Investment in a new transportation management system (TMS) is expected to provide a positive return in a number of ways – lower transportation costs, more efficiency, more visibility and improved customer service. But shippers that don’t carefully consider all the variables before making the leap into a TMS are left with, at best, a functional but flawed system, and at worst, a massive investment that is not useful.
The key to the successful deployment of a Transportation management system is to make sure that investment is future-proofed.
“I want to make sure whatever I purchase is scalable to me and is not sitting on the shelf in two years because I outgrew it,” Sanjiv Mahajan, associate principal at The Hackett Group, explained. The Hackett Group provides consulting services to businesses, including those in the transportation space. “I think the company’s strategic plan and vision is key. We always recommend starting with that. If a transportation or logistics organization hires us, we want to start with the CEO or COO.”
Meeting organizational needs
Mahajan told FreightWaves that ensuring the TMS software meets the needs of the organization, both now and in the future, is critical, with consideration given to whether it will be an in-house option or outsourced. This depends on what the company sees as its core competency. If transportation is not, then outsourcing becomes a more viable option.
“There is a huge spectrum [of companies] out there,” he said. “There are companies that just supply freight matching as a [third-party logistics provider] whereas on the other side there are companies out there with assets [that handle everything].”
Andy Schmahl, partner and managing director of the Boston Consulting Group, said that shippers need to begin the process by self-auditing their needs.
“Do we want to use this as a strategic weapon? That may lead you to a company that understands the transportation market really well,” he said. “Or do you want to use this as a cost weapon? You have to start with some of these more basic questions.”
Schmahl also noted that shippers must consider both their macro and micro needs.
“When I talk to shipping companies, I ask them how they think about transportation,” he said. “What are all of these other things that shippers are doing to differentiate themselves in the market? That kind of fundamental macro [thinking] is where they need to start.”
A TMS system provides shippers with the ability to more accurately plan routes, manage inventory, track goods, choose the proper mode to move freight on, and offer real-time visibility into the entire shipping process, including overall management of the load and even payment functions. But not all companies need or want all this functionality at the current time. This is when many fail to future-proof their investment, which can run from tens of thousands to hundreds of thousands of dollars.
nVision Global, for instance, is constantly upgrading and enhancing its tools with the benefits of new technologies and requirements that are driven through their customer and transportation provider relationships.
“These developments reflect a portion of our commitment to providing our customers with technology value adds that are designed to improve access to information and reduce overall transportation spend,” Luther Brown, CEO of nVision Global, said.
Mahajan said that in these cases, it’s important to look for TMS solutions that offer scalability, and that might mean outsourcing these needs.
Outsourcing grows in popularity
“As we see more and more companies, especially in the high-tech sector and those that are not in the industrial sector, they are going to these outsourced models,” he said, noting that outsourcing often allows shippers to choose which functionality they need, and offers the ability to turn on additional functionality as business needs change without a second major investment.
According to Mahajan, a good five-step process to get the ball rolling is to:
1. Understand the vision and strategic plan of the company. This includes the go-to-market strategy and what customers want.
2. Understand what the investment means to the logistics side. What core capabilities are needed?
3. Understand what the differences are between in-house options and those available through outsourcing. Budget, current needs and future needs are key considerations here.
4. Understand what functionality is needed, and which providers offer this functionality.
5. Define what’s most important in the evaluation process. This could include cost, functionality, user experience and scalability.
Don’t forget to include internal stakeholders in the process, Mahajan added. TMS solutions impact more than just the transportation department and deploying one that impacts other departments positively drives increased value and lowers overall operational costs.
Future-proofing your TMS
Future-proofing your TMS software is not an easy task, but it is not as difficult as it seems, either.
“Looking into your crystal ball is important, but being able to look at your TMS system provider and see that they can innovate is [equally] important,” Schmahl said. “If your strategic purpose is to use transportation more broadly as a strategic weapon, you need a TMS provider that is going to innovate.”
This includes considering open-source platforms that easily integrate with customer systems.
“Sometimes you want an open-source API app to go onto your platform, so the more open source you are … [adds] the mobility to innovate, to try new things at an extremely low cost,” Schmahl added. “So I think it’s important to ask that question.”
Schmahl also said, “And cloud-based as well. It often goes hand-in-hand with open source, but the more cloud-based you are, the more opportunity you have to scale, innovate and quickly adapt to changes.”
Investing in a TMS requires more than just buying an off-the-shelf product. It requires thought, analysis, and the right investment to ensure that you buy today is what you need tomorrow.