Buying Your Own TMS System vs. Using A Freight Management CompanyWritten by Paul Forand
It's no secret that many companies today need to get their freight expenditures under control, for the sake of their bottom line as well as retaining customers. Those who can improve and optimize their shipping processes will save money directly while being able to provide better service to their customers. It's a win-win proposition in the long term.
The issue, of course, is the short-term: How do you get a handle on your freight, and how do you best update your processes? This can require significant expenditures depending on how you approach it. The key is looking for the best ROI for your budget.
Many companies either purchase their own Transportation Management System, or employ the services of a Third-Party Logistics firm. Let's take a look...
Questions To Ask Before Purchasing Your Own TMS
1 - Do you have sufficient internal IT staff?
This may be the single largest consideration. Even the most customer-friendly TMS packages can require substantial modification and ongoing service/maintenance. You may even need to hire a programmer for custom work. This will require a dedicated IT staff to manage effectively, and the more extensive the TMS implementation, the more staff and time you will need devoted to supporting it.
2 - Do you have someone to serve as Transportation Manager?
Even though a TMS is largely a software/networking project, it needs a "big picture" manager who can look beyond the data to the actual results. This person, in fact, should be chosen largely for their people skills. They'll be your first point of contact between yourselves, your shippers, and your clients on any transportation matters.
Handing off these duties to someone in IT is rarely a good idea. Ideally, it should be someone who already has existing contacts in the freight industry they can leverage to bring better rates.
3 - What is your budget?
Realistically, the absolute minimum it could cost to implement your own TMS is in the thousands of dollars. A five-figure spend is far more likely, especially considering the hardware and manpower required. There will also be the ongoing costs needed to support the system, and recurring costs like software licenses.
Plus, of course, the older your network is, the more likely it would require an upgrade as well. Anything older than 2007 may need an upgrade.
Owning your own TMS will ultimately give you more personal control and power over your shipping systems, but it requires a significantly higher up-front investment than is needed for a freight management company.
4 - How fast do you need it?
A DIY implementation of transportation management software is time-consuming, especially if it's your first attempt. If you're content using off-the-shelf software with limited customization (and functionality), 30-60 days to implement is standard. For a full suite of customized tools and network-wide integration, it will be more on the order of six months, including testing time.
The Alternative: Hiring a 3PL
Hiring a third-party logistics firm to help with your transportation management is typically less expensive, faster to implement, and more reliable. A 3PL with experience in software integration can help upgrade your systems with actual experts, and they'll know the ins-and-outs of effective system transitions.
Further, a 3PL also brings industry contacts. They can create direct cost-savings by leveraging better buy rates than a single company could get on their own. In the meantime, you get a single point of contact for all of your freight related matters, no matter how complicated.
Want to learn more about the benefits from using a 3PL? Contact ReTrans Freight today for a free savings analysis!
image credit 1: http://en.wikipedia.org/wiki/Logistics