Software-as-a-Service or Outsourced Managed Services: Which is Right for Your Organization?
When it comes to managing transportation operations, shippers are often at a crossroads. They may find themselves asking the questions: Should I implement a transportation management system (TMS) in-house or via software-as-a-service (SaaS)? Should I outsource everything to a Managed Transportation Services (MTS) provider? Or take a hybrid approach?
Not all companies' core competencies are the same, and there are a number of different paths and scenarios to consider when an organization has the need to improve their transportation capabilities and performance. So, what factors are key when it comes to choosing an in-house TMS, SaaS or MTS?
Factors to Consider: Software-as-a-Service Model (SaaS)
The software-as-a-service model may be a good fit for organizations that have a commitment to fully staff their operational team, but have hit entitlement on their performance capability and need technology to get them to the next level of improvement. The value of a SaaS environment is the ability to gain access to a TMS system without having to make a significant IT investment. SaaS mitigates the need for internal resources, does not require up-front capital investment, and minimizes overall infrastructure impact.
However, the SaaS route does require an ongoing investment into the team and resources surrounding it. When deciding if SaaS is right for their organization, shippers need to determine if transportation management is a core competency for them and if they are willing (and able) to invest in and continuously develop the processes and human capital needed to successfully utilize the technology in their daily operations.
Factors to Consider: Managed Transportation Services (MTS)
When considering managed transportation outsourcing, the maturity of the organization may come into play. Those organizations that do not continue to make the investments in the people and the process (unlocking new capabilities in the technology as they become available) typically see a degradation of performance after a few years. And those shippers that have a legacy of five, seven or ten years of an in-house TMS or SaaS may be interested in handing over certain services to a third party in order to drive more long-term results.
An MTS provider's industry expertise and proven processes can help by maximizing the technology and driving meaningful, sustainable benefits beyond what a single shipper may be able to achieve on their own. Collaboration with a third-party provider, and leveraging its extended network, can provide numerous optimization and cost saving benefits.
Results from a TMS or SaaS solution are easy to realize in the first few years because of the initial investment in training and change management that occurs with the implementation process, but in order to see long-term success, companies must sustain the resources, commitment and investment in not only the technology but also the accompanying operations. Therefore, MTS might become a more appealing option as an organization matures. Additionally, a hybrid approach to managed transportation is a viable option—shippers can choose to outsource only certain pieces of the supply chain puzzle (e.g. keep procurement in-house but outsource day-to-day execution).
The Key to Successful Shipper-Provider Relationships
The most important aspect of a successful managed services relationship is transparency and open communication. The right provider should be focused both strategically and tactically. This is an ongoing partnership, and shippers must realize that even after turning over certain processes to a third party, they will need to continue to be involved in their operations.
Finding the Right Solution
There is no "one size fits all" approach when it comes to managing transportation operations, so each shipper needs to carefully consider each option before making a decision. Factors such as network complexity, level of investment in the technology, processes and personnel, as well as the organization's level of competency in this area will help guide the decision.