9 Questions To Ask When Buying a Transportation Management System

If you're buying shipping software, you're sure to have a lot of questions. Read these top questions to be sure you pick one that will work for your business.

1.) Should I use the carriers I currently have negotiated rates with?

There are two types of shipping software, aka TMS (transportation management software).

The first type of system allows you to use your current carriers and negotiate rates with them periodically. You see your contracted rates inside the software.

When you renegotiate the rates, the updated rates will automatically show since this type of system is connected in real-time to the carriers’ servers.

The second type of system is provided by brokers or companies that resell rates. They provide their systems free of charge but don’t allow you to use your carrier account numbers and rates. They negotiate rates and upcharge you when they provide their solution. On the surface this may seem like a great option because you don’t have to deal with negotiating or setting up carrier accounts.

You may also believe that since they may have a bigger volume, you may get better rates from their carriers. That may not be the case. These days carriers are providing better rates to smaller companies and shippers directly to cut out the middle man.

Based on our experience, you can get better rates directly with the carriers if you negotiate yourself. The other problem shippers run into when using these systems is that when a problem arises, the carrier wants to deal with the account holder directly (the reseller) and may not talk to you, the end customer. In the end, solving issues takes a lot longer, or may not get resolved at all.

2.) Do I need shipping software I can use across modes?

Some software can only be used for one mode. Others can do one or two of the most common modes. Consider who your inbound and outbound carriers are and where you ship to. Make sure you pick software that can do more than just the modes you currently use. Business requirements change and you may need to ship using another mode at a moment’s notice. Here are the most common modes you should make sure your software can handle.

parcel:

Shipping small packages using carriers that include FedEx, UPS, DHL, USPS, TNT, OnTrack and others.

Air Freight:

Shipping larger and heavier packages including pallets with next day, 2- day or 3-day delivery. Carriers that provide these services are FedEx, UPS, and other air freight carriers and freight forwarders.

LTL:

Shipping less than truckload. In this case, one or multiple pallets or skids are shipped. Carriers that provide these services include FedEx Freight, XPO, ESTES, ABF, Old Dominion, and many others.

Truckload (FTL):

Companies that ship full truckloads at a time. In some cases, truckloads are used to ship multiple LTL shipments and save money. The truckload may be dispatched and make a few stops before its gets to its final destination. Most truckload carriers also offer intermodal services.

Intermodal:

Companies that ship containers that will travel over the road and via rail use intermodal services. This is a less expensive option than truckload, but it may take a few days longer to arrive at its destination.

International Air Freight:

Most international airfreight is handled by freight forwarders. These companies contract directly with the airlines and use the airlines’ cargo services to ship your heavier shipments that include pallets or skids.

Ocean:

Freight that is very heavy and too expensive to ship via air is normally shipped via ocean. Carriers offer ways to ship pallets or full containers. Since its transported via a ship on the ocean, this may take up to 30 days to arrive at its destination, but may cost up to 70% less than air freight.

A Buyer's Guide To Shipping Software!

3.) What workflows Need Automating? (quoting, shipping, tracking, auditing…)

A TMS is meant to automate parts of, or the entire, shipping and logistics process. You can do these tasks manually, but with a TMS or shipping software, they are automated and are done by the software more accurately and a lot faster. Think about process and what you want to automate.

Shipping software may automate multiple processes saving you both time and money. Look for one that automates most, if not all, of your shipping tasks. Below are the most important processes that you need to consider automating with shipping software.

Across mode freight rate comparison:

Getting quotes from carriers can be time consuming. Make sure the software you choose can provide the rate quotes for your shipments in one window, side by side, for all your carriers and across modes for easy comparison. The best decisions are made when you have the right information, presented simply, and in real time.

Shipping labels:

Printing shipping labels, BOLs, AWBs and other shipping documents: All shipments require various documents to be filled out and printed. Make sure the software you chose can print the labels and documents required by the carrier and by customs.

