Seven must-have features in a TMS
In the market for a new transportation management system? Here are seven features to look for.
Even by the standards of the supply chain software world, transportation management systems (TMS) have proved to have exceptional legs. After nearly two decades on the market, these solutions continue to sell briskly. Last year, revenues generated through TMS sales and software support grew 11 percent, according to the research firm Gartner Inc. In fact, Chad Eschinger, an analyst at Gartner, estimates that in 2010, the global TMS market reached $625 million despite the sputtering economy.
That will come as little surprise to those in the business. These solutions have earned widespread renown for their ability to streamline time-consuming tasks like carrier selection, routing, and rating as well as their capacity to save users money—no small consideration in an era of skyrocketing fuel prices and tight capacity.
What's less well known is that today's models can do much more than handle basic shipment planning tasks. In addition to managing freight movements and expenditures, the newer, full-featured packages offer capabilities like electronic load tendering, freight analytics, shipment visibility, and freight-bill audit and payment.
If you're in the market for a TMS, what should you look for? We asked several industry experts for their advice. What follows are their recommendations for "must have" features:
• Support for parcel shipping. Early versions of TMS were geared toward truckload and less-than-truckload (LTL) moves, the predominant modes of shipping at the time. But patterns have changed over the years. As the "inventory is evil" mentality has taken hold, a lot of customers have begun demanding smaller, more frequent shipments from their suppliers. The result has been a shift toward parcel shipping.
For that reason, industry experts recommend choosing a TMS that can handle parcel rating and routing along with the traditional truckload and LTL comparisons. "The TMS should be able to evaluate piece vs. hundredweight ratings as well as compare LTL to parcel," says Monica Wooden, chief executive officer of TMS developer MercuryGate International Inc. "All too often, these decisions are based on a fixed weight and they should take into account distance, packaging, etc.," she adds.
• Support for international movements. The first transportation systems on the market concentrated on domestic moves. But in today's global economy, most companies will need a program that can also select air or ocean carriers and manage international shipments. Gartner analyst Dwight Klappich recommends choosing a solution that can "support all modes in a common platform" and make rate and service comparisons among those modes.
Wooden advises shippers to look for a TMS that can provide multi-language interface screens and supports the use of foreign currencies. On top of that, the solution should be able to calculate any cross-border fees, value-added taxes, and freight forwarding charges involved in an international shipment.
• The ability to track and manage carrier contracts. Part of what makes carrier selection and rate comparison so complex is the wide variation in carrier contract terms—particularly when it comes to accessorial charges (for example, fees for the use of lift gates or "lumpers," temporary workers who assist with freight loading or unloading). "A single customer will have many multimodal carrier relationships, with each carrier having different methods of charging for accessorials and specific lane treatments," says Les Hamashima, chief operating officer at TMS developer Transite Technology Inc.
For that reason, Hamashima and other experts urge shippers to look for a TMS that can track all of their various carrier agreements and the individual terms of each contract. Among other benefits, knowing precisely what a particular carrier would charge for a given shipment takes the guesswork out of carrier selection.
• The ability to handle freight settlement. The logistics manager's job doesn't end once the freight has been loaded onto the vehicle. There are still invoices to be reconciled and bills to be paid at the end of the cycle. To streamline the process, Wooden of MercuryGate recommends choosing a TMS that can audit and pay freight invoices.
Essentially, the software takes invoices as they come in and matches them to loads in the system, she explains. It then compares the rated amounts to invoiced amounts based on established rules. Once the invoices are approved, the software applies the necessary general ledger codes to the trucking charges to ensure proper accounting.
• The ability to provide item visibility. When it comes to the whereabouts of their goods, today's customers are no longer satisfied with assurances that the shipment is en route. They expect their suppliers to be able to pinpoint the exact location of their orders at any given moment. That's why Wooden advises selecting a TMS that can provide shipment visibility down to the item level.
"A user should have the ability to key in an item and find out what shipment [contains] that item," she says. "What box the item is in. What pallet the box is on." That kind of information will prove invaluable if the customer needs to reroute its freight, she adds.
• The ability to provide benchmark data. Up until recently, shippers had no good way of knowing how the rates and service they got from their carriers stacked up against what their peers were getting. But shippers no longer have to operate in the dark. A number of TMS developers—particularly those who offer their solutions on a software-as-a-service or on-demand basis—are starting to collect carrier rate and service information from all of the shippers in their network, which they then use to develop benchmark data for specific shipping lanes. This allows logistics transportation managers "to determine if they are getting good or bad rates compared to the norm," Klappich explains.
Klappich notes, however, that this capability is still in the early stages of development and that it may be some time before it becomes widely available.
• The ability to provide business intelligence. In addition to handling routine shipping tasks, more and more TMSs these days have the capability to analyze the user's shipping practices and identify opportunities for improvement. They do this by capturing data and using it to develop key performance indicators (KPIs)—metrics showing how an operation is performing in areas like on-time delivery or damage in transit.
"Today's best transportation solutions are smart," says Chris Timmer, chief operating officer at LeanLogistics, which offers on-demand transportation management systems. "They tell you where your process is optimized and where it is not. They also identify available options in lanes, carriers, rates, and performance."
Klappich notes that these kinds of embedded analytics can provide valuable information for tasks like carrier selection. For instance, a shipper could use the KPIs to create a carrier scorecard, which it then might use to handicap the carriers. If the scorecard showed that a particular carrier offered the lowest rates but had a poor record of on-time delivery, the shipper would automatically know to divert a particularly time-sensitive shipment to a slightly higher-cost carrier with a better service record.
So what has all this meant for the price of transportation management software? The good news for shippers is that the emergence of these premium features hasn't necessarily led to premium pricing. If anything, market competition has forced TMS prices down in recent years.
That's partly due to the advent of TMS delivered on a software-as-a-service (SaaS) or on-demand basis for a modest monthly fee. "SaaS is having an impact as the subscriptions keep near-term costs down [for TMS purchases]," says Klappich.
But intensifying marketplace rivalry plays a role as well. "Competition is tough everywhere Ã¢ï¿½Â¦ which says that vendors cannot charge a steep premium for their TMS," says Klappich. "Deals are heavily negotiated today."
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