Over the years, I’ve heard many excuses from companies as to why they aren’t using a transportation management system (TMS), such as:
- “We don’t need a TMS.”
- “We had a TMS, but the system didn’t work well, so we stopped using it.”
- “We’re at the bottom of the priority list when it comes to getting IT funding.”
- “A TMS is too expensive and difficult to deploy.”
Most of these excuses, however, are no longer valid or justified. For example, although affordability was a real issue a decade ago, with some TMS solutions costing $1 million or more in license fees and implementation costs, the emergence of software-as-a-service (SaaS) solutions has significantly reduced the upfront costs to acquire a TMS, and has made the implementation process quicker and easier too.
Yet, many companies still manage their transportation operations with spreadsheets and fax machines.
Why?
In last week’s Talking Logistics episode, I asked Nicholas Carretta, president of UltraShipTMS (a Talking Logistics sponsor), what he viewed as the biggest barrier to implementing a TMS today. Here’s an excerpt of what he said:
The biggest barrier that I see is getting the internal alignment around a project like this. A TMS project requires not just a transportation manager to want this software, but he also has to convince the other stakeholders within the organization, such as the CFO, the president, maybe the people in purchasing or procurement, the distribution people. So, there are a lot of stakeholders, and increasingly what I see [as the challenge] is getting the organizational alignment. From past experience, [transportation executives] know what the benefits [of a TMS] are, they know it helps to control costs, they know that…there are efficiencies that are gained through the day-to-day-operation of a TMS. So for them, the biggest challenge is choosing the right solution, a solution that’s going to deliver value to the organization, and then getting the support from the other stakeholders within the organization to move the project forward.
How does a transportation executive get that buy-in and support?
In order to do that, they need to be able to measure the ROI and present a clear case for delivering that ROI with a solution like this. Quite often what I see is a shipper…that isn’t able to clearly make a business case for a TMS, mostly because a lot of the different product literature out there…make claims or assumptions that you can attain a certain amount of savings, but to truly find [those] savings within their network, [shippers need] to map out a clear business plan that’s going to show you what your payback horizon for a software investment like this is, what’s your total cost of ownership…and how do you ultimately make [the TMS solution] pay for itself.
Nicholas underscored one of my five New Year’s resolutions for supply chain and logistics executives: Learn to speak the language of the CFO. Whether it’s a transportation management system or any other enterprise software application, you have to equate the value proposition to metrics the CFO understands and cares about, such as working capital, cash flow, and other items linked to the company’s P&L and balance sheet.
Nicholas also discussed another barrier that often gets overlooked: many shippers lack the right people — “power users” — to unlock the value of a TMS. Watch the short clip below for his comments on this topic.
Here’s a snippet of what he said:
I’ve run into that firsthand in a couple of situations where I’m dealing with a transportation executive at either the VP level or director level and one of the things they tell me is, “I’m ready to do it, I’m ready to move forward [with the TMS implementation], I just have to backfill a couple of positions within the organization so I have the right people to do this implementation.”
And that becomes a challenge in itself because, quite honestly, when somebody comes into an organization and is new, they don’t have the experience with the network or the shipping patterns, and there’s a lot of risk there as well.
I encourage you to watch the rest of my conversation with Nicholas, where he also discusses how companies that already have a TMS can continue to get value from the solution. After you watch, post a comment or question and keep the conversation going!
