TMS: Time to Make Your Move?
Featured in Inbound Logistics, May 2016 by Merrill Douglas
Thanks to recent advances in technology, transport management systems (TMS) promise to deliver more bang for the transportation buck to more shippers. Vendors keep adding features and functions, and offering easier and more economical ways to implement TMS solutions.
Most Tier 1 shippers—those that spend $100 million or more annually on freight—already use TMS solutions. But smaller companies find it hard to justify the expense of implementation.
“TMS solutions have an approximately 15-percent market penetration into Tier 2 companies,” says David Landau, executive vice president at Cloud Logistics, a TMS vendor based in West Palm Beach, Fla. The smallest firms—those that spend $5 million to $10 million annually on freight—rely mainly on manual methods and spreadsheets to manage transportation, he adds.
That is starting to change, though, as the cloud and other technologies reduce the cost and labor attached to TMS solutions.
“Small, mid-segment shippers and logistics companies that did not even consider deploying a TMS in the past are now increasing adoption,” says Vikram Balasubramanian, senior vice president of strategic product development at MercuryGate International, a TMS supplier based in Cary, N.C. “The market is growing purely because technology is becoming more affordable.”
A TMS can take many forms. It might be a standalone product, or a component of a broader supply chain management or enterprise resource planning suite. Simply put, a TMS is technology for managing the part of the supply chain that puts commodities in motion.
“A TMS helps companies efficiently, reliably, and cost effectively move freight from origin to destination,” says Chris Cunnane, a senior analyst at ARC Advisory Group in Dedham, Mass.
ARC divides the TMS market into two solution types. “Planning and execution systems are for freight moves involving carriers; fleet management solutions are for freight moves involving transportation assets the company owns,” Cunnane says.
Some packages combine both types. MercuryGate, for example, recently added fleet management to its TMS. “Shippers can manage a private fleet, execute transportation, and procure freight from common carriers, all on a single platform,” explains Balasubramanian.
FEATURES AND FUNCTIONS
The functions included in a TMS vary from one product to the next, but systems often include the following:
- Procurement. Conducts bidding events and manages contracts with carriers.
- Planning and optimization. Chooses the most efficient modes and routes, and finds opportunities to implement efficient strategies such as load consolidation.
- Execution. Conducts day-to-day shipping activities, such as matching loads with appropriate carriers, tendering and dispatching loads, generating shipping documents, exchanging information with carriers, and monitoring freight progress.
- Freight bill auditing and settlement. Manages the financial aspects of a freight transaction.
- Reporting and analytics. Analyzes carrier performance, internal performance, and transportation costs.
Solutions that ARC classifies as fleet management may also include functions such as GPS tracking and transportation asset management.
The TMS market is broad, deep, and continually evolving. Here’s a look at some of the latest developments.
A WALK IN THE CLOUD
In the old days, if you wanted to implement a TMS, you licensed the software and installed it on servers within your own walls. Today, TMS—like so many other kinds of software—is increasingly moving to the cloud.
Vendors tout the fact that cloud computing—also called Software-as-a-Service (SaaS)—eliminates the labor and upfront investment that traditional software implementations require. The TMS vendor hosts the software or maintains it on infrastructure owned by a company such as Amazon or Salesforce.com, and provides it to the user by subscription.
“The use of the cloud has improved the economies of scale, so companies get a faster return on investment,” says Balasubramanian. That’s part of the reason more companies are adopting TMS solutions, he adds.
“As companies realize they need some kind of automation to manage transportation, they are creating a lot of pent-up demand,” says Landau. Freight transportation is complex, and managing it manually is simply not effective.
Some suppliers of cloud-based solutions—including Cloud Logistics—promise not only to lower the cost of using a TMS, but also to get the technology up and running in record time. “We implement our system in four to 12 weeks, rather than four to 12 months—and sometimes faster,” Landau says.
