Choosing a TMS: How to Make the Right Move
What features do you need? What benefits are you looking to gain?
How much should you spend? Answering these questions while managing the implementation process prudently is crucial to selecting the right transportation management system for your organization.
Transportation management systems (TMS) offer major potential benefits to shippers in the supply chain, but only when companies use due diligence to select a solution that is an optimum fit for their profile and needs.
The right TMS offers both savings and process improvement.
"Everyone will see value in a TMS," says Mark Nix, senior vice president of transportation and founder of Cloud Logistics, an Atlanta-based provider of transportation management solutions. "Many will say that having visibility to inventory in motion enables them to reduce safety stock while improving customer satisfaction, which is priceless.
"Selecting the best carriers for every contracted move can save 2% to 5% of freight spend," he adds. "Automating the match-pay process can save an additional 2% while streamlining accounts payable and giving the chief financial officer real-time freight accruals."
Sending spot quotes via email to 50 carriers can take a great deal of time; a TMS can automate that exercise, saving several percentage points. A reporting module within the TMS can instantly identify opportunities for cost improvement. "You can improve anything you can measure," Nix says.
Before you can realize these types of gains, you must choose the TMS that is the best fit for your operation. The options are wide-ranging.
How to Prioritize
Companies should consider the necessary key features when weighing new TMS options. Depending on an organization's priorities, these features could include:
- Inbound and outbound shipment visibility with alerts
- Carrier selection and rating
- Planning and route optimization
- Match-pay and carrier settlement
- Instant messaging for each shipment
- Cloud-based portals for all trading
partners, carriers, brokers, and third-party logistics partners
- Mobile apps for drivers
Organizations should seek systems that are easy to use and deploy, and that will deliver a quick return on investment.
When weighing new TMS options, getting hung up on features sometimes can distract from key considerations. Organizations should avoid emphasizing features and instead focus on "the business problem, the key opportunity area," recommends Geoffrey Milsom, senior director of transportation strategy and consulting services for enVista, a global consulting and software solutions firm based in Indianapolis.
For instance, a company that manages thousands of monthly shipments shouldn't disqualify a TMS solution because it can't integrate a handful of those movements. Companies shouldn't be intent on "a perfect-world situation," Nix says.
"A great TMS solution built to handle the largest global shipper's requirements is expensive to deploy and too hard to configure for everyone else," Nix says. "Companies searching for a TMS should prioritize their extensive wish list of desired features and weigh it against the actual return." It's common for a company to purchase a complex system and not use it to its full capabilities.
Any system that is implemented should have a business case to support it. When Milsom considers TMS features for a client, for instance, he points to optimization as a feature with a clear business case, whether a shipper is working with a fleet of vehicles or moving less-than-truckload shipments or whether they are managing scenario analysis or live orders.
"There's a lot of money to be saved by using an optimization engine properly," Milsom says.
Prestage Foods, a North Carolina-based producer of pork and poultry products, recently implemented the Cloud Logistics by E2open TMS. The company was opening a new facility and needed a TMS to deploy quickly.
"The system had to be easy to use so our carriers and our poultry logistics team could adopt it without much training," says Crystal Hill, director of supply chain and logistics at Prestage Foods.
It was critical for the TMS to scale as Prestage's needs grew.
"When we open a new facility, we start with a few truckloads per day," says Hill. "But that will grow to more than 50 truckloads daily within the first year and double to 100 daily trucks when we add a second shift.
"Whether it's managing a few truckloads a day from one shipping location or hundreds across multiple locations, the TMS supports our business today and into the future at an effective price," she says.
Managing the Process
It is important to not rush when selecting a TMS. Companies should establish a realistic timeline and be disciplined during the decision-making process.
"The objective is to choose a system that lasts for the next five to 10 years and that provides a return on investment in less than 18 months," Milsom says. "The right TMS also should save between 3% and 7% of transportation costs. Those benefits are important, so you should take the time to do it right."
A new TMS can make a large impact on the organizational side of a business. "Activities change, processes change, the way you support the tool changes," Milsom says. For that reason, companies should take a bottom-up approach to implementing a TMS. Instead of identifying a date and pushing toward it, organizations should begin with the details and work to determine a prudent timetable.
Firms should build a team that includes the TMS's "super users." The team determines priorities, defines problems and the business case, and considers organizational changes needed to support the TMS. Companies should develop scenarios to see how prospective TMS solutions handle them, putting the onus on vendors to not just show off their features but also to demonstrate their systems' capabilities to support an organization's process.
"A successful implementation is about taking the right amount of time, involving the right people, and focusing on the right level of detail," Milsom says.
Organizations sometimes are lulled into selecting a vendor because of an ongoing relationship. But existing relationships don't necessarily make for a smoother integration.
The buying power that leads to better pricing also is overblown. "We've learned and we preach that price doesn't matter," Milsom says. "One TMS vendor being 10% higher or lower in cost than another vendor doesn't matter as much as the system being the best fit."