Process Survey Tools (PSTs) are used to assess the maturity of the trans- portation management processes against the world-class benchmarks.
PSTs are maturity grids describing processes in, for example, 10 levels,
where the presence of only basic processes scores a “1” and the presence of world-class processes scores a “10.” Another way to indicate the maturity level is to use the four stages as explained by Dr. Robert Monczka and his co-authors in their book “Purchasing and Supply Chain Management”
(6th edition, page 237 and further): “1. Basic beginnings,” “2. Moderate development,” “3. Limited integration,” and “4. Fully integrated supply chains.” Process experts assess processes and advise what and how to improve to achieve the next level of maturity. The advisory market offers various PSTs. The following strategic and enabling processes of Dr. Robert Monczka’s are applied to transportation management:
• Category strategy development
• Supplier evaluation and selection
• Supplier quality management
• Supplier management and development
• Worldwide sourcing
To reach the world-class levels with the strategic sourcing processes it is necessary to facilitate a set of supporting processes. These enabling processes are:
• Human resources
• Organizational design
• Information technology (IT)
• Measurement
3.11.1 Category Strategy Development
Another word for “category” is “commodity.” A commodity strategy is a plan how to achieve both short- and long-term goals such as the number of carriers, their characteristics, contract periods, and cost targets. The plan is based on the commodity classification as “leverage,” “strategic,” “routine,”
or “bottleneck” and includes timelines, responsibilities, accountabilities, and measurable performance targets. To reach the world-class level it is necessary to have a written action plan, which includes customer, business, process, and employee requirements, goals, and targets. This action plan contains a SWOT analysis, how the strategy will give the shipper a compet- itive advantage, a communication plan, intermediate reporting structures
and timing, a review process, market studies with benchmark and trend information, performance targets by time, and who will do what when.
3.11.2 Supplier Evaluation and Selection
The outcome of this process, which is discussed more in detail in another section of this book, is the selection of the optimal number of carriers with the characteristics and capabilities to meet the business needs. The carriers are categorized as “commercial,” “preferred,” or “strategic” to define the type of supplier relationship management to deploy with them.
Commercial suppliers offer a standard service, which can be purchased elsewhere. No proactive initiatives are started to improve as long as the agreed performance levels are maintained. A shipper and its preferred carriers have mutual and confirmed benefits. The focus is on meeting the price, quality, and service targets. A strategic partnership is a situa- tion where both parties are open to share confidential information and work on mutual benefits on longer terms. A supplier rating system, which includes the what, when, and how to measure the weighted criteria such as delivery performance, costs, responsiveness, and innovation, rates all the carriers. The objective measurements are built into and downloaded from an IT system. They are regularly shared with the carriers and other stakeholders. The subjective criteria are scored in a cross-functional team.
Based on the product classification (“leverage,” “strategic,” “routine,” or
“bottleneck”) and how the carrier sees the shipper (“core,” “development,”
“nuisance,” or “exploitable”), the companies can define their strategies for the different services and carriers to close the gap between the as-is and to-be situation. To reach the world-class level it is necessary to have a documented process to evaluate and select carriers and to generate and maintain carrier portfolio analyses, carrier rating systems, and product portfolio analyses.
3.11.3 Supplier Quality Management
Carriers often do not have the full overview of their strong and weak points. It is useful to help them by identifying improvement opportunities on which they can work to increase their performances and capabilities.
Typical tools are audits and assessments. To reach the world-class level it is required to have a documented process to measure and guide the
supplier development efforts, offer resources to help, and create a continu- ous improvement culture including review and follow-up processes.