That “sometimes faster” refers to a product Cloud Logistics introduced in 2015, calledSame Day TMS. It’s aimed at small companies that don’t have resources to support a lengthy implementation and can’t justify a large software investment.
“We’ve come up with a way to deploy our system, along with some of the technology behind it, in one day,” Landau says. The secret lies in the fact that Same Day TMS doesn’t require much integration with other software that shippers use, although Cloud Logistics can provide such integration for more sophisticated companies.
“This system’s user interface is designed for companies that don’t handle a lot of volume and don’t have help from their IT departments,” Landau says. Such companies work with just a few carriers, which use a web portal to interact with the TMS.
“Shippers simply key in their orders, and it takes one to two minutes to create an order in the system,” he adds.
Another TMS vendor that promises speedy implementation in the cloud for smaller companies is Kuebix, based in Maynard, Mass.
Kuebix offers two transportation management system TMS products: Kuebix Enterprise TMS, a customized solution designed for multi-billion-dollar corporations with specific freight optimization needs, and Kuebix Small Business, a standardized system that a smaller enterprise can get up and running in about 10 minutes.
“First, shippers log on and sign up for a free trial,” explains Dan Clark, president of Kuebix. “If they like it, they swipe a credit card.” The online interface offers a variety of how-to videos to help new users with every application in the system.
“Within 10 minutes, they are up and running with a full transportation management system,” he adds.
Among the smaller firms that have migrated to a TMS in recent years is Badcock Corporation, a furniture chain that also sells mattresses, electronics, appliances, and seasonal items. Based in Mulberry, Fla., Badcock uses the Cloud Logistics TMS solution.
Badcock and its franchisees operate 325 Badcock Home Furniture & More stores in eight southeastern states. The company sources product from suppliers in the United States and Asia, and moves it to the stores through three U.S. distribution centers (DCs).
Badcock uses common carriers for inbound freight and a private fleet to deliver product from the DCs to the stores and to customers’ homes.
A MODEL OF INEFFICIENCY
Until recently, Badcock used mainly manual processes to manage transportation. “We had a traffic manager,” says Greg Brinkman, the company’s senior vice president of supply chain. “Two traffic people who worked on our private fleet would back him up, and make decisions on inbound freight.
“We managed through spreadsheets,” he adds. “When suppliers called, we manually looked up which carriers they were supposed to use.”
That process bred inefficiencies. “Trying to keep up with all the phone calls would delay shipments,” Brinkman says. The company tried adding extra workers during busy times, but it’s hard to employ the necessary talent on a temporary basis.
Manual processes also made it hard to optimize loads. “When employees got busy, they would route freight to whomever they happened to be talking to that day, rather than to the lowest-cost carrier,” Brinkman says. “The wrong trucking companies were getting our business.”
Today, the Cloud Logistics TMS helps Badcock’s traffic department make more cost-effective matches between carriers and loads. Also, the system generates reports that provide better insights into carrier relationships. “We know how much freight each trucker is getting,” Brinkman says. “We also know how they performed and if any shipments were delayed.”
Brinkman says he hopes that, in the future, Cloud Logistics will tie Badcock’s overseas suppliers and international carriers into the system, along with domestic trading partners. The goal is to learn about potential production delays as soon as possible, so the company can adjust its transportation and marketing plans.
“The more visibility we can have into production, the better,” Brinkman says. “Also, when we can decrease lead times, we save money on safety stock, which goes right to the bottom line.”
ONE PLATFORM, MANY TENANTS
Besides reducing the cost of ownership, speeding ROI, and cutting implementation time, the cloud provides a platform for a more social version of transportation management. When a vendor provides a single-tenant solution—implementing its solution once, and then connecting customers, carriers, and suppliers to that solution—it can direct data among hundreds, or thousands, of supply chain participants.
A multi-tenant solution reduces the time needed to set up data links between shippers and their service providers. That’s the case with Chelmsford, Mass.-based Kewill’s MOVE TMS, a system whose roots go back about 17 years to a company called Nistevo.
