Shipping is a 24-hour business. The supply chain never sleeps and neither does technology, particularly transportation management systems (TMS), which are being increasingly utilized by companies. As the supply chain has evolved, so too has TMS technology.
Traditional TMS was costly and complex to implement and maintain, but new developments have made them less expensive, easier to use and more functional, allowing more enterprises to take advantage of the great benefits these systems can provide in cost, data acquisition, efficiency and communication.
There are several key factors contributing to the growth of the TMS market, according to Chris Cunnane, Senior Analyst with Boston-based ARC Advisory Group.
“First is the fact that TMS has a proven ROI. Second is the rise of omni-channel. E-commerce is surging, and it’s not just retailers turning to e-commerce; more brands are selling products directly to the consumer over the Web. A third key factor is the rise of cloud solutions and lower barriers to entry. The freight spend required to invest in a TMS solution is lower than ever. Historically, if a company did not have over $20 million in freight spend, purchasing a TMS was out of the question. The emergence of SaaS solutions, and less sophisticated on-premise applications, has reduced that number significantly. Now, essentially companies of all sizes can afford a TMS.”
An ARC survey on the ROI of TMS found that respondents indicated freight savings of approximately eight per cent with the use of a TMS application, which is two per cent improvement from the last time ARC surveyed TMS users. Of these savings, explains Cunnane, 60 per cent of users indicated that less than 10 per cent of the net savings were absorbed by the TMS. “These freight savings can be attributed to simulation and network design, load consolidation and lower cost mode selections, and multi-stop route optimization,” he says.
“The growth we’re seeing in the TMS market is a natural result of two things,” says Brian Ware, VP, Marketing and Business Development with Transplace Canada. “One is an increased range of functionality within the TMS offerings and it’s coupled, with what we don’t speak about very often, which is ongoing market pressures to identify inefficiencies within a company’s supply chain. And that’s what I hear about when I speak to customers and potential customers.
“TMS’ have evolved from the fundamentals, which of course is order processing and tendering and dispatching to more robust, even cloud-based systems complete with expanded connectivity with customers, with carriers and even with third-party telematics providers.”
Companies looking for ways to improve cost and service as well as gain more control over their transportation networks, would be wise to think about the value that can be delivered by the implementation of a TMS, says Dave Belter, VP & GM of Global Transportation Management with Ryder System Inc.
“The simplest value is going to be the automation of a lot of the tactical administration of the transportation network.,” he says “You are going to gain greater visibility, especially now with integration of location-based services or application program interface (API) integration with carriers, you going to have near real-time visibility of where loads are and when you put predictive analytics on top of that you can start to predict if a load is going to be arriving on time for pickups and deliveries and with that be much more proactive in your management of your transportation network.”
The company recently launched Ryder RyderShare, a cloud-based platform that provides real-time shipment visibility, predictive alerts, and exception dashboards. The technology is accessible through a customer-facing website and mobile application that utilizes cellular and GPS technology to link shippers with onboard vehicle technologies.
“We took an innovative approach in developing Ryder RyderShare by collaborating with several of our customers who were seeking greater network visibility and proactive event management around their shipments,” said Steve Sensing, President of Global Supply Chain Solutions at Ryder.
Another advantage of implementing a TMS is to maintain continuity of resources, says Ray West, Senior VP & GM of TMS Solutions for TMW. “In other words, to make sure you know where your resources are at all times—your drivers, tractors, trailers and other assorted equipment. A make sure you have continuous service out of that. You know which trailers are available in a certain yard at a certain time so that you can book freight on those trailers. Knowing where they are from a in-transit visibility standpoint, or if you have to deadhead a tractor from one location to another to make a pickup. You need to be able to account for that deadhead segment because someone will have to pay for that segment, most likely the driver and alternatively you have costs associated with that deadhead segment.
“You can’t dispatch a tractor from one location if they’re actually at another location without adding that deadhead segment so that you cover your associated costs—your deadhead mileage and paying the driver for that deadhead ride.”
According to Belter, it’s not unheard of that a shipper could achieve 10 per cent ROI, depending on their current condition and whether they are centralized or decentralized in how they manage their transportation.
“We’ve worked with customers that were entirely decentralized where they have all of the transportation decisions being made at the local level and the don’t have control over any kind of a route guide compliance and the local operators that are making decisions and they have no centralized view of what their costs are and why their costs are what they are.
“Other customers are much more sophisticated in that they’ve already centralized some stuff, but they’re looking at TMS to get to the next level of automation and maybe the business intelligence.
