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One of the biggest areas for efficiency gains and cost reductions within the supply chain revolves around the freight and transportation of products. Many firms are beginning to investigate the implementation of transportation management systems (TMS) to augment their other supply chain applications. They also realize that performing a detailed logistic operations analysis gives them the best chance of realizing gains in productivity and cost reductions teamed with TMS implementations.
Software applications are never the be-all and end-all to these gains, as the realignment of work processes must support any software implementation. When both the operational best practices and state-of-the-art software applications are implemented together, organizations quickly realize their goals.
The overall TMS market has seen a myriad of developments over the last few years. Numerous software organizations have identified potential takeover opportunities as well as strategic alliances.
Organizations looking to implement TMS applications have various choices they can make. Three of the most common are:
Purchased software: There are numerous software applications available for purchase specifically focused on the transportation initiative. These purchased packages enable firms to configure and run the software on their own terms and make changes where necessary. They can be run centralized or decentralized depending on the corporate mandate. They tend to be a little more expensive and time-consuming to implement; however, implementation timeframes can be streamlined depending upon configuration. Companies going this route will have hardware expense and a certain level of systems interface time to contend with.
Outsource/3PL: A strong alternative to purchasing TMS applications is to turn over the transportation function to a company focusing on this market as their business. These can be third-party logistics (3PL) providers or even TMS software organizations that will basically make all the decisions with respect to the movement of goods for you.
This tends to be a good alternative where an organization wants to focus on its core competency. Costs for this type of implementation vary and are generally a negotiated contract arrangement. Implementation times can be greatly reduced due to the 3PL provider having expertise in implementing multiple clients over the years.
Software as a Service (SaaS): The new kid on the block with respect to TMS applications is the SaaS or hosted type implementation. Hardware costs are pretty close to nothing, as the actual provider of the application is "hosting" your software in their datacenter. This is different than outsourcing because you are still making all of the transportation decisions using the software as if it resided in your facility. You do not have the hardware maintenance and support issues to deal with, new releases of the software application are done behind the scenes, and guarantees of uptime are built into the equation. The onus of communication bandwidth does fall upon the end user, and while service is contracted, transaction fees can be pricey.
The key consideration here is ensuring the provider has a strong disaster recovery plan/backup sites. Implementations with respect to SaaS are generally much faster due to the same considerations as the 3PL.
If you have export documentation, denied third-party tracking, and AES reporting requirements specific to your business, you will need to be very diligent in your TMS assessments. While this area is becoming better focused by the solution providers, it is still an area of "partnering" for the functionality. Most TMS providers have identified a deficiency in their offerings of export-related functionality and have built alliances with providers of this reporting. In fact, some are building standard interfaces between the applications. Others tend to develop each one as a "one-off."
Be specific in your requirements when you develop your list of must-haves and identify any real or near-real time data verification with international regulation websites. Do not make the mistake of assuming the TMS provider has everything you will need just because they say they can handle international shipping.
Whatever path is chosen with respect to the implementation of TMS applications, the assessment and implementation of new business practices and work processes cannot be stressed enough. Many years back, Business Process Reengineering (BPR) was all the rage in standard business processes. It's funny how the more things change, the more they stay the same.
If you were to take any application and neglect due diligence on your process flow to implement best practices you would be no better off than when you started. The good thing is most TMS applications today have a level of best practices built into them to jump start the process. An overall assessment of the entire transportation staffing and day-to-day operations is needed to really gain the benefits. The goal is to manage only the exceptions, as the application will handle the standard processes which consume most organizations today.
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