Five questions to ask before buying a transportation management system
Getting the right TMS system and vendor requires doing your homework up front. Asking questions is the right start.
Chris Caplice -- Purchasing, 9/14/2009 3:04:01 PM
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Transportation Management Systems (TMS) have come a long way in the last 10-15 years. Improved computer processing power, better optimization algorithms, and more customizable user interfaces have all contributed to increase the functionality and effectiveness of a TMS. While greatly enhanced, TMS are not all the same and none of them are perfect for all users. While it is important to understand the specific features of each TMS, there are other considerations. Here are four questions that transcend individual features that you should ask when choosing between Transportation Management Systems.
Question #1: Does the TMS bridge the planning-execution gap?
There are four main processes involved in transportation management: design, procurement, selection, and reconciliation. Design and procurement are planning events where substantial time and effort is spent to come up with an optimal plan. Selection and reconciliation are execution tasks that involve selecting the carrier, offering the load, making the tender, confirming details, paying, and auditing. There can be a substantial gap between planning methods and execution tasks involved in transportation management.
For example, combinatorial auctions that enable carriers to bundle or package lanes together are now widely used in transportation procurement events. However, very few TMS can actually enforce these complex conditions during execution. A great deal of emphasis has been placed on the development and marketing of complex procurement systems that allow the shipper to enforce business conditions such as favoring incumbents, ensuring minority owned carriers receive a specific portion of business, etc. Unfortunately, the same amount of effort has not been put into improving execution systems. The time and effort spent designing these lofty objectives into a plan are worthless if the execution system cannot enforce them. It is critical that the TMS fits into the transportation planning/execution lifecycle for both the processes and the data flows for your company.
Question # 2: Does the TMS have sufficient structured flexibility?
Every software system has to have structure and adhere to certain standards. Transportation, and logistics in general, must also be flexible since it often serves as the shock absorber for a company. If demand shifts suddenly or fuel prices spike, the transportation function needs to be able to adapt. This requires "built-in" or structured flexibility. While this sounds like an oxymoron it is actually a critical software design criteria.
The TMS should allow you to customize the information and process flows to both adhere to the established standards and still meet your specific needs. Structured flexibility implies that the system is modular and can be easily customized without significant cost when upgrades are made available. Different firms need different types of flexibility and each TMS is designed with different types of flexibility into their systems. Some have more adaptability workflow processes while others enable bolt-on applications. To understand if the fit is right, be sure to involve a large and diverse group of stakeholders to brainstorm on potential future scenarios under which the TMS would have to operate. The output of these brainstorming sessions can be used in the selection process to understand if the right flexibility exists within each candidate TMS.
Question # 3. Does the TMS lend itself to business intelligence?
Transportation transaction data are some of the richest sources of intelligence within a company. The physical movement of product across the world can provide insights into new trends, pricing shifts, and demand pattern changes. Additionally, transportation is one of the only functions within a company that routinely involves both suppliers and customers in practically every transaction.
Sadly, most TMS treat the transaction history data as an after-thought rather than a source of intelligence. Getting data on what actually happened out of a TMS is typically an extremely time consuming and manual process. Rather than disposing of the data or using it solely for payment, it should be archived and actively mined.
- Are lengths of haul increasing?
- Are shipments trending to higher cost origins and destinations?
- Is the dwell time increasing at certain locations?
- How does carrier performance relate to the placement in the routing guide?
These are all important and insightful questions that can easily be answered if the data that always exists somewhere in a TMS is harvested, harmonized, and mined. Recent work I have conducted both at MIT and with the consulting firm Chainalytics has shown that there is a direct and measurable correlation with these physical characteristics and the rates charged by carriers. However, if the TMS does not capture, collect, and archive this data and make it readily accessible, these questions cannot be answered.
Question # 4: Does the TMS functionality match the users', not the buyer's, needs?
As with any complex software system, the people making the software buying decision are rarely the same ones that will be using it day in and day out. The running joke amongst transportation software vendors is that pretty maps sell software, but are rarely used by the actual power users. The same can be said for optimization.
Often the mathematical details of the optimization algorithm in the planning portion of a TMS receive more attention than the daily workflow of the execution system. But, for example, if your company operates under a very uncertain planning horizon where more than half of your shipments change the day of shipment, then having an exceptional detailed optimal load plan run three days in advance is akin to rearranging deck chairs on the Titanic. Get the real users involved early in the selection process so that the right features are taken into consideration.
Question # 5: How many and what type of resources do I need to support the TMS?
There are many different delivery modes for TMS including installed, remote hosted, software as a service (SaaS) and fully outsourced. While these different methods might change the number and type personnel needed to successfully operate a TMS, none of them completely replace your staff. You need to have the right resources to support the in-house management of whatever TMS you ultimately choose.
This includes access to IT resources and trained professionals to run the system and maintain it. If you do not have all of these in-house resources, give some thought to licensing a system that is partially hosted by or completely outsourced to a 3PL.
If you choose a partially hosted option you will still need trained personnel to translate the output into management strategies. If the fully outsourced option is selected, make sure that the provider is in tune with your operational goals and that proper incentives are in place to ensure that the 3PL strives to get the best transportation deal for you. Even an outsourced 3PL arrangement requires some level of management and supervision.
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