can improve resource utilization by about 3-5% on top of the TMS-planning functionality. Since the typical cost for staff is at most 10% of the total cost, this implies that the business value for an APS is much stronger.

The implementation of an Advanced Planning System influences in particular only a part of the staff, mainly the planning and dispatching department. Hence, it has a much lower implementation risk, compared to implementing the entire IT-backbone of the company.

An Advanced Planning System includes optimization capabilities during dispatch and execution, which improves on-time availability and service during the day. Informing receivers an accurate ETA is crucial. According to a recent study by the Customer Experience Magazine, 76% of the UK online shoppers would switch to an alternative because of a poor home delivery experience.

4. Should I consider what peers are doing?

Large 3PL-companies recognize the value of using an APS next to a TMS. Examples of large 3PL companies are DHL Supply Chain, Hoyer, DSV Road and Kuehne & Nagel. Mid-size, family-owned companies like Bakker Logistics, Visbeen, Simon Loos and Nabuurs in the Netherlands also run an Avanced Planning System on top of their Transport Management System and recognize the benefits of their investments.

Business cases show an average of 3-5% improvement in resource utilization by making better combinations of orders to routes and routes to resources. As a result, operational costs decrease along with empty mileage and CO2 footprint. Additionally, by modelling traffic congestion and respecting drive time legislation, employees are more satisfied. Customer satisfaction typically improves as a result, with deliveries occurring on time and SLAs respected. Most important, the company gets really ‘in control’ and can use the available data and knowledge for customer analysis, tendering purposes, network design and forecasting.

Using an Advanced Planning System, alongside your Transport Management System will help you get more employee engagement, lower CO2 emissions, be more cost-efficient, and grow your business. As you make the choice, review your logistics concept, and see how you can remodel it to become a competitive 3PL party.

Goos Kant
Global Director Logistics Industry – ORTEC
Professor Logistics Optimization -Tilburg University