In a recent posting in "Logistics Viewpoints," an online newsletter published by ARC Advisory Group, analyst Steve Banker reflected on two companies that had recently implemented transportation management systems (TMS) with an eye to reducing costs and improving service.
In one case, the company achieved its goals, wrote Banker, a member of ARC's supply chain and logistics consulting team. But in the second case, the firm had only limited success.
What made the difference, Banker concluded, was not the software, but how the customer managed the implementation. The first company had strong executive support. The second had a sales team that ignored the TMS forecasts for delivery times, promising faster service to win business—a move that ultimately led to complaints about "late" deliveries.
He wrote, "When I have talked to companies with failed supply chain implementations, they typically do not blame the software company. Rather, they admit that the fault was their own, usually because they couldn't change their internal culture, especially if a project requires the sales force to change the way it wants to do business."
In an interview with DC Velocity, Banker expanded on that theme. "When I talk to end users who have had bad implementations, they often say that while they would like to blame the TMS vendor, they have to admit that they have to take a lot of the blame," he said. "They did not have enough buy-in, they did not have enough training, they did not have good project management skills."
So how can companies avoid these pitfalls and ensure a successful implementation? We asked several experts for their advice. What follows are their four steps to TMS success:
1.Build the case. "It starts with the business case," Banker says. "You need to understand that clearly." He explains that the potential returns from a TMS implementation will vary by the type of organization and that it's important to be realistic about what you can expect. "A TMS in some industries is just going to have a higher ROI than in others," he says.
Banker cites the food and beverage and consumer packaged goods industries as two sectors where companies can expect a big payback from a TMS—typically through consolidation and backhaul opportunities. "There are just a lot more optimization opportunities in that sort of supply chain than, say, a chemical company, where an order goes out in a full truck that comes back empty. No one wants to clean the truck, so there are limited optimization opportunities," he explains. "In the business case, you have to understand the optimization buckets and how big they are, and not base your case on, say, an average 8 percent savings."
Mike Hood, director of implementation and professional services for Transite Technology, a TMS developer, stresses the importance of good communications with the vendor. "[The software developer] needs to have a list of what you are trying to accomplish," he says. Hood also warns that it can be easy to get tripped up by terminology. "I've heard customers talk about a bill of lading when they were really talking about an order," he says.
2. Match the provider to the need. Once the business case is nailed down, it's time to move on to vendor selection—a process that requires great care. Hood urges customers to observe the TMS in action either through demos or at other customer sites. "Make sure you see it," he says.
He also recommends including operations personnel in the planning and decision-making process. Those are the people who have to put a TMS to work. But too often, he says, they are not included until after the decision is made.
Hood says that customers should meet with the vendor in what he calls business design sessions that lay out precisely what the system will provide—and help to avoid "scope creep," a reference to changes and additions made after the business case has been developed and approved.
3. Manage the change. The implementation itself demands executive support and sufficient training. "A few things are just obvious," says Joel Hagle, vice president of IT solutions design for Transplace, a firm that provides logistics technology and transportation management services. "You need good project management. You need to operate to a plan. You need to have a test plan that is comprehensive enough. You need to test each process individually. That testing is important."
Banker stresses the necessity of sufficient training. "You need to set aside time for lots of training," he says. Hood adds that training should take place as close to the go-live date as possible. "You don't want to train people a month ahead. They'll forget what they learned," he says.
Attention to change management is all the more important in cases where the organization is undergoing some restructuring at the time of the TMS installation—generally, a shift from decentralized to centralized transportation management. With a TMS, the biggest savings opportunities come in a centralized operation, Banker explains. "You are not going to get the same payback if you have, say, 10 factories and you still have transportation planners optimizing orders for each factory. When you are planning for all the factories, you can make yourself more interesting to carriers, and you can get price breaks and more optimization opportunities."
Although centralization will result in better payback, it's also likely to create some short-term disruption, Banker says. "You have to say to your planners, 'We're going to do it here. Are you willing to move?' You might not need as many. And people who have been doing it by phone might not have the right skills to go from a manual operation to a TMS."
In any event, Hagle says preparing employees for the change is critical. "The customer needs to get in front of that early on. You want to talk to the people on the dock. If no one talks to them first, they are going to get scared." And, no doubt, a major implementation will affect some jobs. "Some of that has to happen," he says. "Change management is difficult."
The change process must also include those in the business affected by transportation decisions even if they are not directly involved—such as sales and marketing or customer service.
4. Take it one step at a time. Hood urges establishing a go-live target date early in the implementation process and sticking to it. But that's not to say the switchover necessarily has to be completed that day. Hagle says most customers do not do a "big bang" switch to a new system. "You might go live with one or two or three vendors. You roll it out in chunks, and each chunk has a cutover plan."
Hood says that if the customer is switching from an existing TMS, it often makes sense for the new and old systems to run in parallel for a few weeks.
What it comes down to, then, is careful planning, selection of a system that meets well-defined requirements, appropriate training and preparation, and a measured rollout. But what might be most important is to ensure that everyone affected by the system—from executive management through sales and marketing, to transportation planners, to those on the dock—is on board and committed to making it all work.