How much are shipper TMS implementation costs?

The costs related to any Transport Management System you are considering acquiring are an important part of your software selection process. In a previous blog we talked about the typical recurring costs related to a shipper TMS. While these costs are significant, recurring costs are spread out over a long period of time (10+ years) and are typically associated with the volume of shipments flowing through the TMS; therefore, recurring costs are more directly linked to the value and Return on Investment (ROI) the TMS brings to your organization. There is another significant one-time cost that shippers with more than the smallest of freight volumes need to consider - TMS implementation costs. It is important to understand how to evaluate these on-time costs and how to minimize them. In this article we’ll review what shippers need to know about the TMS implementation costs:

Investigate what you need, at what price and what value you can expect

Any shipper that is looking to acquire a TMS will be looking at how the various TM systems available can optimize their operations. It is key to have a clear understanding of the value and benefits being created by your new TMS and look at the costs in relation to the value created. Based on capabilities, related costs, and expected value you can make the right choice for your business. You will most likely also include other elements, like the security and reliability of your selected TMS and its vendor. But we will focus on the implementation costs in this article.

What are the costs of implementing a shipper TMS?

The simple question ‘how much does it cost to implement a shipper TMS?’, can be answered with ‘anything between 30,000 EUR and 900,000 EUR (33,500 USD and 1,000,000 USD)’. The fact that numerous elements influence these costs explains the wide range. Below we discuss the key influencers of TMS implementation costs:

Connectivity with carriers/forwarders

Automation is the key driver of operational benefits and specifically for high-volume shippers it is essential to run an efficient and effective operation. However, automation not only requires the setup of connections with internal systems like your ERP, but also with external carriers/forwarders, for automating things like; booking/tendering of shipments, exchanging instructions, status messages, and invoicing; all of which should be included in any TMS you select. Setting up these connections requires effort and costs, and if you work with several carriers/forwarders this can certainly be significant.

Some TMS solutions have a published API (Application Programming Interface) and state that any external carrier/forwarder can connect their systems to the TMS via that API. However, many carriers/forwarders are not willing or able to create the connection, and even if they are, they will most likely want to charge the integration cost to you. That makes having a TMS provider with a large, connected network and the ability to easily add new carriers/forwarders crucial to keep connectivity costs under control.

Complexity of business rules to automate and optimize your processes

The more advanced shipper TMS solutions are capable of handling a lot of different scenarios (transport modes, different freight types, regional differences, etc.) which typically require configuration. While the basic solutions often only allow for one process flow and set of rules with minimum deviations. If your current process for working with your suppliers and carriers/forwarders is not supported by the TMS, you may struggle to use it effectively and achieve the promised results, even though that simplicity may minimize the effort during implementation.

Be cautious, as many shippers chose a sleek, modern, and inexpensive solution, only to discover it doesn't align with their workflow, leading to manual workarounds and even termination of the contract with the TMS vendor after a few months. Almost all shippers need the ability to define advanced business rules in their TMS to automatically consolidate shipments, select the optimal transport mode, build multi-stop loads, follow routing guide logic, and automatically select the best carrier. Securing expert support during the initial implementation is essential for maximizing the benefits of your TMS, although it does involve effort and expense. While companies want to keep costs to a minimum, implementation costs that configure and connect the TMS correctly will allow you to reap the benefits from the TMS for the next 10+ years.

Third-party solutions and involvement

A modern and complete TMS should handle all modes of transport, connect with all involved carriers/forwarders , automate the information exchange and provide real-time visibility. However, some TMS providers still rely on third-party solutions to provide some capabilities. A couple examples include real-time visibility and parcel rate shopping/shipping (which are minimally supported by several well-known TMS providers). The need to involve third-party solutions and often third-party resources during the implementation adds complexity and requires building/configuring interfaces to facilitate data model alignment and data exchange. These will obviously not only impact the initial setup effort and costs, but also impact the future maintenance effort.

Project team expertise with the selected TMS

Some large companies’ ERP vendors, who also provide a TM component, rely mostly on large external partners to implement their TM solutions. Since most TM solutions are complex and offer different functionalities, it may be the case that the project is staffed with people who are not experts in that specific TM solution and will require more time to complete the implementation and, in some cases will not configure the TMS optimally. While an experienced project team with your selected TM solution will bring best practices and standards that can greatly reduce the effort and cost of setting up the TMS. Even the best TMSs can be implemented incorrectly and lead to sub-optimal business processes that do not maximize the savings potential, and in some cases may require unnecessary manual workarounds that can lead to dissatisfaction.

How to save money on a TMS implementation before you start?

There are different ways to save costs. For example, you can:

1. Take the opportunity to consolidate the number of carriers/forwarders you are working with or let smaller providers connect via a carrier portal vs. a direct API or EDI connection. This means they’ll need to manually accept shipments/loads and you’ll get automated updates in your TMS. Automated real-time visibility may still be available with those carriers through a separate connection to an integrated visibility platform like Descartes MacroPoint.

2. Limiting the number of solution vendors involved in your overall TMS will have the most impact in terms of implementation time, costs, and the required implementation team expertise. Having one team of true experts overseeing your complete solution will result in highly optimized process handling by the system and a reduced risk of unexpected implementation costs.

3. Beyond these external factors, the active involvement of your own team is essential. Having the right key users participate and promptly reach consensus on the optimal processes, along with reliable IT support, and a project manager from your side, will significantly influence project costs, timeline, and overall success.

To conclude, we spoke with shippers that have implemented a TMS and they indicated that the analysis and design phase is crucial to the overall project. Their advice is to make sure that the right people allocate sufficient time to deliver a robust solution design document, as well as participate in acceptance testing which will minimize change requests, and timing delays due to bugs throughout the project.

We hope you found this article insightful and that you got an answer to the question ‘How much are the shipper TMS implementation cost?’ At Descartes we are passionate about transportation and logistics and support our global customers with our modern, complete and world-leading shipper TMS. If you have any feedback or questions about this topic please let us know via info@descartes.com or contact us via the button.