In any software selection process, costs are a major consideration. In the case of a shipper transportation management system (TMS), there are two sets of costs: recurring costs, which are typically related to the number of shipments flowing through the system; One-time implementation costs. While recurring costs are likely related to volume, value and return on investment (ROI), it is important for any shipping company to understand, evaluate and reduce its one-time costs, while optimizing its programs to achieve long-term value.
Elmer Spruijt, vice president of global sales at Descartes, explains what shippers need to know about TMS implementation costs.
Investigate your needs
Any shipping company looking to acquire a Transportation Management System (TMS) will be looking at how different solutions on the market can improve their operations. However, with the cost of a TMS ranging from €30,000 to €900,000 (£25,000 – £750,000), it’s essential to have a clear understanding of the value and benefits you need to provide for your new TMS – and look at the costs in the relationship With the value created. Based on the capabilities, relevant costs, and expected value, you can make the right decision for your business, simplify implementation and setup, and ensure system longevity.
Key influencing factors to consider for TMS implementation costs include:
1. Contact with transport companies/shipping agents
Automation is a key driver of operational benefits. It is essential that the operation process be efficient and effective, especially for large shipping companies. However, automation requires not only setting up communications with internal systems such as your ERP system, but also with external carriers/freight forwarders to book/bid shipments; exchange of instructions; Status messages and alerts; And invoices. All of these factors should be included in any TMS system you choose. However, setting up these connections requires effort and cost, and if you work with multiple carriers/shipping agents, this can be important.
Some TMS solutions have a published API that allows any third-party carrier/forwarder to connect their systems to the TMS system. However, many carriers/freight forwarders are not willing or able to establish the connection, and even if they are, they will likely want to pass on the cost of the integration to you. This makes having a TMS provider with a large connected network and the ability to easily add new carriers/shippers essential to keeping connectivity costs under control.
2. Complexity of business rules
More advanced shipper TMS solutions can handle many different scenarios (transportation modes, different shipping types, regional differences, etc.) that typically require configuration, while basic solutions often only allow a single process flow and set of rules with minimal Of distractions. If your current process for working with suppliers and carriers/freight forwarders is not supported by a transportation management system, you may have difficulty using it effectively and fail to achieve the desired results.
The word here is caution, as many shippers can be tempted to choose a sleek, modern, and inexpensive solution, only to discover that it doesn’t mesh with their workflow. Consequences are likely to include 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 transportation management system (TMS) to automatically consolidate shipments, determine the optimal transportation mode, create multi-stop loads, follow routing guide logic, and automatically select the best carrier. Securing expert support during initial implementation is essential to maximizing the benefits of your TMS, although it requires effort and expense. While businesses want to keep costs to a minimum, implementation costs that properly configure and connect a TMS system will allow you to reap the benefits of a TMS system over the next 10 years.
3. Third Party Solutions and Involvement
A modern, complete TMS system should handle all modes of transportation; Communicate with all relevant carriers/shipping agents; Automation of information exchange; Providing real-time visibility. However, some TMS providers still rely on third-party solutions to provide some capabilities, for example real-time visibility and parcel rate shopping/shipping. The need to often involve external solutions and external resources during implementation increases complexity and requires creating/configuring interfaces to facilitate data model alignment and data exchange. Obviously, this will impact not only the initial setup efforts and costs, but also future maintenance efforts.
4. Project team experience with the selected TMS
Some large ERP vendors, which also offer a transportation management component, may rely on external partners to implement their TM solutions. Given the complexity and different types and levels of functionality involved in implementing TM, it may be the case that the project involves individuals who are inexperienced in your specific requirements. Not only is this likely to take more time (and cost) to complete the implementation, but there is also the risk of a sub-optimal TMS configuration.
In return, a project team that is experienced with your chosen tag management solution, and has a clear understanding of your business needs, will deliver best practices and standards that can significantly reduce the effort and cost of setting up a TMS, while ensuring a system configuration that will maximize Tap into your savings potential.
How can you save money when implementing TMS before you start?
There are three basic ways to save costs:
- Take the opportunity to consolidate the number of carriers/freight forwarders you work with, or allow smaller providers to connect via a carrier portal instead of a direct API or EDI connection. This means that they will need to manually accept shipments/loads while receiving automatic updates in your TMS system. Real-time machine vision may still be available with these carriers through a separate connection to an integrated vision platform such as Descartes MacroPoint™.
- Limit the number of solution vendors involved in your overall TMS system. This will have the greatest impact in terms of implementation time, cost and implementation team expertise required. Having one team of true experts overseeing your complete solution will result in improved process handling and reduced risk of implementation complexities and unexpected costs.
- Beyond these external factors, the active involvement of your team is essential. Involving the right stakeholders (including key users) and reaching consensus on optimal processes, coupled with reliable IT support and a project manager on your side, will significantly impact project costs, schedule, and overall success.
conclusion
Shipping companies that have implemented a transportation management system indicated that the analysis and design phase is critical to the overall project. Ensure that the right people devote sufficient time to delivering a robust solution design document, as well as participating in acceptance testing which will reduce change requests and timing delays due to errors throughout the project.
Improving your TMS implementation by understanding and scoping your needs up front, studying ways to enhance project complexity, and ensuring the right stakeholders are involved in every step of the process will help ensure that your one-time costs are limited, and you are setting yourself up to capture value. Long term.
