Until operations management and transportation expenses are combined, a company doesn’t know the true cost of its business, says Jim Barnes, executive vice president of Körber supply chain.
You don’t really know your job profitability until you know the true cost of your transportation, says Barnes. The key then is to combine your order management with your transport cost optimization platform. This determines the profitability of the order. “There’s no guessing game anymore,” he says. “So if you’re a retailer or digital commerce leader, you really understand the profitability of that order, you really understand the gross margin.”
All too often, he says, the focus is on getting a product to the customer anytime, anywhere without thinking about shipping costs. “But as brands and retailers focus on margin, this combination of transportation spend management and order management gives them insight into the profitability of those orders.”
According to Barnes, a hypothetical retailer with 2,400 stores nationwide and a network of two DCs, one on each coast, must carefully consider where and how much inventory to stock. Delivery to stores or e-commerce drops at customer’s door need to be factored into fulfillment costs.
“It’s important to tie transportation expense management to the original purchase order ID from an invoice verification perspective,” says Barnes. “By combining these two together, where a primary key is the order and customer, we know order profitability at the order shipment level.”
A network is a combination of physical assets, working capital, and inventory, says Barnes. A broken network means you have the wrong product in the wrong place at the wrong time. “The worst thing you can do is make up time in transit,” he says. By combining order management and transportation cost management, you get the granular details needed to drive order profitability.