Tracking:

Tracking shipments is a crucial part of the process. Most carriers offer tracking on their websites, but who has time to go into every carrier site to track each shipment? Having a single place where you can get real-time tracking saves you and your team valuable time. And when you don’t have time to track shipments, having alerts sent to your email notifying you of problems on shipments in real-time becomes very important. Look for software that has this feature included.

Reporting:

Colleagues from various departments of your company may require different reports on shipping and logistics. Make sure you have a wide range of standard reports and a way for you to create your own reports.

Freight invoice auditing:

It’s a fact that carriers don’t always invoice accurately. We’ve saved hundreds of thousands of dollars over the years by simply auditing our invoices for “promised” rates. You can pay a consultant on a gain-share basis to audit your invoices or you can use shipping software that has this feature built in. Either way, make sure you are being billed the correct rate. Also, most carriers have delivery guarantees that when not met should result in a refund or reduction in your rate, but you must know and you must ask. A good TMS should automate all this for you.

Internal Communications:

Make sure you get software that facilitates communication to other departments regarding shipping. This includes providing security features that allow others to see only certain information. Configure alerts and scheduled reports to others as needed. Let the TMS help you streamline your communication.

4.) How Long Does The Software Take To Set Up Before I Can Use It?

Traditional shipping software, or TMS, can take a few weeks to several months to set up and implement. Nobody has that kind of time today. With the technology we have now, there is no reason why set up and implementation should take more than a few days.

Even when integrating with your ERP or order system, you should be up and running in a day or two. If you aren’t connecting to your ERP or order system, you should be able to use the software right away. This may lead you to look for a SaaS solution. A SaaS solution is software that you don’t need to download, just connect to their servers through the internet.

5.) How easy is it to add new carriers?

Depending on the shipping software, each one may have a different process for adding your carriers to your account. Some take weeks and other just days. My advice is that you get software that allows you to add your carriers in minutes. Yes, there are some carriers that have restrictions and need approval before you start using them in your new shipping software, but those are few, and even then, should only take a day or two to approve.

Also keep in mind that when adding your carriers, you will need your carrier credentials. This will be required regardless of what software you go with. You will need at least your carrier account number and the user name and password that is used when you log into the carrier website. Some carriers, and this is only a few, require a little more information, but the software should outline anything else needed to get the carrier ready to use.

6.) Is the user interface easy to use, like a mobile app?

Make sure you get software that is easy to use and has a great user interface. The best software does not require training. We can thank Apple for that. Your software should be as easy to use as mobile apps are. It should be intuitive and require few clicks to complete a task. Nobody likes cluttered and noisy screens.

7.) What is my budget? Do I prefer monthly subscription pricing?

The fact is that all of us are given unreasonably low budgets by our bosses. We also know that the more money we save the company, the better it makes us look. Shipping software can range in price, dramatically! Although they can run into the millions of dollars, most TMS for SMB (small to medium size companies) ranges from $25,000-$100,000. Most conventional TMS software is sold with a large upfront cost and a yearly 18% maintenance fee.

The new way to buy software is on a monthly subscription price model with no long-term contracts. Instead of paying everything up front you pay a much smaller monthly fee. Look for a package that has a low monthly subscription cost but still has all the features you need.

8.) Is there a minimum term contract? 

You don’t need to sign long term contracts anymore. There are plenty of options that don’t require a contract. Unlike the stubborn telco industry, long term contracts are on the way out with subscription based shipping software. Look for software that is very easy to get going on, with a no-contract monthly cost. That way you can easily try it without any risk. If it fits your needs, great. If not, move on to another one. There’s no reason to be stuck with software that doesn’t work for you anymore.

9.) What is the expected ROI?

If you can’t easily come up with an ROI (return on investment) or see that you are saving a lot more than what you are paying for the solution, something is wrong. There are several ways you can measure how much money you are saving to calculate the ROI.

