If asked to make a list of anything that would be considered fixed or constant for any distribution manager, I can assure you that list would be a short one. Although I’d be willing to bet that sitting at the top of their list is the responsibility and directive to increase efficiency and reduce costs.
Thus if you aspire to move up the corporate ladder, you had best be exploring every option available to you to deliver on that mandate. Anyone who has ever been in a distribution leadership role will also tell you that regardless of how many times you are successful in accomplishing this, it never seems to be removed from the action item list and has a permanent home on your assigned annual goal and initiative plan.
Labor and Transportation Costs
Most supply chain professionals would agree that the two largest expenses on their P&L are labor and transportation. Now only if there were a way to reduce both of those at the same time…enter your TMS!
Countless seconds, minutes, and hours are wasted every day on antiquated paper based processes.
Carriers have made huge strides in offering online booking and electronic document prep but that only solves half the problem while ushering in a set of its own. Calling and emailing carriers for spot quotes or entering shipment info on multiple carrier portals to find the best rate is tedious and inefficient.
It will also inherently discourage your team from finding the most economical option for transporting your freight by making it more attractive to simply book with the first carrier who answers their call or with the carrier rep they may have established the closest relationship with. While maintaining a positive and collaborative relationship is good business practice and important to your company’s success, it should not be the cause of you missing out on additional savings.
If leveraged correctly, a TMS will level the playing field and ensure you are consistently getting the best rate and service for all of your freight.
Shipping Software (aka TMS)
A good TMS will streamline the bid process and through reporting, identify areas of opportunity for additional savings. If there is one thing I would advise, having personally learned the hard way while evaluating and selecting a TMS solution, it is to not underestimate the importance of your TMS’s ability to provide the same cost savings potential for your truckload freight as it can for LTL and parcel shipments.
While LTL and parcel savings can be significant and easy to be sold on, I assure you that you would be doing yourself and your company a disservice by not choosing a TMS that also offers robust functionality which will allow you to also realize savings on your larger shipments.
Finding a TMS that can do both well is a challenge, especially if you’re working on a limited budget and/or do not have the time or resources to spend on customizations and extensive testing. Anyone who has been through a software implementation can attest to how quickly the costs of custom modifications can add up. So the key here is to do your homework and make sure the TMS you select can satisfy your business requirements with minimal need for custom mods.
Remember that just as no TMS is the same, no operation is the same. Be sure to take the time to talk through the nuances of your business with potential TMS providers up front and challenge them to demonstrate if and how their software will meet your business’ unique needs.
Implementing a TMS
A good first step is to take a look at your freight profile. What percentage of your freight is parcel, LTL, TL, Rail, Ocean, etc.? How many shipments do you process per day/week/month? Do you already have tariff agreements with the carriers you use and was your freight volume high enough to ensure you got the best negotiated rate? Do you have a need for load planning?
If yes, do you have the weight and dimension data for the product you are shipping? Is route optimization a feature you can benefit from? These are some of the questions you will need to consider before deciding on the right TMS for your business.
A recent example that I can share is with a TMS software that had been selected by a colleague of mine and handed to me to implement. It was a basic, no-frill TMS that seemed to have all of what we were looking for, or so we thought. We had all of our negotiated rates uploaded into the software, set up all of our carriers, and began using the system within a week or two of purchasing it.
To start, we decided to only use the TMS for our LTL shipments and when ready, we would then start using it for our TL and Rail loads. We came across and worked through some minor bugs over the next several months on the LTL side but for the most part, everything seemed to be fine. With the TMS we were able to easily open the doors to work with new carriers and negotiate more competitive tariffs.
We were seeing savings in our LTL spend and even reduced the order cycle time by being able to process shipments quicker. Now we were ready to see those savings on the truckload side. There were some additional costs associated with importing truckload carrier rates but they paled in comparison to the savings we expected to achieve with our TL freight costs so we moved forward.
This was the point that we realized the TMS we had spent the past 6 months implementing was not what we had hoped it would be.
There was no one to blame but ourselves. We had not taken the time to discuss our unique shipping process with the TMS provider beforehand. We made a lot of assumptions by thinking that because a TMS could also do truckloads, that it could do our truckloads. Sadly, this was not the case.
What made our truckloads unique is that the majority of them were multi-stop loads, often 4 or 5 stops. For most companies, the thought of 4+ stop offs would seem crazy and rightfully so. Why would anyone book a truckload for 5 stops?
That is what LTL is for, isn’t it? Sure, but when you have freight that is 20ft long or need to ship pallets that are 7ft tall under 300 lbs, LTL in no longer an economical option. Long story short, we spent another 4-5 months trying to work with the TMS provider on additional customizations and tweaks.
During that time, I also learned that every change to carrier pricing, carrier info, user settings, etc., required the software company to perform them. I finally threw in the towel and decided it would be best to cut our losses and so began anew the search for the right TMS. If only I knew then what I know now.
Fore more information on TMS, please see our Ultimate Guide to Transportation Management Systems.
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