• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • SCB YouTube
  • Login
  • Subscribe
  • Logout
  • My Profile

  • CORONAVIRUS
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Supply Chains in Crisis
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • REGIONS
    • Asia Pacific
    • Canada
    • China
    • Europe
    • Latin America
    • Middle East/Africa
    • North America
  • THINK TANK
  • WEBINARS
    • On-Demand Webinars
    • Upcoming Webinars
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Blogs » Think Tank » How Many Shippers Have a TMS? The Answer Might Surprise You

Think Tank
Think Tank RSS FeedRSS

Global Trade Management / Sourcing/Procurement/SRM / Supply Chain Finance & Revenue Management / Transportation Management / Supply Chain Planning & Optimization / Supply Chain Visibility / Technology

How Many Shippers Have a TMS? The Answer Might Surprise You

November 30, 2015
Robert J. Bowman, SupplyChainBrain

The gap is astonishing. According to recent research by the American Productivity & Quality Center (APQC), the average U.S. business spends $25.30 for each $1,000 in annual revenue on outbound transportation. Top-performing companies pay just $6.35 per $1,000, while bottom performers shell out $53 – more than twice the national average.

The cumulative impact is even more dramatic. Over a year’s time, a low-performing company with $5bn in revenues will spend $266m more on outbound transportation than a top performer of equivalent size, according to Eyefreight, a vendor of transportation-management system (TMS) software.

There are a number of ways that companies can reduce their transportation spend. They can renegotiate contracts with suppliers, find other carriers, and do a better job of maximizing their use of space on trucks. But Eyefreight chief executive officer Ken Fleming says those efforts bring relief that’s temporary at best. Freight costs are continuing to rise, he points out, pushed upward by the chronic driver shortage, unpredictable fuel-price trends, the nation’s crumbling infrastructure and stricter regulations in areas such as driver hours of service. For their part, carriers aren’t likely to agree on an endless series of rate cuts.

Shippers that are paying too much for transportation tend to be hampered by a lack of total visibility of their carrier spend. They’ll agree to a contract rate, only to be hit with high accessorial fees when they get the bill. “They need to find another way to control the spend, to make sure they’re paying for what they’re getting,” says Fleming.

High performers are simply doing a better job of measuring rates and monitoring their carriers on a regular basis. By avoiding surprises in the form of unexpected charges, they’re able to cut their transportation expense by an average of 10 percent, and as high as 30 percent, Fleming claims.

Having all relevant information up front allows shippers to address the issue of accessorials during the negotiation phase, he says. Leaders have a much better idea of which shipments were delivered on time, how often they had to resort to expedited transport, and how well the customer was served. Comes time to renew a contract, the shipper can raise those issues with the carrier.

The work involved in keeping tabs on carriers can be immense. Some companies prefer to outsource the management of their freight costs. They allow third parties to manage the bills and negotiate with carriers, much in the way that a debt-laden consumer might make arrangements with a credit-card company for repayment. The carrier might not recoup the full amount of the challenged bill, but both parties avoid a line-by-line audit and further delays in resolving the issue.

Not good enough, says Fleming. “They use brokerage firms to reduce the cost, but it doesn’t repair the problem. If you don’t have visibility, it’s never going to go away.”

A longer-term solution lies in the use of a good TMS application, but here’s the second shock: a large number of shippers don’t have one. Fleming says that approximately 85 percent of the companies to whom Eyefreight talks haven’t got a TMS of any kind. They are managing hundreds of millions in freight spend through the use of spreadsheets, manual processes and endless phone calls to the carriers.

There’s an odd disconnect at play. Larger companies were generally the first to embrace TMS software, but Fleming says the vast majority of tier-one businesses today still don’t possess them. Nowadays, it’s the smaller entities that are more likely to acquire a single TMS across their organizations, possibly because their supply chains are less complex in terms of geographic footprint. A shipper that only distributes goods throughout the U.S. by road might be more willing to buy the software, or turn the whole operation over to a third-party logistics provider.

