Based on our research and experience, many companies are not using a transportation management system (TMS) for one or more of the following reasons:
- “We don’t need a TMS, our current process works just fine.” This may be true at companies with very low shipping volumes and simple transportation networks, e.g., a few truckloads per week going to a handful of locations. But in most cases, “we don’t need a TMS” indicates a resistance to change, and “our current process works just fine” is often more perception than reality, a fact many companies don’t realize until they reach the breaking point.
- “We had a TMS, but the system didn’t work well, so we stopped using it.“ This is a common experience for many TMS users. It takes time to set up and fine tune a TMS, particularly its optimization capabilities, so that it accurately reflects your transportation operations. And since your operations change over time, you need to continuously fine tune the TMS, otherwise the quality of the output degrades and you’ll end up thinking the solution is “broken” and stop using it. Unfortunately, many companies don’t review and adjust their TMS setup after the initial implementation, and most TMS vendors have dropped the ball when it comes to helping clients “tune up” their systems.
- “We’re at the bottom of the priority list when it comes to getting IT funding and support.” This reality has prevented many transportation departments from implementing a TMS in the past, and it remains a stumbling block today.
- “A TMS is too expensive and difficult to deploy.“ Years ago, a typical TMS deployment would cost at least $1 million and take as much as a year to implement. Today, thanks to the emergence of ‘on demand’ (aka “software-as-a-service”) solutions and more modular applications, TMS solutions are more affordable and faster to implement. Instead of paying a relatively large license fee upfront, companies typically pay a monthly subscription fee, converting what was previously a capital investment into an operating expense. Also, instead of taking a “big bang” approach, companies can deploy (and pay for) a TMS one module at a time, thus reducing implementation time from months to weeks. In many cases, companies use the savings achieved from the initial implementation to fund future ones.
Most of these excuses, however, are no longer valid or justified. “On demand” TMS and managed transportation services, for example, have largely eliminated the cost and resource constraints companies have traditionally faced in implementing new technology and continuous improvement initiatives. By eliminating these constraints, companies can break free from the status quo and implement best practices that result in significant cost savings and productivity improvements.
For example, once Jel Sert and Northwest Pipe realized they needed to streamline and automate their transportation processes, the question they then faced was how to enable this change. “We had examined implementing a TMS in the past,” explained Michael Martinez, Director of Distribution at The Jel Sert Company, “but the cost and IT support required prevented us from moving forward.“ But as the company continued to grow and manual processing reached its limit, Jel Sert took another look at implementing a TMS. According to Martinez, “When we finally decided to proceed, we initially didn’t consider an ‘on demand’ solution because we didn’t know much about it.“ In other words, Jel Sert had an outdated understanding of the TMS market, based primarily on its past experience.
Northwest Pipe had a similar experience. The company initially considered implementing a TMS in house, but according to Max Beach, Director of Logistics at Northwest Pipe, “This would have required us to hire two more IT resources to support and maintain the system.“ Both companies ultimately selected an ‘on demand’/ software-as-a-service TMS solution from LeanLogistics.
A particularly appealing aspect of the ‘on demand’ model for Martinez is that it provides “ongoing service, support, and innovation driven by everyone on the network.“ The TMS allowed both companies to standardize and automate their shipment planning and execution processes, as well as implement best practices. Northwest Pipe, for example, conducted a network-wide procurement engagement, including implementing carrier contracts and rationalizing its carrier base. Jel Sert brought its freight settlement process back in house, streamlined and automated it, and now has complete visibility to freight bills, overcharges, and payment issues.
In terms of driving change and implementing best practices in transportation, both executives agree that the economy should not serve as an excuse for maintaining the status quo. Max Beach summed it up nicely with a quote from John Wooden: “Failure is not fatal, but failing to change may be.” Michael Martinez offered similar words of wisdom: “If you do nothing different than what you are doing today, expect your results to be flat or worse a year from now.”
(This posting is an excerpt from a more detailed Executive Brief (available here) that ARC wrote on behalf of LeanLogistics).
Adrian,
I enjoyed reading your post and all the excuses that people have used to delay a TMS implementation in their business. I also agree that a big part of any TMS implementation is really examining their existing business processes and even making recommendations as to how to best re-engineer them to maximize their TMS investment.
However, as you might expect, I disagree that a “hosted” model is necessarily a better model for every company. We help prospects determine what is best for them (ROI)etc. and allow them to make a decision that ties to their Strategic IT Plan. Consequently we offer both “On-Premise” and “Hosted” TMS models.
In any case, the “call to TMS action” is very compelling for businesses that rely on transportation services. Dispelling the aforementioned myths/excuses and educating prospects that the road to TMS is a well travelled path, is an important aspect of today’s TMS providers mission.
Keep up the good work!
Ari Smith
Next Generation Logistics, Inc.
Adrian,
I agree the “on-demand” TMS has lowered the cost considerably with little loss of functionality. However, many shippers have figured out over years of doing business what mode, service, carrier is right to service a particular customer. Static routing guides can help when shipment sizes vary. The occational cross mode optimization opportuntiy is not enough to justfiy the cost of the software. Certainly, small shippers would have difficulty cost justifying these systems, even on-demand solutions but, often big shippers have pretty predictable freight. Further, we find tier 1 TMS have functionality a shipper will never use, yet they pay for it.
There are a lot of choices out there and buyers should be cautious of buying functionality they’ll never use.
Giles Taylor
Trans-solutions, Inc.