TMS ROI: Five Pitfalls that Will Drive You Mad

Picture2Many times when a company implements a new transportation management system (TMS), it expects a certain level of savings based on what was promised during the sales cycle. However, a year or two into using the new system, those promised savings often remain unrealized.

While there are many reasons for this “TMS disconnect,” the most common include:

1. Trying to force the TMS to match your current processes A new TMS implementation offers the perfect opportunity to evaluate and improve business processes and streamline operations. A TMS typically offers more than one way to accomplish certain tasks and some flexibility in setting up workflow processes. They also have a set of parameters designed to produce optimal operational results. Some companies resist making changes to their existing processes and will ignore the TMS provider’s advice by trying to duplicate their current business processes in the TMS. This can lead to “system workarounds,” suboptimal routing results and less savings than expected. (For example, rules or processes that can affect TMS savings include tight pickup and/or delivery windows that reduce consolidation opportunities and allowing orders to drop into the system late, by-passing optimization and forcing them to be manually planned.)

2. Bypassing the system-generated solution It’s not uncommon to hear a transportation planner say, “The system can’t plan as well as I can!” This I-can-do-it-better mindset leads planners to manually plan loads themselves or adjust the TMS. While it’s true that an individual might be able to plan one or two loads better than the system, the system is evaluating hundreds of scenarios across thousands of orders to locate the best solution for all orders–not just one individual order. Another common problem? Individuals bypass a system-selected carrier and choose another one. The new TMS should enable monitoring this type of activity through reporting, though.

3. Rushing the TMS implementation so it’s not done properly Faster is always better, right? Every TMS vendor knows how long it takes to properly implement their solution based on a firm’s requirements. But inevitably customers ask vendors to cut down their implementation timeline for one reason or another. A lot of TMS vendors will cut down their implementation timeline to win the business, but this can result in shortcuts being taken or set the implementation up so it needs a “Phase 2” to achieve many of the money-saving features. More often than not, “Phase 2” never happens and the features that could drive cost savings are left on the shelf.

And while companies may be willing to make changes and reduce costs, they often overlook effective KPI reporting in an effort to save time–yet another casualty of rushed implementations. Without proper metrics in place to monitor savings and compliance, companies may be inadvertently sabotaging their results, since implementing at TMS without them can make it difficult to achieve savings goals.

4. Implementing the TMS without having necessary support in place A TMS is similar to a living entity: It requires proper care and maintenance. Many times after a TMS is implemented, little thought goes into keeping the system running at peak performance, and one or more of the following occurs:

  • The level of assigned system support personnel is inadequate
  • Rates are not maintained
  • Carrier commitments and capacities are not updated
  • New TMS users are not adequately trained

Any and all of these oversights can lead to reduced savings.

5. Placing more constraints on the system during implementation than accounted for during evaluation Most companies evaluating a TMS vendor take some shipment data and model it using their optimization engine. This exercise will often show large savings based on shipment consolidation, mode shifting, carrier selection, etc. However, when the solution is implemented, the level of savings does not match that of the optimized data sample.

As a peak under the hood: When a company’s data is modeled, real-world constraints may not have been applied. For example, were origin and destination hours of operation taken into account? What less-than-truckload (LTL) tariff was used?  Were loads consolidated into more stops than committed carriers are willing to do? Modeling of sample data during the evaluation process is a great way to see the TMS’ capabilities and get an idea of possible savings. However, it should not be the only factor in determining estimated cost savings; there is still a lot of work to be done and decisions to be made between modeling the data and final implementation.

A TMS is a great asset in today’s complex supply chain environment and can bring many benefits to the bottom line–from cost savings to increased visibility. Proper TMS implementation and maintenance is extremely important in ensuring maximum return from the investment.

Kirk Graves is Director of Chainalytics’ Transportation Competency. He brings 20 years of extensive transportation and logistics experience across a myriad of industries to his group’s client engagements. His areas of specialization include TMS implementations, systems design, continual process improvement and logistics operations.

Comments

  1. Kirk – I would add one more item; having the right staff, with the right knowledge, to actually use the TMS, understand the TMS, and tweak the TMS. Every TMS needs one or more “power users” that can drive the improvement process long term.

    Tim Higham
    CEO
    InMotion Global, Inc.
    Developer of AscendTMS (www.TheFreeTMS.com)

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