Get Real: What ROI to Expect from Your TMS Implementation
Q: Transportation management system (TMS) solution providers routinely claim their automation tools will deliver cost savings as high as 25 to 30 percent of annual transportation spend. Is this accurate?
A: Sales representatives have a tendency to oversell things in their pursuit of new clients. This is problematic for the industry because it discredits TMS solutions as a whole when users expecting 25-percent savings yield significantly less. Of course, it is theoretically possible for an organization to capture this level of savings, but only if it had no established processes, controls, or program of any kind before implementing a TMS.
In reality, most companies already have some form of transportation management processes in effect. Companies should expect a more realistic savings range of between two percent and 11 percent, according to a recent ARC Research study. This is accurate, with perhaps a bit more potential on the upside—up to 15 percent.
Q: How can transportation organizations estimate what they stand to gain by implementing a TMS solution given the relative strength or weakness of their existing program?
A: Companies interested in automating and optimizing their transportation management processes should examine their current capabilities across eight critical transportation functions. These include optimization-related processes such as optimal routing and load building, as well as execution processes such as mode selection, carrier management, procurement, collaboration, business intelligence, and others.
Resources are available to help would-be TMS users assess their existing capabilities in each of these areas, and determine what level of savings they could expect to capture by applying TMS to standardize and automate these functions. Using figures provided by credible third-party experts, industry analysts, and others, they can arrive at a realistic set of expectations based not on sales rep promises, but on empirical evidence.
Q: What is the average return on investment for the typical TMS user?
A: Frame this question in terms of how long it takes for a TMS to pay for itself. TMS solutions generally produce enough savings—from both freight and labor costs—to cover implementation expenses and monthly program fees for the term of the contract within the first three to six months—and often even sooner.