TMS Solutions: The Big Picture
Transportation management systems streamline the information exchange between shippers and carriers, so freight moves reliably, efficiently, and at the best possible cost.
When Martin Rothe joined Progressive Converting (Pro-Con) three years ago as vice president of supply chain, the company managed 15,000-plus annual shipments using spreadsheets and email. “It was clear we needed to implement a transportation management system (TMS) or we’d lose control,” he says.
Pro-Con, based in Appleton, Wis., converts paper stock to the rolls and sheets commercial printers require. It also delivers paper to printers, many of whom expect next- or second-day delivery. “That part of the business has continued to grow more demanding over the past 15 years,” Rothe says.
Rothe researched about 40 TMS solutions with several goals in mind. “We didn’t want to give away control of our supply chain,” he says. Instead, he wanted a way to better manage the transportation activity in-house, given how critical it is to Pro-Con’s customers.
Cost also was a concern. “Even though we’re a healthy mid-sized company, we didn’t have the budget for a traditional TMS installation,” Rothe says.
Rothe decided on a transportation management solution from U Route, a Warren, Mich.-based shipper software vendor, attracted in part by its web-based connectivity and API (application programming interfaces) connections to carriers. “With the TMS, I’m now out of the business of uploading rates and tariffs,” he says. Instead, carriers handle that function.
Pro-Con rolled out the solution at each of its five facilities, one at a time. While reengineering processes required several months, the software installation took just a few days.
Since then, Pro-Con employees have cut in half the time they spend tracking and monitoring shipments. The visibility the system offers allows Pro-Con to save money by consolidating shipments. The company’s cost per shipment remains below what it was in 2013, when Rothe joined the firm. “The savings on freight expenditures has been substantial,” he notes. That’s key, given that annual shipments now top 22,000.
Like Pro-Con, a growing number of mid-sized and even small companies can leverage transportation management systems that previously were out of reach for all but the largest enterprises.
“The big change has been in the architecture,” says Chris Caplice, executive director of the MIT Center for Transportation & Logistics in Cambridge, Mass. Early TMS solutions, which came on the scene in the late 1980s, were “mainframe AS400s, with green screens,” he says.
Client/server models came next. A central server connected to multiple PCs allowed more than one person to work off the same rate base.
Ahead in the Cloud
Then, “cloud technology changed everything,” Caplice says. The cloud speeds implementation, eliminates hardware compatibility challenges, and allows for easier communication among carriers and trading partners.
Most important, cloud technology prompted dramatic drops in the cost of many TMS solutions. Shippers no longer have to invest in software licenses and hardware, nor mammoth installation projects. “The cloud has made TMS accessible to a wider swath of companies,” says Jordan Kass, president of TMC, a division of third-party logistics provider C.H. Robinson, based in Eden Prairie, Minn.
Cloud systems also do more: They not only automate shipment planning and execution, but sophisticated algorithms also allow them to optimize shipments across modes and routes. “The logistics network becomes a fine-tuned engine,” says Frank McGuigan, president and chief operating officer for Transplace, a Frisco, Texas-based logistics solutions provider.
Craig Boroughf, senior director of global sourcing for building products manufacturer USG Corporation, based in Chicago, has experience with the TMS evolution. USG has used a Transplace TMS since 2001 to help manage daily shipments from 45 manufacturing facilities.
In 2001, USG’s goal was to automate carrier assignments and manage shipment costs, Boroughf says. Transplace’s optimal carrier assignment (OCA) software compares all shipments against the entire carrier pool. “Given the size of our plant locations and the volume of daily shipments, we saw the software as a real opportunity to optimize those load assignments,” Boroughf says.
Another focus has been automation and efficiency. Software has reduced the time spent on transactional tasks such as email and status updates, Boroughf says, enabling employees to spend more time with customers.
USG is now leveraging the TMS to improve service even more. One example: Linking the software with GPS to pinpoint shipment locations. The goal is to “proactively use that information to resolve service issues before the customer is even impacted,” Boroughf says.
As the software evolves, it allows Boroughf to manage a larger customer base with the same number of staff. He notes that housing starts—a key measure of the market for USG’s products—nearly doubled between 2010 and 2017, rising from 580,000 to about 1.2 million. “The TMS allows USG to meet the growing demands of the industry,” he says.
