TMS Talk Series – Part 2: The Importance of Having the Right Strategy Behind Your TMS
Welcome back to our newest series, “TMS Talk,” where we are exploring the ins-and-outs of all things transportation management technology. In the first post, we highlighted the different aspects of a TMS and examined some of the key considerations when selecting a TMS that’s right for your organization. In part 2, we’ll take a look at the importance of having the right transportation management strategy behind this powerful technology. Perhaps you’re seeking better visibility of your supply chain to improve customer service. Maybe your organization is experiencing an influx of growth and you need help scaling your logistics operations to meet increased demand. Or there’s only one person at your company who understands your logistics process, and you need a backup plan. Maybe you’re drowning in paperwork and have a paper map with push pins and yarn that serves as your shipment routing tracker. No matter the size of your business or your current predicament, implementing a TMS would likely have a position impact on your supply chain. But is just implementing the technology enough to see success? The short answer is no. Transportation Optimization is More Than Just Buying a TMS On average, companies spend 3 to 7 percent of their sales on transportation – so, a $500 million company with 5% of sales spent on transportation spends $25 million annually. And with such a significant portion of your sales going to transportation, it’s critical for companies to have the tools and processes in place to ensure that this business function is executed correctly and cost-effectively, while also fitting in with your overall business goals and strategy. And while a TMS can help reduce transportation costs by optimizing things like carrier and mode selection, logistics expertise can have an even greater impact on your organization. Optimizing your transportation management is about more than just saving a few dollars on each load. It’s about making strategic, data-driven business decisions that allow you to reduce risk, boost efficiency and drive meaningful change throughout your organization. Improvements in these areas will further support your efforts to reduce operating costs, improve customer service and gain a competitive advantage. Tools + Processes + Expertise = Success The right TMS can have a significant impact on your supply chain operations, but it’s not automatically going to “fix” your entire network. You need the right strategy and processes behind it. And while some organizations have the human capital, industry depth and expertise and IT infrastructure to manage their transportation on an insourced basis, many do not. As a result, many shippers look to partner with a third party to manage that business function for them. A third-party logistics provider can provide a deeper understanding of the key processes and best practices that are necessary for supply chain excellence. By outsourcing their transportation management to a transportation management provider, shippers not only gain access to a team of knowledgeable, experienced supply chain professionals, but can also leverage the provider’s size and scale. Outsourcing also gives shippers access to the provider’s comprehensive technology platform and services. With a software-as-a-service (SaaS) TMS application, implementation is faster than licensing in-house, making speed to market and speed to benefit much quicker, and the total cost of ownership is lower by not having to invest in additional human capital or IT infrastructure to support it. In addition to supplying technology solutions, logistics providers provide a deeper understanding of the businesses and the key processes that are necessary for supply chain excellence within the specific verticals in which a shipper resides. And this type of specialized knowledge is as critical as advanced technology, if not more. Shippers can also have the flexibility of outsourcing certain functional areas to a logistics provider, or completely outsource an order to cash. This experience, as well as the strength and depth of the transportation management provider’s network, is what enables the ultimate value delivery that shippers are trying to derive from a technology investment. To achieve true supply chain excellence, technology must be combined with industry expertise, sound processes and the ability to develop and execute effective optimization strategies. It’s also important to remember that shippers that are diving into the next generation of TMS solutions can trust their transportation management provider to leverage its inherent technical and industry expertise to help enable all of these new capabilities and data possibilities. As supply chains become all the more complex and technology progresses, TMS providers can help deliver a next-gen experience that will take your transportation operations to the next level and beyond. Stay tuned for more in our “TMS Talk” series here on Logistically Speaking! What questions do you have about your TMS?