In these tough economic times, companies everywhere are focusing on controlling or eliminating costs as a means of achieving a better bottom line. One of the areas that many companies are looking at is the purchase of a new transportation management system. Companies realize that purchasing a good TMS allows them to be more productive with fewer people. It helps them eliminate billing issues, which results in a higher level of cash flow. Finally, their customers are demanding more services be performed by the third party with increased sharing of information in an effort to become more productive on their end while controlling head count.
In a recent survey of transportation industry professionals, 70 percent of respondents said in 2012 they would increase their investments in IT with 53 percent of money allocated to researching and implementing transportation management systems. But how many of those professionals have mapped out how their technology investments will not only address current critical needs, but also maintain productivity in the future?
Many companies jump into investing in new technology without first understanding how that technology will fit into their current needs and end up having to retrofit that technology into their business plan. Executives need to ask the question: does technology build the business or do business needs build the technology?
Before investing in a TMS, it is important to map out the important aspects of business operations that should be enhanced by the new technology. This includes operations, accounting and claims needs.
When choosing a TMS, it is essential to base that decision on preferred methods of transportation. All transportation modes require some of the same information such as shipper, consignee and bill-to parties. However, each mode also requires unique information specific to that method. The TMS should be able to be modified to fully support any mode of transportation.
For example, many 3PLs offer multiple modes of transportation, so they must focus on acquiring a TMS that easily moves freight in all of the modes they currently utilize. Each mode requires different data elements that 3PLs need to track and communicate with all parties for a successful engagement.
4PLs have the ability to operate as a conventional 3PL, but often offer enhanced services along with the services offered by the 3PL. Functions such as reverse logistics, order optimization, bid and capacity procurement and information dissemination are some of the additional offerings a 4PL should take into consideration when making their purchase decision.
When investing in a TMS, the largest area to gain ROI is in operations. Before engaging in a search for a new TMS, meet with current operations staff and document their requirements. Look for processes where efforts are duplicated on a daily basis and where, if these processes were electronic, the operations staff could utilize their time on other tasks that require manual intervention.
For example, a shipper who ships directly to retailers in LTL-type order quantity would consider the ability for order consolidation into multi-stop FTL shipments a key function of a TMS. Making this process electronic significantly impacts their efficiency.
On the other hand, a 3PL with standardized freight would benefit from a TMS that automatically chooses the lowest cost or best service carrier and tenders the shipments directly without any manual intervention. This automation would allow them to move more freight without having to add more staff, resulting in significant cost efficiencies.
When deciding on a TMS, it is also important to understand which services need optimization for efficiency and productivity. Some customers prefer to plan and schedule their shipments on their own. If this is the case, consider a TMS with an easy-to-use end-customer experience that connects the business with the customer. Consider the ability to interact with all constituents as a base line of a good TMS.
As part of this process, it is important to consider making electronic data interchange an integral part of the communication efforts based on the methods by which constituents prefer to communicate, and ensure that the system supports those capabilities. These benefits enable them to easily post their scheduled shipments while also allowing the company to easily source their shipping needs.
Furthermore, address communications down to the lowest level of sophistication, such as a driver making a phone call from the truck stop regarding arrival time. By allowing for this level of sophistication up to the highest levels, it is possible to increase productivity and efficiency for carriers, brokers and customers. Also, computerizing overall communications efforts allows operators more time to deal with exceptions.
When considering the fine details of how a TMS can affect operations, it is equally important to consider the level of interaction the operations staff requires for order processing. Most transportation companies would agree that the ability to quickly enter orders both electronically and manually is critical. The faster orders are processed, the more efficient the system. Evaluate a potential TMS based on how quickly it will allow orders to be processed.
Lastly, when it comes to carrier or broker selection and management through a TMS, it is necessary to determine the criteria needed to approve or decline the potential business partner. Look for a system that can track the insurance requirements and government data such as the status of a carrier's authority, their current safety rating or CSA BASICs scores, or a broker's bond and credit information. Make sure that the technology also allows users to enter their own approval rules as well as store data such as rates and FSC tables. The system should also be able to assist the user in sourcing shipments based on criteria and data point constraints the end consumers may place.
In terms of operations employees, one of their biggest battles for covering loads is finding low-cost, efficient transportation alternatives and capacity for their clients. Selection of a TMS not only needs to meet their demands but also those of the accounting department and the optimization of back-end functions.
At the beginning of the evaluation process, determine which manual steps in accounting can be accomplished electronically. For example, an exceptional TMS can automate the entire payables function, saving time and money for smaller transportation firms who manually receive invoices and cut checks. A system that auto-generates commission reports, calculates commissions, and produces checks provides an efficient and cost-effective way to conduct business.
While many TMS programs have built-in accounting functions, most companies choose to integrate it with their existing accounting procedures. So, when selecting a TMS, keep in mind the ability of integrating it with current accounting packages.
Accounts Receivable personnel must be able to invoice customers through a variety of means including EDI, paper invoicing, consolidated invoicing and email invoicing. A good TMS will support all modes of communication and successfully integrate with accounting programs to provide all required documents, such as Proof of Delivery.
Also, the ability for the TMS to retain required documents from carriers is very important as it directly impacts the function of generating bills. Look for a TMS that allows users to enter documentation into the system in multiple ways, such as scanning, faxing and emailing. For example, 3PLs work with carriers with varying means of documentation. Some carriers have the ability to complete all documentation online and want to work with a 3PL that accepts their documents electronically. Other carriers may still mail in their documentation, requiring the scanning of documents into the TMS.
On the accounts receivable side, it is important to show payments received to ensure the aging is accurate. An accurate aging allows for the accounts receivable personnel to focus their efforts on the exceptions, instead of the whole pie. By ensuring the TMS will include this function, the accounting department will be better equipped to quickly find and address outstanding bills.
Another back-end function to keep in mind when evaluating a TMS is claims management. By having the new TMS track claims, all operation and company information will be stored in one place, allowing personnel to more easily administer claims while determining and correcting freight and carrier problems.
The ability to monitor or track carrier or broker compliance by approval requirements is an additional advantage. With a comprehensive TMS, approval requirements can easily be established to ensure that both trucks and brokered shipments are in compliance.
In addition, any new TMS should have the ability to attach documents to a record in the company's current database, allowing employees to add contracts to a customer or carrier. The ability for a TMS to track and record documentation saves time and effort, resulting in more accurate accounting for the company and all its constituents.
The ability to quickly sift through available documentation to determine if a dispatcher is profitable, or if an account is generating revenue according to company goals, is invaluable to conducting business in the digital age. A good TMS allows for this without having to go through a lot of steps to make that determination.
As the industry continues to operate in an extremely tight economy and companies continue to purchase transportation management systems, executives need to completely understand the capabilities of the technology and how they can best support company initiatives. This includes evaluating how a new TMS can benefit direct operations in scheduling loads as well as analyzing how to streamline back-end operations in accounting, compliance, claims and record maintenance. By thoroughly understanding all back-end and operations functions, companies will be well placed to make valuable commitments that enhance their business.
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