Along with a wider range of prices for transportation management systems, the term itself has broadened to encompass an expanding universe of solutions.
For example, Freightview, also a division of C.H. Robinson, provides “a tool that allows shippers to automate communication with carriers, rather than rely on email and phone calls,” explains Megan Orth, director of Freightview.
Freightview is geared to small or mid-sized companies that ship daily. They can purchase a flat, monthly subscription and then connect with their carriers through API technology. The software focuses on less-than-truckload (LTL) shipments; a module for truckload shipments is in beta testing.
One Freightview user is Wallprotex, a St. Charles, Ill.-based provider of sustainable, quality wall protection products. The company had been working with a broker to identify carriers to move its LTL shipments. “We had no visibility, and just a small list of carriers,” recalls Keith Cocking, customer service manager.
As the company grew, Wallprotex struggled to provide timely responses to customer inquiries because it had no shipment visibility. “The lack of visibility was a challenge because we try to be competitive, and open and transparent with customers,” Cocking says.
Before he could implement the Freightview system, Cocking needed to establish direct rates with carriers. That process took several months, after which Wallprotex initiated a trial with Freightview.
The benefits were immediate. First, obtaining shipping quotes, which used to take up to 30 minutes, dropped to about one minute. Wallprotex also saves about $40 per shipment.
Second, the ability to more quickly respond to customer requests provides a competitive edge. Wallprotex recently began working with a customer that switched from a competitor and wanted to arrange same-day shipments. “In two minutes, we had all the rates,” Cocking says. “We set up guaranteed shipments while still on the phone with the customer”—an impossibility before implementing the software.
Large Companies in the Mix
While TMS solutions now are available to many smaller companies, they still have much to offer larger operations. The requirements tend to expand. For instance, multinational firms often require transportation solutions that handle all modes in all regions of the world.
The sophistication of the algorithm that assigns shipments to different carriers is key. It should be able to handle multiple facilities and users, and consider all transportation components— such as cost and time constraints, and equipment type—to identify carriers that are the best match. “The optimization algorithm is the TMS,” says Mitch Weseley, founder and chief executive officer of 3Gtms, a transportation management solutions provider based in Shelton, Conn.
Optimizing transportation might mean comparing LTL to truckload shipments to see which is less expensive. If the shipment must travel via a particular mode, the software should minimize the distance traveled or the number of vehicles used. Or, it might need to identify the least expensive transportation mode that will keep products at a specific temperature.
Moreover, the algorithm should calculate on the fly. Say a shipper is ready to move five LTL shipments, each a different product, from Atlanta to New York. Then a customer requests 200 more units of one product. The additional units won’t fit on trucks already assembled.
The software should help the shipper decide how to accommodate the request. Should they consolidate some shipments? Which group of products should they remove to accommodate the new one?
“There are countless possibilities,” Weseley says. The TMS should work within this “crazy dynamic world” to identify the best solutions.
In and Out
While transportation management systems tend to be used for outbound shipments, they can provide savings on inbound ones as well. A TMS can provide better control and visibility of inbound and outbound shipments, says Rick LaGore, chief executive officer of InTek Freight & Logistics, an Indianapolis-based transportation solutions provider.
Indeed, the savings on inbound shipments can be larger than those on outbound. Historically, suppliers—not customers—have established relationships with carriers, Kass notes. As a result, client companies often have little visibility to cost-savings opportunities. For instance, the company could be using suppliers located within one region that all ship less-than-truckload. A TMS can identify opportunities to consolidate shipments to reduce costs and cycle time.
This often requires reengineering processes. While the supply chain or warehouse team usually controls outbound shipments, purchasing typically controls inbound shipments, LaGore notes. For simplicity, many products arrive with freight already rolled into their costs. Changing this process will alter buying habits and negotiations with suppliers.
A TMS also can impact relationships between shippers and their brokers and/or carriers. Many carriers initially were nervous when Pro-Con implemented a TMS, Rothe notes. They anticipated a reverse auction that rewarded companies on price alone. “But that’s not how we do business,” he says. “We don’t treat carriers as just numbers on a page.”
