Guest Commentary: Why Do Only 1/3 of Companies in North America Have a TMS?

Independent research groups report that a transportation management system (TMS) can save a company anywhere from 3-20% of transportation spend as compared to manual management. It is easy to see why many companies that currently do not have a TMS are now searching for one for their business.

But why have so many companies waited so long?

I believe there are eight reasons why many companies delay their decision to integrate a TMS into their operations:

1. Size. Some companies believe that their size and shipping volumes are too low to realize a return on their investment within a reasonable time frame. On the software vendor side, it might also be difficult to justify an expensive sales cycle with a small shipper, as it may not be profitable.
2. Cost. Upfront hardware, solution software, third party software, and long implementations with potential upgrades after four years make it cost prohibitive for a shipper to deploy a TMS unless they are very large with heavy volumes.
3. Complexity. System complexity requires staffing “super users” (such as MIT graduates) along with a few dedicated IT personnel to manage the TMS database, hardware, and operating system. Prospects might then make reference site visits and find that each client is only using a subset of the TMS functionality.
4. Flexibility. Some solutions available today were first architected and written more than a decade ago. This older technology requires either a change in business process on the customer side or expensive custom modifications in order to make the system fit each business. Another problem is that these systems may also run on a completely different operating system than the company has experienced within their current IT department. This makes it difficult, if not impossible, to deploy and support the TMS with their current resources.
5. Fear. The first move towards making TMS available for every company started in the late 90s when several software-as-a-service (SaaS) vendors set out to prove that companies could access their shipments via a web browser without the infrastructure costs. This approach lowered the price of ownership, but many prospects were initially nervous about speed, security, reliability, and the lack of customization because all the shippers were using the exact same code base. Third party software technology and hosting facility costs were very expensive at that time which meant the vendors had to target higher volume shippers in order to survive.
6. Outsourcing.  Some companies wanted to have visibility and other features from a SaaS TMS, but did not have the manpower to run it. They hired 3PLs, brokers and carriers with TMS systems to run parts of their operations for them.
7. Scope. The majority of today’s TMS solutions started out by managing outbound shipments in the US. There was little focus on the global supply chains that exist when you introduce international inbound freight. Most shippers today are looking for both global inbound and domestic outbound all in a single solution.
8. Awareness. Many companies have not yet discovered the value of automating the execution process. The ability to know where all of the moving inventory is located, who moves it with the best service and lowest cost, what it costs to move it, and invoice payment through an auto-pay format once proof of delivery is provided, are all valuable features of a TMS that many shippers have overlooked.

Technological improvements in TMS, however, are starting to eliminate these eight obstacles. The next generation of TMS solutions will enable shippers of all sizes to automate their manual tasks and improve efficiencies at a fraction of the cost. The newer architectures will also make TMS solutions much more user friendly so that eventually all of the carriers and suppliers can click on a link to join a shipper’s network without training and implementation fees.

Ultimately, the shippers themselves may be able to register online in a software-as-a-self-service (SaaSS) model where they test interfaces remotely and go-lives are measured in days instead of months.

Simply put, technological improvements will continue to drive costs down and eventually allow every company the ability to enjoy the benefits that TMS solutions deliver.

Mark Nix serves as Cloud Logistics‘ chief executive officer and a member of the Board of Directors. Mr. Nix has 27 years of supply chain software experience in helping clients of every size address their global needs. Mr. Nix serves as a Partner with Nix Venture Partners, is on the Board of Directors with the One Step Closer Foundation, and advises various charities. Mr. Nix served as VP of Major Account Sales at Manhattan Associates, an EVP with One Network Enterprises, and worked with IBM’s Nistevo division, Metasys, and the TranScape/Vocam/PBTS divisions of PBI. He holds a Bachelor of Science degree from The University of Tennessee.