What are the potential savings when implementing a TMS?

When you are looking for a TMS, the main and obvious question will rise: ‘What does a TMS cost?’. A difficult question to answer, simply because one easily gets lost comparing prices of different providers. But why not turn the table and focus on the possible savings instead? Did you know that by using a TMS an organization is generally able to save between 5% and 10% of its transportation budget? However standard ROI calculators, do not always reflect the complete or real savings for your company so it is useful to have an in-depth discussion with the TMS vendor you are considering; it can help you building a realistic business case.

In order to quantify the potential gains, you should take a deep dive in the entire transportation process, from planning transport to customer service. Some key examples that can drive significant savings are:

Carrier Selection and Consolidation

A combination of consolidation, automated choice of mode and carrier, optimized loading rate and reduced number of empty kilometers can reduce the cost of freight spend by 5 to 15%.

Communication on the transport order

Once the carrier has been selected, the reservation of transportation mode is automated. Transport orders are transmitted directly without any need for human intervention. Similarly, the shipper receives the status feedback automatically. This automation will lead up to a saving of 5 to 10 minutes per booking, which results in a 3-4% reduction of labor costs.

The implementation of EDI flows and standardized labeling also enables shippers to negotiate better pricing conditions with Logistic Service Providers, as they will also benefit from a reduction in the workload of their teams through information communicated automatically andno more relabeling required.

Loading and unloading goods

Collaborative portals for making appointments and modules for dock management and parking lots can reduce waiting times and associated cost penalties by 25%. A TMS will trace the different stages: docking, end of loading, etc. The client therefore has full insight in the waiting times and can thus identify those declared by a carrier that are not in fact due to the organization of the site. This is particularly the case when the driver did not leave immediately after loading and proceed with its regulatory break on the yard. The company then makes sure that the time charged is legitimate.

In addition, a delay in unloading or loading can have an impact on the final customer promise,

respectively stock-outs or delayed delivery. A TMS will allow to monitor the performance of carriers, suppliers and distribution centers.

Transport performance monitoring

Monitoring the transportation performance with a TMS offers both intangible and tangible savings. Having more visibility on your transportation offers benefits in terms of an elevated service being provided to the customers. It also enables the company to react and even alert its customers more quickly in case of unforeseen events. Providing a higher customer service is a key benefit from implementing the software, but still difficult to quantify this economically.

What is easier to quantify are the reductions in transit inventory levels, made possible by the improved reliability of lead times. In particular of distributors who will have less need to secure their stocks. In some cases, lead times can be reduced by two days, which can reduce inventory levels by the equivalent of 0.1% of turnover.

Carrier billing control

Expenses can be reduced up to 2-7% by implementing automated invoice control or pre-billing modules. Shippers are assured that they will not have to pay for unjustified services or extra costs, which also reduces the workload on billing control by 80% in average. It helps to refocus on disputed cases rather than checking invoices that are not problematic.

Apart from these five areas, a TMS can also provide additional value in other processes. You need to make sure to compare the most important providers for your company and break down what exactly they can add to your business. A TMS provider who is able to send automated messages to your carriers/forwarders and receives status updates from these and other parties, provides a huge advantage. Having those two data flows managed by one party and properly integrated into your TMS is crucial to prevent “value leakage” and prevents data inconsistencies and a source of manual work and loss of high-quality data.