Why have so few companies adopted a Transportation Management System (TMS) solution? There are tremendous benefits but there are obstacles, real or perceived, that get in the way. I believe that the benefits far outweigh the obstacles but the obstacles often do not have anything to do with the benefits.
Many years ago I started a Supply Chain Services business as a new service within the company. The fundamental premise was that we had great Supply Chain expertise, tools, systems and processes which we could easily offer to customers.
One of the services that was very compelling was our Freight Management service. We had a tremendous amount of spend leverage globally, a seasoned team, great supplier relationships, very strong processes, and an excellent Transportation Management System (TMS). With all of that we went to market!
Our target customers were small to mid size companies. We felt that this was a customer set which would not have the same global reach and spend leverage that we had. They would not have the extensive carrier relationships, nor would they get the same carrier service level we could bring. They would not have the organizational depth (even though they had smart people). They would not have the cash or infrastructure to enable them to support either developing or buying, and then maintaining, a TMS capability. And they would not have the end to end supply chain visibility that can come with a TMS.
The service offering sold very well. From a customer perspective they would get typically 5-15% cost savings on their current freight rates across the various modes and lanes which they used. They would get better service. They could perform what-if analyses. They could link to their order management and distribution management systems. They would have access to a greater number of name brand carriers. And they would have desktop and mobile device access to a TMS capability which allowed them to instantaneously arrange for freight, optimizing cost and service parameters in real-time, and give them real-time visibility to their shipments anywhere in the world, 24/7/365.
Many customer prospects however did not elect to buy our service, which we found perplexing. The benefits that we offered were very clear to us and to the customers. The Freight Management service and the TMS capability were compelling. However something was holding many of these companies back.
And this experience is corroborated today by the relatively low number of companies that have a TMS capability. Some surveys show that as few as 20-35% of companies today have a TMS solution.The question then becomes why do so few companies today still not have a TMS capability when the benefits are so clear? And what can be done to take care of these concerns?
In our experience we found a number of reasons which held these companies back.
Supply Chain leaders, like other professionals, are proud of the work that they do and the results they deliver. When a service provider comes in and shows them that they can deliver cost savings above and beyond what they can get on their own, the reaction can be mixed.
Some people take any insinuation that someone else can negotiate lower costs as a personal affront, even if they have never before achieved these kinds of savings on their own. They will often just take the promise of savings from the service provider and turn around and beat up their incumbent suppliers to get some savings here and there for a short period of time.
True leaders however understand that this is not a personal affront. Especially in Supply Chain wherein, by definition, you are reliant on others to provide goods and services to get things done. If a service provider brings greater spend leverage and scale, and in turn better cost savings, it is not a negative reflection on you or your company at all. Leaders understand that partnering with these kinds of service providers will only bring you and your company more success.
The service provider is not there to take over your job, but to enable you to do a better job. The work that you do is the culmination of the work of many employees and partners. You don’t have to do everything yourself. Take pride in leveraging all of the capabilities that are presented to you!
Loss of Control
Most Procurement people like to manage and control Supplier relationships themselves. With a packaged service like a TMS solution the service provider can often bring hundreds if not thousands of new carriers to bear. The threat of losing direct control of existing relationships can be of great concern.
The reality is that you should still be able to deal with your carriers on a day-to-day basis. Further a TMS service provider is likely to introduce you to many new carriers, and new relationships, that will enable you to improve your service levels, support your growth, and provide expanded logistical reach.
Further if the TMS service provider controls the cost negotiations with carriers and you receive a greater benefit from that, you haven’t lost control. You can establish targets and goals with your service provider in advance and let them handle the mechanics of negotiations. You have merely delegated a task. You haven’t lost control at all.
The Promise Of Future Investment
Often Procurement people believe that they can convince their management that they will be able to justify investment in a TMS solution of their own. They think that they need to control the entire TMS ecosystem.
The reality is that a do-it-yourself TMS solution requires a large investment in cash and resources and time. Especially for small to mid size companies this is not likely a good use of constrained assets.
The solution is to partner with a Cloud-based Transportation Management System solution provider. They have already made the enormous investments in software development, management, maintenance, and supplier relationships. They have already established all of the connectivity with carriers. And they have already proven their solution.
Very few companies are vertically integrated in all of the services that they perform. Certainly small to mid-sized companies should not even attempt to develop their own TMS solution when there are so many Cloud-Based TMS solutions available.
Resistance to Change
Some people and companies are caught up in their current processes and organizations. They can only see their one way of doing things and do not know how to change their culture. Often they are only familiar with direct phone contact, sending faxes, manually scheduling and tracking shipments, and manually handling invoices and order reconciliation.
The benefits of an automated Transportation Management System solution are clear. The electronic, and automatic, communication that a TMS solution will facilitate will dramatically improve your productivity, speed, service levels and visibility. But to many companies the prospect of change can be overwhelming. Some employees may see a loss of control when they can’t do things manually.
It is important for the Supply Chain leader and the Transportation Management System service provider to recognize this. You certainly don’t want anyone sabotaging a new system implementation. It is important to make everyone comfortable with this kind of change and make the effort to address the impacts through proactive change management.
Lack of Resources
Adopting a TMS solution from an external service provider will certainly require the investment of some resources on the part of your company. Participation by IT, Finance, and your Supply Chain and Operations teams is essential. Yet in many companies a common refrain can be that people don’t have the time to work on this project.
The reality is you can not afford to not do this work. If you want these expanded capabilities and the ensuing benefits you must invest the time and resource now. There will never be a good time so you have to bite the bullet. Especially if your company is growing or you need to improve your customer service or reduce costs, any delays in making this change only mean that you will continue to spend your time and resource fixing the very problems that a TMS solution can address.
Transportation Management System
With the advent of Cloud-Based TMS solutions there should be every reason to move forward with a TMS capability and service provider. The benefits are tremendous. When I was selling a Freight Management service a Cloud-Based TMS solution had not yet come of age. Now that it has there are very few real reasons not to move forward.
And while there are many concerns that need to be addressed they are typically concerns associated with Change Management. This is where leadership both within your company and within your service provider are critical. You need to get your Managers and your Employees comfortable with the prospect of change. You need to Change the Game!
In the end a Cloud-Based TMS solution, with the proper Change Management leadership, will set yourself and your company up for success!
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