Panduit said the TMS will transform its highly manual process, allowing the company to consolidate shipments and providing improved visibility and more efficient freight settlement.
Panduit, a global manufacturer of products for data centers, is in the middle of implementing the cloud-deployed version of Oracle Transportation Management, the companies said Wednesday.
Panduit plans to use OTM Cloud to automate a transportation management and freight settlement process that was previously handled primarily by spreadsheet and email, Sam Hanieh, Panduit manager of global logistics, told American Shipper in an interview Wednesday.
“Two years ago, we launched an initiative to optimize freight spend,” he said. “Across the board, we didn’t have a systematic solution in place.”
Panduit sells the products it manufactures through a distribution channel, not to end consumers. It manufacturers in 11 countries, with regional distribution centers in nine countries.
Hanieh said the company is three months into deployment of OTM in Netherlands and Mexico, with the United States to follow in July. The deployment is more complicated in the United States because Panduit has a heavily customized warehouse management system with which the TMS must integrate.
The inefficiency of its current transportation management process was evident, according to Hanieh. He said OTM will help Panduit better consolidate loads – whether it’s combining two smaller less-than-truckload shipments into a larger LTL move, or combining a small LTL and parcel move into a larger LTL load, or even combining loads to create a full truckload.
“When we ship to distributors to California, we will ship an LTL pallet and six different parcel boxes to the same customer on the same day with two different carriers,” he said. “We’re unable to consolidate those packages as a larger LTL or truckload today. Don’t have the sophistication to do that.”
Panduit will use OTM for all its modes – both domestic and global. Its transportation needs are such that most orders are fulfilled regionally, so that an item manufactured in Costa Rica will be routed to its distribution center in the United States.
“The majority of ocean shipments are for replenishment from factory to warehouse,” he said.
OTM will also be used to more accurately pay freight bills. The company currently just pays invoices as they are received, with no system in place to prevent duplicate or otherwise inaccurate billing. Managing those freight invoices is the responsibility of Hanieh’s department. He said using the freight settlement piece of OTM will provide cost savings, with the company using tolerances for overbilling to prevent invoices over a certain percentage from being paid until the amount is corrected.
Panduit will also use OTM’s visibility and dashboard functions. Hanieh said it’s harder to quantify the value of visibility than it is to quantify the value of minimizing transportation spend, but that there will definitely be a benefit to the business of having better visibility across its modes.
Panduit manufacturers virtually every component of a data center except for the servers, and it partners with companies like Cisco to provide those.
Panduit uses Oracle’s business applications throughout its organization – about 95 percent of its software, Hanieh estimated – so the decision to examine the capabilities of OTM was logical. But he said the decision to go with OTM over a number of other transportation management system vendors was not just the existing use of Oracle.
“We worked with Gartner and our IT team favored (OTM) because they were familiar with the Oracle suite,” he said. “So we took historical data, ran it through the optimization engine in OTM and the results were favorable. Decision to go with OTM was not affected by use of Oracle.”
Panduit looked at other TMS vendors like JDA, SAP, and RedPrairie (which merged with JDA in 2012), but did not look at software-as-a-service TMS vendors. In fact, Hanieh said the company considered building a TMS in-house, since he had worked with a third party logistics provider that had developed its own TMS in a previous role.
However, Hanieh quickly realized that wasn’t a viable solution.
“We realized we didn’t have all the answers,” he said. “The cost to set something like this is borderline scary. We know that’s not a core competency for us. Panduit is just a shipper. The mistake we made with our WMS is that we customized to do what we want it to do, but that left us unable to take advantage of upgrades.”
The somewhat unsatisfying experience with its highly customized WMS is what led Hanieh to choose the cloud-deployed version of OTM. Oracle released the cloud version of its TMS in August. Oracle’s cloud-deployed TMS is a private cloud solution, not a multi-tenant one.
Hanieh said, more than anything, the OTM Cloud would prevent Panduit from customizing its TMS so much that it wouldn’t be able to leverage the advantages of frequent functionality upgrades.
“With on premise, you have a lot of hardware and maintenance costs,” he said. “There were significant enough cost savings from cloud to sway our business case. But my favorite part of the cloud solution is we did not want to customize the application – wanted it as it is. We unintentionally customized our WMS so that it’s hard to migrate to the latest version.”
Hanieh said application speed was the only concern about the efficacy of the cloud version of OTM versus the on-premise version.
“At this point, we’ve no issues at all,” he said. “Speed is equivalent to the applications on premise. I don’t know how it will behave once we run bulk plans and have a ton of data running through it.”
Derek Gittoes, vice president of value chain execution product strategy at Oracle, said that he largely now presumes a customer that has decided on OTM will choose the cloud-deployed version over the on-premise version.
“When we began offering OTM cloud-deployed, we thought the primary consumer would be mid-sized companies, or companies smaller than we sold to in the past,” he said. “We are seeing more small companies, but seeing the whole spectrum. We thought cloud would be very popular, but we’re now assuming it’s going to be a cloud-based deployment unless there’s some extenuating circumstance. It’s a cloud first mentality.”
Oracle historically has deployed its solutions on-premise, but has been rolling out cloud-deployed versions in recent years. OTM was a natural fit for cloud deployment, and is being sold not just as an extension to its traditional business applications like enterprise resource planning, but as a standalone solution as well. Hanieh, for example, said that while he was researching TMSs, spoke to several OTM customers that were predominantly using SAP or JDA for other business functions.
Gittoes, meanwhile, said he doesn’t think company size is an indicator of whether a company will deploy cloud or on-premise. More relevant is the industry. For example, aerospace and defense are not big consumers of cloud-based applications, primarily because those companies are not allowed to work with applications that aren’t on-premise.
Hanieh said the initial goals are to reduce transportation spend through consolidating shipments. OTM, he said, will allow the company to have better insight into whether it makes sense to hold delivery of an order for a day to group loads more effectively.
“Today, if we receive an order, we ship it the same day,” he said. “Tomorrow, we’ll hold one day and consolidate.”
Longer term, the company will deploy OTM Cloud across its entire global network and also include inbound, which accounts for the bulk of Panduit’s transportation spend.
Data center component manufacturer deploys OTM Cloud