A big global company, by contrast, might be using TMS for portions of its supply chain – say, domestic over-the-road transport – while resorting to manual efforts for ocean or air, or the movement of specialized heavy equipment. Ironically, they’re the ones who stand to benefit the most from a “control-tower” approach to managing total freight spend.

The fact that Fleming touts TMS software as the solution to managing complex freight spend is no surprise – Eyefreight sells the stuff. Nevertheless, he makes a valid observation about the tendency of many companies to persist in the use of labor-intensive manual methods for dealing with carriers. What’s more, he sees the cloud, or software as a service (SaaS), as playing an increasingly vital role in the development of TMS.

Companies expanding operations in multiple countries will find it easier to apply the software when it’s in the cloud, Fleming says. In such instances, visibility is key to keeping track of the changes that occur in overseas markets, such as new regulations and route restrictions. Supporting software must be able to constantly adjust.

The cloud is also a boon to “best-of-breed” software vendors like Eyefreight. In recent years, the big enterprise resource planning (ERP) vendors have moved into many other types of applications, especially execution-based tools such as TMS and warehouse management systems (WMS). Independent vendors have found it increasingly tough to compete with these enterprise-oriented giants.

The arrival of cloud technology might have saved the independents. Infrastructure providers such as Amazon.com and Google have made it possible for smaller vendors and their clients to launch software at a much lower cost than before. They don’t have the expense of maintaining applications on site, or the hassle of dealing with upgrades.

Eyefreight, for one, relies on the servers of Amazon. “I only have to pay for what I use, when I use it,” says Fleming. “I’m not carrying any extra overhead.”

Today, some 60 percent of Eyefreight’s costs are going directly back into research and development. That’s about the same amount the vendor would have spent on its own infrastructure in a world without the cloud.

Shippers, too, reap the advantages of lower maintenance costs. But the real benefit lies in the streamlining of processes, combined with improvements in visibility, that come with cloud-based execution applications. Maybe the technology will finally convince the laggards that a manually generated spreadsheet is no longer adequate for addressing the complexities of transportation management.

Next: New technology in the vehicle.

Comment on This Article

RELATED CONTENT

RELATED VIDEOS

Wake up to live
“Supply Chains in Crisis”
updates and the latest Supply Chain News!

Subscribe to our Daily Newsletter

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • 0620_NFT.png

    Can NFTs Be an Effective Tool for Supply Chain Visibility?

    Technology
  • The Craft Beer Boom: How to Satisfy Changing Consumer Tastes

    Shortages of Beer, Popcorn Join Supply Chain Crisis

    Global Supply Chain Management
  • FedEx

    FedEx Faces Big Changes as New Boss Confronts Higher Costs, Angry Contractors

    Last Mile Delivery
  • 0621_Burrito.png

    Chipotle Zeroes in on Supply Chain Traceability and Visibility

    Sourcing/Procurement/SRM
  • cyber crime

    The Cyber Blind Spot That Makes Every Supply Chain Vulnerable

    Regulation & Compliance

Digital Edition

Scb may 2022 sm

2022 Supply Chain ESG Guide

VIEW THE LATEST ISSUE

Case Studies

  • 3PL Doubles Productivity With Robots to Fulfill Medical Supply Orders

  • E-Commerce Company Cuts Order Fulfillment Time by 40%

  • Fashion Retailer Halves Fulfillment Time With Omichannel Automation

  • Distributor Scales Business by Integrating Warehouse Automaton Software

  • Fast-Growing Fashion Brand Scales E-Commerce Fulfillment With Whiplash

Visit Our Sponsors

Yang Ming Alithya Barcoding
Blue Yonder BNSF Logistics Generix
GEP GreyOrange Here
Honeywell Intelligrated IFM Inmar
Keelvar Kinaxis Korber
Liberty SBF Locus Robotics Logility
Lucas Systems Nvidia Old Dominion
ORTEC Parsyl QIMA
Redwood Logistics Saddle Creek Logistics Schneider Dedicated
Setlog Holding AG Ship4WD Shipwell
Tecsys TGW Systems Thomson Reuters
Tive Trailer Bridge Vecna Robotics
Verity
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • On-Demand Webinars
    • Upcoming Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright ©2022 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing