There are plenty of startup companies that say they can revolutionize logistics by using technology to make it more efficient. Yet there are many within the transportation and trucking industry already doing that. One of them is Schneider.
That’s right, the company you know for its ubiquitous orange trucks.
“When folks think of Schneider, they think of the orange assets on the van, dedicated or intermodal side,” admits self-described “supply chain geek” Mike Kukiela, senior vice president of supply chain management at Schneider. “What is a little less known is that we have an incredibly scalable logistics offering that is becoming the fastest-growing division of the company,” offering third-party logistics, warehousing and value-added services to shippers.
Kukiela’s division goes even further, offering what is called fourth-party logistics or lead logistics provider (LLP) services. “We work with our customers and become, to a degree, a part of their logistics staff. We can leverage our process and our technology to drive efficiency, create visibility, and reduce waste and inefficiencies and cost in their supply chain.”
What Shippers Want
Schneider was doing this long before anyone started using terms like 4PL or LLP. Decades ago, it created its own transportation management system, called Summit. About five years ago, it converted to Oracle, and more recently started using MercuryGate as well as JDA (for warehousing), as complementing technologies for its customers’ TMS needs.
“We have tremendous insight into the order-to-cash process and the technology needs that shippers have.”
In surveying shippers, Schneider has identified three big challenges in the past few years:
- Control, and better forecasting capability to lower costs
- Supply chain visibility
- Scalability and flexibility within their network
And of course, all those affect motor carriers. Supply chain visibility, from a carrier perspective, Kukiela says, “is the track and trace and the ETA of when it’s going to arrive.”
The need for scalability and flexibility is related to the boom in online and omnichannel commerce. “The supply chain needs to be completely agile and flexible to those needs,” he says.
Kukiela says that technology can address all these needs. “If a shipper has great technology, it allows them to provide more lead time to the carrier. When they don’t, you see drivers waiting, orders being canceled, routes being changed midstream.”
While getting the right rate is part of it, he says, it’s also about reducing waste, and that affects both shippers and carriers.
“If you think how often a driver sits at a facility, that’s waste. If you have a trailer pool and you can do it with half the amount of trailers, that’s waste. [It’s about] removing the need for there to be accessorial charges, because you’re working with the customer to optimize their supply chain and helping carriers' operations.”
The increased need for technological logistics solutions and third- and fourth-party logistics providers is a result of dynamic changes in the supply chain, Kukiela explains.
Shipping patterns are another area that is completely changing due to an omnichannel marketplace, he says. “Twenty years ago, you would see lots of full truckloads on the outbound moves; now you see a lot of less-than-truckload and parcel on the outbound, and you’re seeing more full truckload on the inbound. You’ve seen a complete shift in how freight is moved.
“What has not changed is there’s still a great need for visibility… ‘Where’s my freight, when is it going to be delivered’ – and a growing need for TMS services,” says Kukiela. “The pace of innovation is incredibly fast, yet there remains a lack of adoption [of technology.]”
Enter the TMS
Some 65% of shippers are still not using a transportation management system, Kukiela says, citing data from the American Productivity & Quality Center. That means there’s a lot of opportunity for 3PLs to help shippers create more efficient supply chains. He says that also benefits the carriers that haul their goods, with fewer delays and longer lead times.
“Shippers that are not using a TMS are paying 8 to 10 times more in their overall distribution costs than customers currently using our platform,” he says.
Schneider works with customers to diagnose their current situation and key needs and to add the right technology into the supply chain.
“The number one item most customers think they need right away is visibility,” he says. “You hear a lot about shippers partnering up with visibility companies such as FourKites and Project 44 and Macropoint.
“I think all those guys provide a great service.” However, he says, “I think shippers have been slow to realize the value of the TMS. You get not only the visibility, but so much more. You can standardize and take some of the inefficiency out of the supply chain.”
Schneider walks customers through a four-step continuous improvement program:
• Phase 1 is tactical: Get the rules of engagement set up, establish KPIs.
• Phase 2: “After six to eight months we have real data, and now we can tell you, this is how your network is flowing. We look at mode shifts, core carriers, and develop a routing guide so when markets change there are secondary and tertiary carriers the shipper can go to seamlessly. We’re working with facilities to change operational requirements carriers find as a dissatisfier in recruiting and retaining drivers.”
• Phase 3: “This is where you’re really leveraging the data, to determine areas where customers can optimize their network from a strategic standpoint.” Are imports coming into the right locations? Is multi-stop truckload an option? Can the shipper eliminate the high cost of expedited freight by increasing lead time in the supply chain?
• “Stage 4 is really where we start looking at customers collaborating with other customers that have complementing networks. We might look at multi-shipper bids, shared cross docks, putting two or three customers’ freight on the same truck.”
Without the right technology, Kukiela says, people working in a shipper’s logistics department may only be able to cover a handful of shipments a day. “When we implement that technology and take them through our phases of improvement, they go from two or three or four shipments per day to over 55 per day. This allows them to grow their business without adding tremendous costs in the supply chain.”
Can You Follow in Schneider’s Footsteps?
Obviously, most motor carriers don’t have the scale that Schneider does. But that doesn’t mean that there may not be opportunities to be had. So we asked Kukiela for his advice for trucking companies that are interested in offering shippers more than just transportation.
For the smallest fleets, he says, “I think the best approach is to partner up with a 3PL and really find their niche and get real sticky in that niche. When they have the critical density where they can go out on their own, they’ll have the lessons from that partnership.”
Doing your homework is also important for midsized or large carriers, he cautions. “The emergence of new brokers is always increasing, and with that comes the use of standalone technology. The only caution I would share is be smart – take small bites on these things. Everyone rushes to get technology without fully understanding the business processes – understanding the rules, the order-to-cash process… And you want technological expertise on your staff, because there’s a large amount of learnings. There will be things you didn’t realize in your previous environment.”