How automated TMS delivers a competitive advantage during economic uncertainty

December 23, 2022

Uncertainty lurks everywhere along a supply chain—from sourcing products to delivering them to a customer. Then a recession happens. Here’s how automated TMS can help.

When an economic downturn occurs, companies may try to compete on pricing. Given the circumstances, the reaction is understandable. But lowering prices is often a race to the bottom. Shippers then find themselves losing their customer base while supporting unsustainable losses.

Shippers can weather economic uncertainty building a competitive advantage in their business model at any time by using an automated transportation management system (TMS) to create a competitive advantage. This article looks at how an automated TMS reduces risk by helping shippers achieve both comparative and differential advantages:

  • Why competitive advantage matters in a supply chain
  • Should shippers focus on comparative advantage over differential advantage?
  • How transportation management automation adds value to a supply change
  • Can shippers avoid a recession with an automated TMS?
  • The competitive advantage that Princeton TMX automated TMS gives a supply chain

Why competitive advantage matters in a supply chain?

Supply chain profit margins can be razor thin even in good years. Volatile markets make it difficult to maintain healthy profit margins. Transportation costs alone account for 30 to 50 percent of a supply chain’s total expenses.

Shippers looking to increase profits while reducing expenses and minimizing risk will need to build long-lasting relationships with suppliers, preferred carriers, and loyal customers. Establishing a competitive advantage is key to making it all possible.

Shippers cannot create value in the minds of customers and carriers by waving a magic wand. Instead, they have to create a culture of continuous improvement by implementing transportation management automation.

Should shippers focus on comparative advantage over differential advantage?

There are two different kinds of competitive advantage: comparative advantage and differential advantage.

With comparative advantage, shippers look to increase profits by being more efficient. Differential advantage is where customers perceive a shipper’s goods and services are of higher value or quality than their competitors.

Being efficient helps reduce transportation and other operational costs. Perceived value means shippers don’t have to participate in a race to the bottom when markets are volatile.

Building both types of competitive advantage are significant because they lead to those long-lasting relationships that minimize risk and increase profit margins.

Can shippers better navigate a recession with an automated TMS?

Customer behavior changes rapidly in a recession due to tightening budgets. Projects such as TMS logistics may be put on hold or canceled until the economy gets better.

Some forward-looking customers may view a recession strategically, however. After all an economic downturn won’t last forever. So, these types of companies position themselves for growth before recession fears start to fade.

Strategic-thinking shippers also position themselves to weather a recession better than their competition. Therefore, while shippers cannot avoid all the effects a recession may cause, an automated TMS can substantially minimize risk.

TMS logistics risk mitigation involves analyzing data from an integrated cloud-based TMS to find hidden opportunities. These opportunities reveal where new efficiencies can be introduced without severing carrier, customer and, even, employee relations. They can also reveal how to increase the true value of goods and services to establish a greater competitive advantage that will endure in any market.

How transportation management automation adds value to a supply change?

Former UCLA basketball coach John Wooden once said, “If you don’t have time to do it right, when will you have the time to do it over?” Wooden’s maxim applies to shippers seeking a competitive advantage in today’s volatile transportation market.

The best TMS systems automate as much as 95 percent of all transportation management tasks. First, automating tasks reduces the likelihood of resource-draining human-caused errors. Second, automation allows transportation management teams to quickly establish more efficient workflows and processes once a cloud-based TMS is up and running. Third, automation is how shippers can create a differential advantage in their customers’ minds.

Here are some of the ways automated transportation management adds value to supply chain logistics:

  • Fast freight settlement. Autopay allows shippers and carriers to pre-negotiate rates, including some accessorial charges. A carrier can then receive payment upon delivery instead of months later. Any charge discrepancies can then be easily negotiated during the accounts payable audit.
  • Multiple transportation modes. Transportation management teams can reduce shipping costs and their carbon footprint by seamlessly switching between transportation modes, including truckload, intermodal, LTL, and rail.
  • Freight shipment visibility. Real-time visibility, from origin to destination, requires a cloud-based TMS system that supports integrations using ready-to-use application programming interfaces (APIs). These seamless and secure integrations allow for connectivity to data from carrier monitoring devices and other systems within the supply chain, including enterprise resource planning systems (ERPs).
  • Larger preferred carrier networks. Shippers can build in economic security by increasing the size of their carrier preferred networks. TMS automation allows them to maintain far more contracts than they could with spreadsheets. Automation also eliminates the need for phone and email tagging.
  • Better procurement processes with more transparency. Transportation management teams can manage the entire procurement process, including annual freight RFPs, short-term RFQs, and the spot rate market. Preferred carriers are also better able to submit high-quality bids when the procurement process is transparent.
  • Integrated knowledge base data. Transportation management teams can make quick decisions based on the KPIs displayed on the dashboard. But true innovation happens when analyzing all the data from integrated systems: from TMS to ERPs to carrier systems. Decision-makers can then take advantage of hidden opportunities, even when market conditions are fluid.
  • Better carrier relationships. Volatile markets create unreliable carrier capacity. Better carrier relationships helps shippers move cargo when capacity is scarce. Carriers are more likely to accept loads from “shippers of choice” who make the freight sourcing process easier to navigate.
  • Better communications means no one has to waste time with phone calls and emails.
  • Better customer service. All this effort to build a competitive advantage through TMS automation leads to better customer service, from product sourcing to on time and reliable delivery services.

For more tips on implementing an automated TMS in your company, download our ebook, “Best Practices for Implementing a Transportation Management System”.