3 Problems You Can Now Solve with a Transportation Management System (TMS)

The new generation of cloud-based transportation management systems (TMS) changes the way you think about their value to the organization and implementation strategy. You can now solve transportation problems more cost-effectively, and with faster payback than traditional TMS solutions. Advanced TMS capabilities and new architectures enable better support for multimodal transportation, stronger collaboration with carriers and suppliers, and more flexible deployment options.

The growth of ecommerce and changing delivery models has created organizational and visibility silos within the transportation department and across the supply chain. Both these business opportunities expand the traditional transportation options beyond truckload (TL) and less-than truckload (LTL) to either fleet, small parcel, or both. In the drive to speed time to market, or sometimes through acquisition, it is common for these new transportation options to be developed outside of the traditional transportation and logistics team, or isolated within it. To make matters worse, five years ago, most TMS solutions were only capable of effectively supporting one of these transportation options (i.e., TL/LTL, parcel, fleet). This is no longer the case. It is time to take a step back and assess how a cloud-based advanced transportation management system can be used to link disparate departments and support all transportation modes, optimize all shipments, improve customer service, and grow new sales channels.

Historically shippers have focused on outbound transportation as it is often the lowest hanging fruit for cost savings. However, there is also a huge opportunity to pro-actively manage inbound transportation. Typically, there are four benefits to tackling this:

1. reduce transportation costs 
2. improve supplier delivery performance 
3. increase shipment and PO visibility and 
4. reduce inventory. 

With a cloud-based TMS and an integrated supplier and carrier network, shippers can now track key steps from purchase order from creation through shipment and delivery. This eases answering questions such has which suppliers have the most accurate lead times and which carriers deliver on time. Although these seem like basic metrics, many companies are not only missing supplier connectivity, their internal systems are fragmented and provide conflicting information. With a TMS, both parties are using the same lead time which enables better inventory management and lower stock-outs. Finally, by working with suppliers and taking on the freight management, it is possible to clearly understand the cost of freight. Separating out freight costs provides a more detailed understanding of where savings could be identified. Questions to answer when determining where to start include: which vendors’ products have the greatest cubic volume or highest delivery frequency? Are there geographic areas where suppliers are closely located for shipment consolidation? What internal capabilities are required such as carrier contracts, supplier product dimensional weight and routing guides.

The advancement in TMS architectures over the last five years has provided a lot more flexibility in how customers can realize a rapid return on their TMS investment. Historically, TMS solutions were monolithic, on-premise applications that took months of planning and implementation before seeing cost savings. Originally, they were designed for companies that had a freight spend of $100M or more. Several trends have emerged, however, and opened up transportation management solutions to more shippers, reduced the risks for large shippers, and also cut the initial time to value to weeks. These include cloud computing and modularization of the TMS. Cloud computing and easier enterprise resource planning/warehouse management system (ERP/WMS) integration simply lowers the IT resources required both from a cost and an expertise perspective. Regardless of project size, this ultimately cuts time off the implementation and accelerates the payback. The modularization allows shippers more flexibility as to what functional areas to focus on to get the quickest return. Examples include optimization, execution, dock scheduling and yard management. Alternatively, it might be better to focus by sales/customer segment and optimize home delivery with fleet, or ecommerce fulfillment with small parcel. For companies that have never had a TMS, a modular approach to implementation can minimize risk and enable best practices learning.

In order to evaluate how you can take advantage of these trends and capabilities, there are some concrete steps you can take in the next 30 days. First, review all of your current transportation modes and identify the silos. Make sure to factor in growth, and potential new sales channels. Evaluate your inbound transportation, including a review of capabilities by mode. Taking on inbound freight for LTL/TL where you have expertise on the outbound side will result in faster payback. Once you have determined the silos, and inbound options, pick one area and build the business case. Target a payback of 12 to 15 months