The formula for an ROI is: “your savings due to your software less the cost of it divided by the cost of it”. For example, let’s say over a one year period you spend $600,000 on shipping costs and using the shipping software saves you 10% of that, or $60,000. The software costs you $200 per month or $2400 for the year. Your ROI is ($60,000-$2400)/$2400, or 2400%.

You can see why shipping software or TMS sales are setting records every year. Another way to look at the purchase is by determining how long it takes to pay back the investment. Here are a few ways to determine savings.

Save Money by saving time:

The software you end up with should save you time by automating processes that may have been done by employees manually in the past. Some tasks may now be 100% automated and done by the system and others may reduce the amount of work staff must do by up to 90%.

A few processes that shipping software can help automate: (For the calculation, we will use an hourly pay rate of $20. Most SMBs ship between 5-25 shipment per day, so we will also use 15 as the number of daily shipments and quotes. We’ll use an average cost for a shipment for SMBs of $125.)

Getting rate quotes:

Getting rates quotes on shipments can take anywhere from 1 minute to 5 minutes per carrier for a manual process. This may consist of having to log into carrier websites and filling in their forms or making phone calls. Its standard practice to get at least 3 quotes to make sure you get a competitive rate. This can result in about $1.66 savings per quote if you have software that can get quotes from all your carriers at one time.

Shipment processing and document printing:

It takes the average shipping clerk about 10 minutes to fill out all the forms and print all the labels and documents required to process a shipment. Forms may include the online data required by the carriers for shipment as well as any product information.

Most shipments require shipping labels or BOLs to be printed, pallets or box labels, packing slips, and other customs documents for international shipments. This is an average savings of $3.33 per shipment because a good TMS does all this in about 30 seconds.

scheduling pickup:

Based on the current process your company has, this can take from 30 seconds if done on a carrier website to 2 minutes, if done via a phone call. For the calculation, we will use 1 minute, which gives a savings of $00.33 per shipment.

tracking:

This can take from 30 seconds if done on a carrier website to 2 minutes if done via a phone call. For the calculation, we will use 1 minute. This is a savings of $00.33 per shipment.

freight invoice auditing:

Auditing freight invoices can be time intensive. All carriers except parcel carriers invoice per shipment. These invoices take about 2 minutes per invoice to audit depending on what systems are used and how accessible they are to the user. Parcel carriers invoice weekly and all a week’s shipments can be on one single invoice, making it difficult to audit. In either case, it will take about 2 minutes per shipment leading to a savings of about $00.66 per shipment.

A Buyer's Guide To Shipping Software!

additional roi

Another way you will save money is based on the results of the quoting task and freight invoice audit tasks. If you don’t compare rate quotes between carriers you could be leaving money on the table. The same is true if you are not auditing your carrier freight invoices. On average, companies that shop rates and audit save 20% over those that don’t. This is an average saving of $25 per shipment.

If you buy software with these features, the math works out to be a savings of about $31 per shipment. For an average SMB processing 15 shipments per day, the savings can average $9300 per month. Make sure the software cost you less than this. If you are shipping about 15 shipments per day, I suggest you find software that cost you around $500 per month. That ROI makes for an easy decision.

About Us

Over the past 20 years we’ve grown into a mid-size distributor, going from $0 to $100M in revenue. We’ve learned and used these methods to save hundreds of thousands of dollars in shipping spend over the past five years alone. For the first 17 years, we used spreadsheets to manage our shipping. It was a very manual and inefficient process. We tried an enterprise TMS for three years which was expensive, hard to implement and update, and only satisfied about 70% of our needs. Now, there are many software options to choose from that automate these methods.

The goal here is to enable you to be a pro at buying shipping software, stay tuned for more shipping hacks!

For more tips, check out our ultimate bundle with in-depth tips on carrier rate shopping, digitizing logistical supply chains, isolating carrier invoice discrepancies, and more!