Mike Hane, Director, Product Marketing, TMS at Descartes
Does your company view transportation as a competitive weapon? An enlightening new report indicates that this strategy corresponds to strong financial performance for shippers and logistics service providers (LSPs). Descartes’ 2024 Global Transportation Management Benchmark Survey shares responses from more than 630 companies, indicating there is a correlation between financial performance and the strategic importance senior management places on transportation.
The report categorized survey respondents in terms of how they see transportation: either as a “Competitive Weapon” or “Not Important.” Competitive Weapon companies regard transportation as a top strategic priority, while Not Important companies think of transportation as a “basic service” or “necessary evil.”
The report also differentiated respondents by how they perceived company financial performance, delineating between industry leading performers (“Top Performer”), middle of the pack, below average, or bottom performer (“Poorer Performer”). The link between Competitive Weapon companies and Top Performers was clear—using transportation as a competitive weapon generally results in better performance and growth. For example, Competitive Weapon companies are 3.4 times more likely than Not Important respondents to be Top Performers, and almost half of Poorer Performer respondents view transportation as unimportant.
The focus on transportation also impacts a company’s outlook on future performance. Competitive Weapon companies are 13% more likely to expect at least 5% growth than Not Important companies (79% versus 66%, respectively). Conversely, 13% of Not Important companies expect limited or no growth—or even negative growth—while only 4% of Competitive Weapon companies expect this level of lower performance.
The data strongly indicates that supply chain leaders are achieving greater financial prosperity in part by embracing proactive transportation management. To understand more about this strategy, the report provides some deeper insight into the following ways supply chain leaders are leveraging transportation as a Competitive Weapon:
Measuring Transportation Value as a Contributor to Success
The report suggests that measuring the value of transportation by how it contributes to company success is a winning approach. Even though most survey respondents measure transportation value by cost per shipment, Competitive Weapon companies are 1.5 times more likely than Not Important companies to value transportation by how it contributes to revenue growth (58% vs. 38%) and competitive differentiation (37% vs. 23%).
By recognizing the value of transportation as a key to business performance, rather than simply as a cost center, supply chain leaders are motivated to invest in new strategies and technology to improve service and capabilities, and ultimately become more competitive and profitable.
Adopting Leading-edge Strategies
In order to maintain market leadership, a company must keep adopting new strategies and innovating new products and services. The report confirms this, as Competitive Weapon companies are 2X+ more likely to create or adopt leading-edge strategies than Not Important companies. More than half of Competitive Weapon companies (54%) are early adopters of leading-edge strategies, while another 40% are fast followers—a combined 94% aggressively keeping pace with or surpassing the competition. Unsurprisingly, only 24% of Not Important companies self-identify as early adopters.
Investing in Transportation Management Technology
The report highlights how transportation management (TM) technology is vital for supply chain leaders. Competitive Weapon companies are investing in TM solutions as the top strategy (44%) to prepare for industry and regulatory change, while most Not Important companies (35%) rely on cutting costs. It is important to note that, even in the face of today’s challenging environment of inflation and higher costs, many leading companies are still making technology investment a priority.
The report also established that technology investments are increasing—three-fourths of all survey respondents plan to increase TM IT investments for the next two years, and both Competitive Weapon companies and Top Performers were much more likely than Not Important companies and Poorer Performers to increase those investments. This disparity expands even further when considering the percentage of increases, as Top Performers (33%) are 2.75X more likely to increase IT spend by more than 5% compared with Poorer Performers (12%).
Driving Business Growth and Expanding Product Offerings
The Descartes research demonstrates that both Competitive Weapon companies and Top Performers are more focused on offering customers greater choice in delivery options as a game plan to grow the business. When asked what is driving expanded use of a Transportation Management System (TMS), business growth is significantly more important to Competitive Weapon companies and Top Performers (43%) compared to Poorer Performers (32%). Expanded product offerings are also much more of a priority for Top Performers (38%) vs. Poorer Performers (18%). On the other hand, while Not Important companies (43%) say cost reduction is the main TMS driver, fewer Competitive Weapon companies (32%) agree.
Competitive Weapon companies and Top Performers also say expanding delivery options is their top strategy to improve the value of transportation, while the top strategy for both Not Important companies and Poorer Performers is, again, cutting costs.
Focusing on Fleet Routing
Although visibility was chosen as the top overall capability needed for effective transportation management, Competitive Weapon companies see fleet routing and execution as the top capability (46%), with visibility as a close second (40%). Overall, fleet routing increased from 24% in 2023 to 36% in 2024, while most other categories dropped in the rankings from last year.
In contrast to the Competitive Weapon approach, Not Important companies placed fleet routing and execution farther down the list of top capabilities, ranking fourth for 34%. Similarly, Top Performers also selected fleet routing at a much higher rate than Poorer Performers. This data supports findings mentioned earlier that show Competitive Weapon companies are early adopters of new strategies, focusing on growth and expanding delivery options. An important focus area for supply chain leaders could be in expanding fleet usage to drive customer service and revenue.
Sharing Information with Supply Chain Stakeholders
The report found that both Competitive Weapon companies and Top Performers do a significantly better job of sharing information across the organization and external supply chain stakeholders. For example, Competitive Weapon companies share information with supply chain operations (52%), warehouse operations (47%) and suppliers (39%) at a higher rate than Poorer Performers (45%, 40% and 32% respectively).
Supply chain leaders are committed to sharing transportation data because it generates value across the extended supply chain. These Top Performers rely on that information to run their operations more efficiently and improve resilience; choose partners that can also keep them informed and provide timely deliveries; and, maybe most importantly, strengthen customer relationships.
A Proactive Approach to Transportation Management Pays Off
The 2024 Global Transportation Management Benchmark Survey reveals a significant relationship between the strategic value placed on transportation and company success—using transportation as a competitive weapon helps contribute to better financial performance and growth.
Looking deeper at the numbers, a pattern emerges with Top Performers and Competitive Weapon companies proactively pursuing leading-edge strategies to grow the business, such as focusing on customer service, expanding delivery options, investing in TM technologies, and sharing TM information across the supply chain. Meanwhile, their counterparts—Not Important companies and Poorer Performers—are relying on cost cutting, quite possibly as a reaction to diminishing financial returns.
It all comes down to how the companies value transportation management. Competitive Weapon companies and Top Performers measure TM value in terms of how it serves customers and contributes to growing the business—and, in this respect, TM seems to be paying off.
Mike Hane is the Director of Product Marketing for the Descartes Transportation Management (TM) solution area. In this role, he is responsible for driving the go-to-market strategy for the TM solutions. With over 25 years of experience in supply chain and transportation, Mike has a wealth of knowledge in software implementation, consulting, sales, and marketing. Prior to joining Descartes, Mike held a long tenure at Chainalytics (now NTT DATA Supply Chain Consulting) and also worked at CAPS Logistics, DAT Freight & Analytics, and Optilogic.
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