“Over the years, we’ve built a large carrier network,” explains Walt Heil, vice president, multimodal transportation solutions at Kewill. “Once we establish our standard EDI [electronic data interchange] or XML [extensible markup language] data flow with a carrier, our customers can leverage that communication. It’s a simple certification for the customer to use that carrier.”
Some shippers want to exchange more data points with their carriers than others. “Levers in the system can turn those data flows on or off for certain companies,” Heil says.
A multi-tenant TMS also helps with another challenge that many shippers face today: a desire to gain a global view of their transportation.
“Most companies, in just about every industry, have a global footprint,” Heil says. But often, a global company uses different TMS solutions to manage transportation in different regions. “Multiple platforms multiply risk and increase cost,” he says. Also, shippers often prefer to deal with just one IT vendor for their TMS, rather than several.
In the past, a company that wanted to develop a global TMS had to conduct a large, expensive project with an ERP vendor. Only the largest companies could afford that. Today, with multi-tenant cloud solutions, much smaller companies can implement TMS in all their markets, in a reasonable length of time, at a reasonable cost. “A shipper can have a global strategy around one platform,” Heil says.
LIKING THE ‘FACEBOOK EFFECT’
Shippers using MercuryGate’s TMS can choose between a multi-tenant and a single-tenant cloud. In either case, shippers benefit from the large number of carriers doing business on the network.
“It’s the Facebook effect,” explains Balasubramanian. “Shippers still have an onboarding process because they need to ensure that carriers comply with their EDI and other standards, but these carriers are already integrated as part of the system.”
As Balasubramanian draws comparisons to Facebook, Landau points to another popular social network to explain the logistics activity stream on the Cloud Logistics multi-tenant cloud. “Think of it as a Twitter feed for your transportation network,” he says. The activity stream provides updates on every event in the life of a shipment.
“It also allows real-time instant messaging dialog with participants in the network,” Balasubramanian adds. This kind of collaborative activity is possible because of the way the cloud-based system links all trading partners.
Some vendors—including Philadelphia-based Elemica—call this kind of collaborative platform a supply chain operating network (SCON). Elemica designed its SCON for chemical companies and other process manufacturers. The SCON’s TMS functions reside within a portion of the product called the Logistics Management Suite.
“The supply chain operating network has three functional layers: B2B integration, process automation and collaboration, and visibility and analytics,” says Cindi Hane, Elemica’s director of logistics operations. But the value of that network, she adds, also lies in the participating community of trading partners.
One benefit arising from this community is better visibility into the status of freight. “Visibility has been a hot topic for our customers,” says Hane. “I hear comments like, ‘Why is my customer the first one to tell me when my shipment is late?'”
Good visibility relies on high-quality data, she notes. When a SCON serves as a hub, the TMS vendor can make sure that the data loses nothing in translation as it moves among partners.
“First, is the data available?” Hane asks. “Next, are you getting it in a usable way?” Consider what happens, for example, when two partners express the same information in different formats. “If my partner passes a ZIP code as a numeric field, the system might drop any leading zeroes,” she says. “We can fix that format in our network, and make sure that, when it gets through, it’s a properly formatted ZIP code.”
HAVE IT YOUR WAY
For some shippers, the key to TMS happiness is the ability to implement only the functions they need and leave the rest on the table. Agropur Ingredients, a food ingredients producer based in La Crosse, Wis., uses that strategy. In 2015, it implemented select modules of the Transporeon TMS to help manage truckload transportation.
The logistics team at the La Crosse facility used to rely on paper documents, email, and phone calls to manage transportation, recalls Sean Smith, supply chain director at Agropur. “This wasn’t efficient for the volume of freight we were starting to handle—both our own inbound and our customers’ freight,” he says. Without a TMS, Smith would have needed a larger staff.
