Choosing a TMS: What’s Your Endgame?
With so many choices available, shippers must truly understand what they want a Transportation Management System to accomplish in order to make the right selection.
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Transportation management system (TMS) solutions have been in existence for some time, with third-party logistics (3PL) providers and brokers being early adopters. Increasingly, shippers in the retail, food and beverage, electrical, and electronics and distribution verticals are investing in this technology.
In the past, there was an expectation that only large companies with huge freight budgets, big staffs, and significant IT infrastructures could afford and benefit from the use of TMS technology. With the growing trend toward cloud-based computing, costs to invest in a TMS have also been reduced, making this technology more accessible for companies of all sizes. Additionally, cloud-based systems do not require the user to have a major information technology infrastructure.
Given the increased complexity of today's supply chains, adopting some form of technology, such as a TMS, is critical, whether a shipper purchases a TMS on its own, or works through a 3PL. "I honestly don't know how you can operate in this environment using spreadsheets," says Vincent Chiodo, chief commercial officer of Transplace, a Frisco, Texas-based transportation management services and logistics provider.
Something for Everyone
The good news for buyers who are ready to kick the tires is that many TMS options are available in the marketplace, including broad-based systems that support multiple transportation modes as well as niche products, ideally suited for a specific market segment, such as freight forwarders. With so many choices, buyers must truly understand what they want the TMS to accomplish in order to make the right purchasing decision.
"Technology cannot fix bad processes," says Chiodo. Buyers must understand their business challenges as well as evaluate the internal resources available to support a TMS. He recommends assembling a cross-functional team to lead the search, ensuring all stakeholders' expectations are addressed during the procurement process.
Bill Grannis, vice president of information technology-transportation for ODW Logistics, a 3PL based in Columbus, Ohio, shares this view. "The question buyers should ask is, what problem are we are trying to solve?" he says. "Is the goal to reduce transportation spending, increase efficiency, centralize transportation operations, or expand the business with new customers or partners?"
For Technicolor, a worldwide technology company serving the media and entertainment sector, the goal was to select a TMS that could become a standard platform for work across customers. The company uses MercuryGate TMS to support standard work processes across business units, according to Doug Suddarth, Technicolor's global logistics director of supply chain.
Buyers should consider scope and long-term strategy, which often play a role in a company's decision to adopt a TMS. Some shippers also consider geographic reach and the ability to manage across borders.
In addition to agility and ease of start-up, Technicolor was looking for a TMS that offered the ability to add customers needing export/import as well as domestic transportation, adds Elaine Singleton, global logistics vice president.
Regardless of the operation's size or the reason for purchasing a TMS, one of the first steps in the process is differentiating between the must haves and the nice to haves.
Some common must haves for all businesses using a TMS are:
- End-to-end Execution
A good way to evaluate a TMS is to look at the system's ability to execute end to end—from order to cash. "The technology should be able to select the right carrier, follow through on all orders, track and trace orders, and offer the ability for consolidation and route guide compliance," Chiodo says. "Finally, it should facilitate payment to carriers."
In many companies, the transportation department is part of a broader supply chain, with dependencies and relationships with manufacturing, distribution, sales, and customer service. To gain the greatest cost savings and efficiency from a TMS, users often integrate this technology with other systems the company uses such as SAP, an Enterprise Resource Planning system, or a Warehouse Management System.
TMS connectivity enables departments and divisions to share information, and companies also can use a TMS to connect divisions. For example, companies looking to centralize the transportation function can benefit from a TMS. Not only does the technology support the establishment of a centralized function, but it also can help managers identify areas of non-compliance as opportunities to achieve even greater efficiency and cost savings.
If a company is planning to use its TMS to select carriers and execute shipping orders, the system must be able to connect seamlessly with up to tens of thousands of carriers. This connectivity can help the user determine which carriers best meet their needs, from service parameters to cost.
Shippers can use a TMS to establish a carrier scorecard, using the shipper or 3PL's own data to measure service levels, onboarding, and rating. However, these benefits can only be realized by a TMS that can interface with large carriers, including parcel providers.
As e-commerce continues to expand, many companies that were once B2B providers are now being asked to also interact directly with customers. "That's why you need to know if your TMS has the ability to talk to the outside world," Grannis says. APIs and mobile applications are becoming the norm, not the exception, in certain aspects of the supply chain, he adds.
- Ease of Use
The industry has come a long way from DOS-based technology to today's cloud-based market. Buyer expectations have also changed. Customers want the user interface to be efficient, effective, and intuitive. Today, supply chain professionals need business applications that are easy to use and don't require an advanced knowledge of IT systems in order to execute a transaction.
This ease of use can also translate into speed—a vital factor for a broker looking to access capacity quickly or risk losing a shipment to a competitor. Many TMS solutions are factoring this market dynamic into their user interfaces, designing business devices to be as easy to use as the devices we use in daily life—for everything from ordering a pizza to making a bank deposit.
- Security and support
With cyber theft now almost a household word, companies must understand how secure the technology is before selecting business applications. This task requires an open discussion with software vendors about their security processes, as well as a thorough examination of those in place within the user's supply chain.
- Good customer support network
TMS users want to ensure that the system will stay in operation and that the provider has the bandwidth and infrastructure to handle high volumes of data. Negotiate uptime as part of the purchase.
Nice to Haves
Many value-added features may be useful for certain buyers, depending on the unique aspects of their respective businesses. For example, companies that operate their own private fleets while also using common carriers often require a TMS solution with fleet capabilities.
Further, if a company needs fleet capabilities primarily to manage equipment maintenance schedules, it may choose a system that focuses on this aspect of fleet management. However, to optimize its use of a private fleet or determine when a shipment should move on company equipment, a different set of vendors may provide the better TMS solution.
Other examples of capabilities that may be nice, but not critical for a company's business include a procurement tool to manage carrier bids, access to multiple public and private bid boards to assess capacity, or multi-modal capabilities.
Throughout the review and purchase process, it is necessary to be an informed buyer and do thorough research, including asking for demonstrations and customer case studies, and working to understand the depth of the provider's capabilities and infrastructure.
Chiodo recommends asking for a demo based on the buyer's data, in addition to any general demos that the provider may offer. With regard to references, "I always request five customer references when viewing products," he recommends.
Finally, some shippers choose to access a TMS through their 3PL partner. Sustainable food packaging company Solut!, for example, outsourced transportation management to ODW.
"ODW's TMS has enabled optimization to save us significant money that would not be available in a direct-LTL environment," says Scott Rechel, president of Solut! "The business intelligence that we've gained from the reporting has helped us transform the way we view the supply chain."
For shippers planning to purchase a TMS on their own, there has never been a better time. The TMS sector has matured, the types of systems have greatly expanded, and across the board, systems seem to be improving.
When considering your endgame, the best way to select the right TMS is to approach the search as an in-depth endeavor with a dedicated purchasing team, a clear vision of internal business processes, and specific goals the technology needs to achieve.