Transportation Planning and Optimization Applications became widely used during the early and mid-1980s. The deregulation of the trucking industry provided shippers with more transportation options, and advances in computer technology enabled them to evaluate these options more effectively. As a result, shippers increasingly sought new technology to reduce transportation costs and improve service in a deregulated market.
Today, shippers, 3PLs, and others in the transportation industry face numerous challenges in optimizing their operations and reducing costs. Understanding the evolution of transportation planning software can shed light on how current technologies address these pain points. This overview will examine the development, capabilities, and limitations of these tools. By reviewing First through Third Generation software, you can better appreciate the advancements and solutions provided by Fourth Generation Transportation Planning and Optimization software.
First Generation Transportation Planning: Truck Fleet Routing
In the early days of freight planning, truckload routing programs were widely used. These programs adapted the “traveling salesman” problem to route dedicated fleets of vehicles. Shippers used these programs for warehouses and distribution centers with dedicated fleets delivering products to customers in specific geographic areas. These applications considered two variables when developing a load plan: the amount of product that could fit on a truck based on its capacity and the product’s physical characteristics, and the sequence of deliveries based on the least number of miles. While these applications could estimate costs by applying a price to miles, hours, or loads, they optimized routes based on the least number of miles, not the lowest cost.
Second Generation Transportation Planning: Online Rating Calculations
Second Generation Transportation Planning involved manually selecting the lowest cost carrier for a load based on stored freight rates or route-by-route bidding events. This capability evolved from rating diskettes provided by carriers, which allowed users to enter shipping characteristics for an estimate. Second Generation systems expanded this capability and, when integrated with a Transportation Management System (TMS), enabled users to select carriers from a list of rates and services. Although useful, these applications were generally limited to truckload or LTL shipments and did not help develop and compare options involving different modes or routes.
Third Generation Transportation Planning: LTL Consolidation into Multi-Stop Truckloads
Third Generation Transportation Planning aimed to help shippers consolidate LTL shipments into multi-stop truckload shipments. These systems compared the cost of multi-stop truckloads with LTL options, selecting modes that resulted in the optimal combination of LTL, multi-stop truckloads, and full truckloads. However, these systems had limitations because they only considered one generic set of rates and accessorials for each mode, significantly restricting the number of feasible options. Additionally, these applications struggled to develop usable routes and plans because they could not account for many real-world constraints, such as service requirements and carrier preferences.
Fourth Generation Transportation Planning: Multi-Modal Multi-Carrier Optimization
Fourth Generation Transportation Optimization combines rate shopping across multiple carriers with analytical capabilities to determine the best combination of modes and carriers. This approach considers all aspects of each carrier’s pricing, including line-haul rates, accessorial charges, equipment, and different service offerings. The number of potential options expands exponentially when considering multiple carriers. This application takes load planning and route planning beyond human capabilities by analyzing all elements for each carrier and mode.
Conclusion: Embracing Advanced Transportation Planning
The evolution of transportation planning software highlights the industry’s ongoing drive for greater efficiency and cost-effectiveness. From early truck fleet routing to today’s multi-modal multi-carrier optimization, each generation has brought significant improvements.
First Generation software provided basic routing, Second Generation enabled online rating calculations, and Third Generation focused on LTL consolidation. Today’s Fourth Generation solutions combine comprehensive rate shopping with advanced analytics to deliver optimal transportation plans.
Understanding this evolution helps shippers and logistics professionals appreciate the capabilities of modern software and leverage these tools to enhance their operations, stay competitive, and meet the industry’s dynamic needs.