“Investments that have been made over the last five years or so and what’s available today in terms of business intelligence capabilities has really been huge in the TMS space because if I’m working at a strategic level I can clearly see the performance of the network and understand where the network is underperforming as well as start to put some predictive elements into the business intelligence where I can begin to understand where my surges are occurring and be better prepared to handle seasonal surges than maybe I had in the past.”
Many shippers who already have TMS may now be looking to upgrade or replace their technology and according to West, there are usually a couple of tipping points behind the decision.
“Perhaps your business has changed, you’ve gone from long haul to short haul or you’ve gone from flatbed to van or added reefers,” says West.
“You could also be on a legacy system that is out of date or perhaps a homegrown system. A generational change sometimes causes that change where they might have an older mainframe computer-based system and the newer generation wants a Windows or web-based system.
“Or it could be that you’ve maintained a custom system for years and it’s hard to find programmers anymore and you want out of the business of having a custom system that only you can maintain and support and you want to go with a commercial software provider and gain all of the efficiencies that they’ve provided for hundreds of other customers across the market.”
West believes one of the most valuable things inside companies today is the data because, “The data shows the history of the lanes that you’ve made profit on, the lanes that you’ve lost money on. What the best freight mix, who are the best customers, which vehicles do you have lower service rates with or higher costs per mile with. Everything is about the data.”
According to West, TMW is doing a lot of consolidation of data across multiple fleets to provide freight lane indexes and the ability for customers to look not only within their own four walls, but also outside of that to see what the rates are for a particular lane or what the market will bear in a certain area so they can determine whether those are profitable lanes or not.
The right TMS can provide transparency and that accompanying business intelligence, which is so necessary today to make strategic, fact-based decisions in a company’s supply chain, according to Ware. “Where you can have concerns with some companies is where they don’t have access to that intelligence and they may be making decisions on the fly that may not be in the best interests of their company.
“And these decisions are so important to supporting cost reduction and avoidance, but ultimately it’s there to strengthen support for business growth and TMS can be an effective tool for that.”
The return on investment of TMS can be found, Ware says, in cost reduction and avoidance, which come in many forms, such as data centre and software development costs and lower IT costs opposed to a homegrown system where the company is making updates and changes, weekly, if not daily.
“A TMS can also provide visibility to financial metrics and that’s important, not just at a macro level, but getting down to some granularity because those metrics will allow for optimization within a company’s transportation network.”
A TMS can also provide access to reporting, which brings a greater focus on carrier compliance and that focus can often lessen the sting of non-compliance fines and penalties.
All of that is prefaced by using the “right TMS,” reiterates Ware, which when combined with the right people and process—the three-legged stool—will pay for itself.
“What we’re seeing is a high demand for that enhanced track and trace feature. One of the things we’ve had success with is dynamic routing and auto tendering. We hear a lot about the interface as well. ‘Is it friendly?’ because a TMS is going to be used at all levels of your organization, not just on frontline operational staff, so a user-friendly interface that allows for ease of access to reporting, dashboards, key performance indicators, etc., that’s what we continue to see as features that are in high demand from our customers and potential customers.”
Supply chain optimization
According to Belter, the value of various TMS features and functions are going to vary by type of supply chain.
“For example,” he says, “If I’m an inbound network my ability to manage my POs and gain optimal visibility of my suppliers’ compliance to ship and release my material on time and in full is critical.
“The integration of location-based services technology with TMS that gives real-time visibility of where’s my load, becomes a critical feature, not just from the management of perfect execution to pick up and deliver on time, but also from security perspective. Those capabilities can be further enhanced when you can begin to monitor the temperature of your product in transit. You’ll have real-time visibility if a refrigerated unit is beginning to fail and the temperature is rising, so you can do something about it before your product no longer meets your customer’s requirements.”
In additon, what type of optimization capabilities does the TMS need have in order to extract the greatest value from a transportation network becomes critical in the decision of what type of TMS a company is going to consider.
“Today it’s all about business intelligence and that pure visibility through location-based technologies and API technologies,” says Belter.
“In the future, think about it as a collaboration layer within a TMS, where suppliers and carriers and others all are equal partners in the supply chain.”
While technology plays an increasingly important role in transportation, people are still the No. 1 resource for companies, says Ware.
“The right TMS can be a very effective tool, but where the rubber hits the road is how that technology is used by people. Skilled operators that well-versed are in the company’s business and supported by stakeholders that are interested in the data and predictive analytics is important, but TMS suppliers like Transplace need to ensure that potential buyers of the service are aware of, not only its overall functionality, but also how it’s going to be continuously supported by people that understand their business and also improved upon.”