Agropur uses the Transporeon TMS, from Transporeon Group Americas in Fort Washington, Pa., to conduct transportation procurements, bid out spot freight, and dispatch loads. “My logistics coordinators say, ‘I need a truck on this date, going from here to there,'” Smith says. By checking a routing guide, the system offers the freight to the most appropriate carrier for that lane. If that carrier declines, the system moves on to the number-two carrier, then farther down the list if needed.
Agropur uses Transporeon’s reporting features mainly to analyze costs—for example, to distinguish a fuel surcharge from a base rate. But because the company doesn’t have problems with late arrivals or dock scheduling, it chose not to implement performance reporting.
It also took a pass on visibility features. “We don’t have much of a problem with shipments disappearing or arriving late,” Smith says.
Agropur chose the cloud-based Transporeon TMS because it’s easy to use, and because the software vendor charges a monthly fee, based on transaction volume. “There was no way my company was going to give me $200,000 outright to buy a full TMS,” Smith notes.
With a pay-as-you-go model, the TMS adds just a small extra cost to each shipment. “If you spend $1,000 for a shipment, then what’s $1,001?” he asks. “It’s worth it if you don’t have to hire another person.”
In keeping with its pick-and-choose strategy, Agropur turned to an entirely different TMS, from Indianapolis-based Spot Freight, to manage its less-than-truckload (LTL) transportation and rates. It started using that solution in April 2016.
Truckload and LTL shipments have different requirements and are usually handled by different carriers. “We decided to keep them in two different systems,” Smith says.
Given the impact of mobile technology in general, it’s no surprise that the TMS world is also feeling pressure to put business functions in the palm of the user’s hand.
That’s particularly true as more millennials enter the workforce. “Millennials don’t use desktop computers, and they don’t use laptops,” says Heil. “The era of the big office of cubicles with PCs for people who are running freight departments is coming to an end.” With transportation apps on tablets and smartphones, people can work remotely, or they can manage and monitor shipments while walking the warehouse floor.
When Kewill first started offering mobile applications—for use by carriers—in 2008, carriers weren’t interested. “At the time, nobody had a smartphone,” Heil says. But a lot has changed since then. Kewill now offers mobile apps for use by carriers and shippers, and is developing some for use by suppliers.
At Kuebix, making applications compatible with mobile devices used to be tough, but new technology has eliminated that problem. Now, every system the company develops will run on a mobile device.
“If you don’t have a solution that’s mobile compatible, you probably don’t have the right solution,” Clark says. Mobile platforms give shippers tremendous flexibility. “You could be having a martini in Tahiti, and process everything that the system does by working on your tablet or smartphone,” he says.
Elemica recently introduced its first mobile app, the Elemica Track solution for shipment visibility. The new function is designed not only for logistics staff, but also for customer service and sales reps. “The solution provides access to customer shipment activities in an easy, straightforward way,” Hane says.
Another trend that has changed the face of TMS is the arrival of web services. These services involve the use of application programming interfaces (APIs) to transfer data among IT systems. Among other benefits, web services improve the way a TMS solution maintains a shipper’s database of LTL carrier rates.
“In the past, shippers would get a tariff [a schedule of rates] from the carrier,” Clark says. “They would get a base rate, a negotiated discount, and different state-specific discounts. They’d have minimums, maximums, and fuel surcharges, among other parameters.” Shippers would upload the tariff into their information systems. Then, every time the tariff changed, they would have to upload a new version.
“Today, carriers are exposing an API,” Clark says. Companies such as Kuebix use the API to set up an interface with each carrier. Then, any time shippers log in, they receive current rates in real time, directly from the carrier.
“It minimizes the work shippers previously had to do to update those tariffs,” Clark says. “Web services also allow carriers and shippers to exchange other data—such as tracking information, pickup appointments, proofs of delivery, and invoices—in real time through the TMS.”
These features, and many new ones, will continue to move small companies toward embracing the benefits of TMS.
Read the original article from Inbound Logistics here: http://bit.ly/1Xz7OZq