3.11.4 Supplier Management and Development
Based on the supplier classification, the shipper needs to work on how to cooperate with the carriers to realize a world-class supply base. The critical path is to build up a partnership with the strategic suppliers. Not all commodities require a partnership: an extensive form of cooperation between a shipper and a carrier. It is a way of working in which both par- ties are open to share confidential information and closely collaborate for mutual benefits by leveraging the capabilities of both companies. It is based on confidence as the shipper commits to the carrier with long-term contracts, while the carrier commits himself to improve price, service, and quality in a continuous improvement culture. To reach the world- class level it is necessary to organize the companies for long-term rela- tionships, depend on and trust each other, have shared objectives and improvement plans, and train and educate each other. A good account management structure is needed to manage processes and projects with the objective to deliver the customer the right product on the right time within the agreed performance and cost targets. The carrier account managers should be in the driving seat to deliver the necessary service solutions and develop the business relation towards a partnership. These employees should be trusted, empowered to take decisions, and not go back to senior management for each customer request or idea. A good account manager has sufficient knowledge of the shipper’s organization and processes. He or she acts as a result-driven advisor for both organiza- tions and should not focus only on sales increase. The account manager is in the lead to drive change and improvement actions by having access to and using carrier resources. This is especially required when KPI tar- gets are not met and action is needed to find out the exact issues, their root causes and work on countermeasures. The manager works on cost reduction and new service road maps. The status and progress reports are not shared only during the periodic business review meetings but are worked upon and shared regularly. The operational KPIs reflect in a way the account manager’s performance and he or she is accountable and responsible for making the targets. The account manager has an
important job regarding communication between the two parties. He or she is the first escalation point to go to, informs the stakeholders about changes in the two companies, plans business review meetings, visits the shipper, offers new services, works on new service requests, and acts as the lead in case of emergency situations. To reach the world-class level it is necessary to have a documented process to classify carriers and to allo- cate resources, based on how important the carrier is for the business, to work on improvement initiatives.
3.11.5 Worldwide Sourcing
If a company has multiple sites and business units over the globe, it is key to organize itself in such a way that it can benefit from the volume leverage and global sourcing opportunities. A good starting point is to standardize KPI targets, contract terms and conditions, rate comparisons, benchmark and tendering processes, and carrier implementations. To reach the world-class level it is required to have a global council, which includes key stakeholders from the various sites. This organization is needed to get the maximum out of volume leveraging, install global contracts, assign global business process owners, standardize processes, implement best practices, and develop carriers to become global players too.
3.11.6 Human Resources
To execute the transportation strategy in a proper way and meet the related targets, it is necessary to hire, educate, and train people. The starting point is to create function profiles including capability requirements such as analytic, customer-friendly, creative, innovative, flexible, efficient and effective, team-oriented, communicative, and influence skills. To reach the world-class level the shipper has to have a documented process to set up and maintain recruitment, training, education, succession planning, and assessment processes. There is the need to have job profiles and func- tion descriptions for key positions. A review process is in place to map the current and newly required skills and have a plan to close the gap.
Other elements are management development and career plans, job rota- tions and interpersonal, functional, integration and strategic skills, team building performance, rewarding, and appraisals.
3.11.7 Organizational Design
To make things happen it is important that transportation management is well positioned and structured in the organization. If transportation is defined as a strategic differentiator then there have to be empowered cross-functional teams in place to play this strategic role in evaluating, selecting, implementing, and developing suppliers. To reach the world- class level here it is necessary to have a documented process to assign the logistics/transportation manager as member of the leadership team to coordinate the improvement processes such as purchasing, contracting, procurement, and related processes throughout the organization.
Purchasing is the process to assess and select carriers, while procurement is the daily activity to order transportation. Other processes are market research, technology roadmap, and commodity strategy development.
3.11.8 Information Technology
IT systems need to be in place to support an effective and efficient auto- mated procurement and order realization processes such as transport ordering and invoicing. It is necessary to have EDI and other fast commu- nication tools such as Internet and intranet solutions. It is required to set up and maintain global databases to make the data available for everyone around the globe. To reach the world-class level it is necessary to have a documented process how to link value stream, business unit, customer, and supplier enterprise systems, via IT networks.
3.11.9 Measurement
The requirement is to have a set of KPIs to measure carrier performance regarding costs, service, and quality in both the order realization and new service creation processes. To reach the world-class level it is required to have a documented process to measure, gather, aggregate, communicate, and compare KPIs with the targets. The KPIs are regularly reviewed and the PDCA cycle is applied to improve where necessary.
3.11.10 Transportation Strategy
An important goal of assessing the transportation management pro- cesses is to create a transportation strategy document, which describes