Why Supply Chains Need Dynamic Routing Now and in the Future
A big routing problem can create big supply chain problems. What do you think?
The current transportation crunch results from a decades-old systemic problem, and supply chain volatility is merely the catalyst. Don’t look to transportation providers to solve the crisis. Look within your company’s shipping process, and you’ll find the source of your transportation problems - the transportation routing process.
Transportation is at the core of every supply chain, and when it fails, the supply chain fails. The primary job of routing is choosing the delivery method so a shipment arrives to the right thing to the right place at the right time. If routing fails, well, you can connect the rest of the dots.
In this post, you’ll learn how traditional routing solutions created the current transportation crisis carriers are unfairly blamed for. You’ll also see that dynamic routing is the best solution for the crisis and the ticket to future collaborative routing.
Static Routing + Volatility = Viscious Cycle
Most routing systems are designed for steady-state transportation, and they fail under volatility. Routing failures increase labor costs, missed pickups, late deliveries, shipping prices, and even freight damage. They produce the exact opposite of everything you’d expect from an effective routing process.
Routing failures can barrage the expectant delivery operation with shipping requisitions (demand) that are subject to change. These exceptions are highly disruptive - the equivalent of a warehouse receiving picklists full of errors. A vicious cycle can start if a transportation operation is constantly revising plans due to routing corrections:
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Shippers: Order volatility causes unreliable shipping forecasts, resulting in changes. Some routing corrections and errors are caught after shipment data has been provided to the transportation provider (carrier).
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Carriers: A common carrier serving thousands of shippers is bombarded with changes. Carrier systems are overwhelmed and errors compound, putting operations in a reactive mode. As transportation operations deteriorate, shipper planning and routing erode with it. Allocating capacity becomes riskier, and priority is given to the largest customers (20%), leaving the other 80% worse off. Adding capacity is detrimental.
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Shippers: The other 80% must compete for reduced capacity. Prices increase and transportation routing and planning become more challenging, returning to step 1 of this cycle.
Dynamic Routing Prevents the Vicious Cycle
A dynamic routing solution will protect transportation providers from incoming volatility and stop the cycle:
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Shipper Solution: Selection of carrier services in fulfillment operations maintains accuracy as conditions change, preventing disruptive manual interventions and transmission of errors to transportation providers.
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Carrier Solution: Carrier transportation operation using a routing process for delivery route planning can continuously optimize delivery plans as conditions change, even enroute to the customer, preventing disruptions.
The End of Static Routing
Twenty years ago, I founded an online transportation market (EFX Inc.) and worked with trucking executives and their customers (shippers) to solve the enormous waste from excess capacity. We focused on shipper routing, and we failed. We were too early. Now conditions appear to be conspiring that finally will prompt carriers and shippers to upgrade the routing process:
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Dynamic routing can end the vicious cycle fueling the current transportation crunch.
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Competitors with dynamic routing will leave the rest behind to fight a losing battle.
The Future is Collaborative Routing
Transportation is evolving towards a collaborative routing process. Collaboration is dynamic, so that it will be a dynamic routing process. What’s different about collaborative routing?
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A shared, real-time process between shipper and carrier
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Transportation planning, routing, and booking are fused into a single transaction.
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AI optimizes the outcome for both parties using a much larger data set from both enterprises, such as SKU details, sustainability goals, and forecasting.
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Revocable transactions are rerouted at any point in workflow for further optimization.
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Open access to the broader transportation supply chain: Support for multi-enterprise freight pools, aggregators, spot markets, and other intermediaries.
Start By Selecting the Best Routing App
Transitioning to a dynamic routing begins with selecting the best routing app. While we can’t know what collaborative routing will look like, we know the requirements for an app to support it:
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Collaboration requires a routing app supporting 3 important design qualities.
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Maximizing supply chain optimization requires a single universal routing process.
Select the Best Partner
Selecting the best app is a vital first step in an implementation process:
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Choosing the best app that meets the requirements
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Data mapping, systems integration
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Effective project management (testing, training, acceptance)
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Continuous improvement to facilitate greater collaboratio
A partner who takes a consultative approach is a must. Such a partner will want to learn more about current challenges and future goals and address the broader success factors, including implementation and continuous improvement.
Conclusion
A big routing problem can create big supply chain problems. I shared my thoughts about static routing and time will tell whether these ideas are correct or not. Regardless, I hope they get you thinking about the advantages of dynamic routing solutions like flexis ProfiTOUR.
Here’s a new idea. A big routing solution can create big supply chain solutions. What do you think?
Do you think dynamic routing will put an end to current transportation problems? Do you think it will open the door to supply chain optimization?
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