Transportation Management System Software Cost vs. Benefit AnalysisWritten by Neal Willis
Even though largely manageable, freight costs are typically one of the top three cost centers for most businesses. Organizations with multiple geographic locations can find it especially difficult to effectively manage freight costs, and they’ll often turn to transportation management system software for help controlling inbound and outbound supply chain costs.
Not only can this software help optimize inbound and outbound shipment routing and rating, but it can also assist with controlling and managing other business unit functions including order management, inventory management and customer relationship management.
However, simply employing a software solution won't magically correct all of your supply chain problems or eliminate process inefficiencies. Some of the benefits of using this type of software include better and more accurate freight data along with both administrative and shipment level cost savings, and some of the drawbacks include the costs and time of implementation.
No matter the process or product, change is often tough. Transportation management system software can be costly and time-consuming to implement and maintain, especially for larger companies with different locations.
When locations operate independently of one another and are left with a certain level of autonomy, they often grow accustomed to doing things their own way. They can become reluctant and even resistant to change.
With numerous locations throughout your supply chain utilizing multiple different software and systems, compatibility can sometimes be problematic. Purchasing all the tools necessary to achieve system compatibility and successful deployment of your transportation management system software can get rather expensive. Purchasing and installing the hardware and software not only takes time, but training people on how to use the new systems and software also takes time and can get cumbersome.
Even after the initial costs are incurred, there are ongoing maintenance costs associated with both the software and hardware, and human resources are also needed to help with the actual updates and upgrades. Employing a transportation management system software also requires an adequate network infrastructure and a certain amount of allocated bandwidth to run efficiently and effectively. A natural disaster, security breach or an equipment failure/malfunction can disrupt operations and cause downtime and, especially for eCommerce companies, downtime means lost business.
You’ll likely want to invest in backup and disaster recovery plans and equipment to help minimize the risks of any potential downtime. Depending upon the location and nature of the information you’re storing and using within your transportation management system software, data security can also be a valid concern.
From inbound and outbound freight operations to order management, inventory management and relationship management processes, transportation management system software can be linked to multiple areas of your organization to lower costs and bring added value throughout your supply chain. When pushed and pulled in a bunch of different directions at the same time across the organization, information can become inconsistent and is more prone to be inaccurate.
People tend to make faster decisions when there are fewer choices involved. As it becomes the primary source of information, transportation management system software facilitates a controlled environment for accessing freight data, which allows for optimum turnaround time of data and information requests whether internal or external. By centralizing data to one location with transportation management software, informational flow is controlled, and the meaning and timing of messages become consistent. Consistency paves the way for precision, which translates to more accurate and up-to-date data for more knowledgeable and informed decisions.
Transportation management system software also allows for processes to be more uniform across multiple locations of the organization, which results in more reliable and accurate information that’s processed faster and more efficiently. When expectations are clearly conveyed and information for everything from inbound and outbound freight to order management, inventory management and relationship management is flowing through one centralized source, and it’s easier for all parties involved to be on the same page.
Whether through APIs, EDI, XML or similar technology, transportation management system software can link back-office systems with carriers and rates to help automate shipment routing and rating functions for inbound and outbound freight. Automated tools like shipment tracking links can be utilized through transportation management software to provide customers with shipment notifications and proactive tracking information for orders from dock to door, which means fewer inbound calls to customer service regarding shipment status and tracking.
Whether it’s within an eCommerce shopping cart or at the warehouse dock, optimizing inbound and outbound freight routings with transportation management system software can lower freight costs and provide more service options for deliveries. Order management and inventory management can be used in conjunction with transportation management system software to enhance customer relationship management and improve the customer experience throughout the entire supply chain.
Before purchasing and employing a transportation management system software solution, it’s a good idea to first determine what you’re trying to accomplish and make sure you’re addressing your needs, rather than simply throwing out a solution to something that may not even be a problem. Dig deep and ask specific questions about your inbound and outbound supply chain, order management, inventory management and relationship management processes and procedures. What problem(s) are you trying to solve and/or avoid? What are the specific steps throughout the entire process and at what point in the process are the problems arising?
After a thorough review of the facts and answers to your questions, you may find that your supply chain problems are a result of inefficiencies in another area. Perhaps a few minor adjustments to order management or inventory management practices are all that’s needed to improve customer relationship management efforts.
From inbound and outbound freight operations to order management, inventory management and relationship management, transportation management system software can be linked to multiple areas of your organization to add value. It can automate numerous processes and provide both administrative and hard dollar cost savings throughout the supply chain. However, depending upon the size and budget of your organization, among other factors, a transportation management system software may not be the right solution for your situation.