Carriers typically come to see Freightview as a better way to communicate with their shippers, Orth notes. Moreover, the service component always comes into play. “If a carrier is the cheapest, but it delivers shipments to customers late or damaged, shippers are unlikely to remain with them,” she adds.
That said, the expanding reach of TMS is changing some roles. Brokers, for instance, may need to find new ways to provide value, given that technology has streamlined the job of connecting shippers and carriers, notes Jonathan Sturtz, founder of U Route.
Given the range of available TMS solutions, how can you decide which is right for your firm?
A solid starting point is doing a “deep dive on your internal requirements,” Kass recommends. Is geographic scope critical? The ability to work with multiple transportation modes? The answers should guide your decision.
Independence is another consideration. A TMS that works only with a specific carrier or set of carriers may limit opportunities to save.
“Look for a system that’s easy to use, but handles the complexity of transportation management,” suggests Monica Wooden, chief executive officer of MercuryGate International, a TMS provider based in Cary, N.C.
For instance, the solution should be able to handle all shipment modes the organization currently uses or expects to use within a single system. That way, it can consolidate shipments from different legs and remove empty miles from the supply chain. Including parcel is key, Wooden adds, given how big a transportation component it has become.
Many shippers retain multiple ERP systems because the cost of consolidating to a single one is daunting. That means their TMS solution needs to support all these systems.
Cost and contract terms also are key. Consider the experience of John Conte, logistics manager for Holman Parts Distribution in Pennsauken, N.J., a division of Holman Enterprises and a nationwide, single-source supplier of original equipment powertrain products with annual shipments topping 10,000. When Conte began looking for a TMS, he focused on solutions that were cloud based, easy to use, and could be adopted across the organization.
Conte didn’t want to sign a multi-year contract, or be charged for each transaction on top of monthly or annual fees. “If a provider wants to charge to print a bill of lading every time you make a shipment, those transactions will eat up the freight savings,” he says.
Conte selected a cloud-based TMS from Maynard, Mass.-based Kuebix that fit his requirements. The system has cut the time required to process a freight shipment from eight minutes to two, and offers “total visibility,” Conte says, noting that he’s responsible for operations at 11 locations.
The Kuebix TMS also cut freight costs by about 15 percent without changing carriers. “The system allows us to look at all our carriers, shipment by shipment,” Conte says. “Depending on a shipment’s origin and destination, the system identifies the most cost-efficient carrier.”
TMS Return on Investment Drives Market Growth
Source: ARC Brief, Feb. 2017
The measurable ROI on TMS is a driving force behind the growth in the market, according to an ARC survey. Compared to a similar survey five years ago, results indicate that ROI has improved greatly. In the original survey, 23 percent of respondents indicated a more than 10-percent decrease in freight costs. Even after scaling the top segment to freight savings of more than 12 percent, nearly 35 percent of respondents in 2016 indicate the top level of savings. Giving these respondents a weighted average, the ROI on TMS has improved from 6.8 percent to 8.5 percent.
Anticipating the Future
Advancing technology will continue to impact the TMS market. The next several years should bring greater deployment of the Internet of Things, predictive analytics, and mobility. These advances will create “an environment in which technology allows us to automate processes, proactively flag supply chain disruptions, and better track and trace shipments,” Kass says.
Jeremy Bodenhamer, co-founder and CEO of ShipHawk, a shipping platform provider based in Santa Barbara, Calif., predicts TMS solutions increasingly will take the form of individual systems pieced together with APIs, as opposed to a single platform that tries to be everything to everyone.
No matter how they evolve, the value of transportation management systems likely will increase over the next decade, allowing shippers to efficiently manage carriers, make optimal transportation decisions, and cut costs.
TMS Implementation Timelines
Source: ARC Brief, Feb. 2017
The TMS implementation timeframe needs ROI improvement, reports a recent ARC survey. The good news is that only 9 percent of respondents to ARC’s study indicate that TMS implementation project timelines slipped and the software was not fully functional at deadline.
Additionally, 39 percent indicate that timelines were met for the bulk of features, but not all promised functionality, and 24 percent say timelines slipped but following go-live, the TMS was fully functional. That leaves only 27 percent of respondents who indicate timelines were met and the software was fully functional at go-live.
This is an area that can make or break IT budgets, and gets shippers thinking about alternative routes.