TMS for SMB: Breaking Down the Barriers

It’s 2015 and I doubt many small businesses are running their accounting without some kind of accounting software, or are having their sales reps work out in the field without some type of customer relationship management (CRM) system, even if it’s a really lightweight one…Freight is usually off the radar for small business owners and leaders, but they need to think about freight shipping in the same way. [Just like] you wouldn’t run accounting without accounting software, you shouldn’t run your freight shipping operations without freight shipping software.

Jason Roberts, Managing Director at Freightview, shared those words of advice in a recent episode of Talking Logistics where we discussed transportation management system (TMS) innovations for small to mid-sized shippers. Before we talked about TMS, I asked Jason to define “small and mid-sized shippers” because it’s a term that means different things to different people. Here’s how Jason defines that market segment:

For me, a small shipper is someone who typically ships, on average, between 5 and 25 freight shipments per day. If you’re only shipping 1-2 shipments per day, then you’re more of a micro-shipper; you can probably take care of all your freight planning for the day before your first cup of coffee gets cold, and it’s questionable whether you need much technology to help you out. When you get to about 5 shipments per day, that’s when it starts to become a burden on your day.

These small to mid-sized shippers typically use six asset-based carriers and one 3PL.

Jason also made the point that many larger shippers with millions of dollars in freight spend actually operate like small shippers. “A lot of these mid-range shippers have grown through acquisitions or by expanding their branch offices or opening new warehouses, so even though they have a lot more volume [in aggregate] than 25 shipments per day, it’s still individual locations or business units doing 5-25 shipments per day.”

How are the transportation operations and needs of SMB shippers different than those of large shippers? Jason provided some interesting perspectives, including:

  • SMB shippers tend to be more single moded — that is, they ship almost exclusively via one mode, either less-than-truckload (LTL) or truckload.
  • They pay attention to the balance of price, service, and transit on a shipment-by-shipment basis. In other words, they’re much more micro-focused on individual shipments, making sure they get to the customer on time at a reasonable cost.
  • The people responsible for shipping have multiple responsibilities. While at large companies you might expect to see a VP of Logistics or Director of Transportation, at many of these smaller companies, the people managing freight are the warehouse manager, operations manager, receptionist, accounting manager, or customer service lead — “not the dedicated transportation professionals who attend the CSCMP conference, but people who started managing freight as a tiny little part of their day job and then it’s grown and grown to be a larger part of their job, but they still have other stuff they’re trying to get done.”
  • Small business owners and leaders often don’t know what’s going on with freight and don’t see it as a competitive advantage.
  • Optimization or freight consolidation capabilities are not a priority or needed.

Shifting the conversation toward technology, I asked Jason why small and mid-sized shippers have been slow to implement transportation management systems?

“At a high level, a TMS has been too expensive and difficult to implement,” Jason explains. “The cost, whether it’s a monthly fee or license charges, is just overwhelming to their budget, and the effort to go through a multi-month project to implement a TMS is more than they can handle because they might not have the skill sets, such as project managers and full-time IT people, who can do these projects.”

The good news is that TMS solutions have evolved in recent years to better meet the needs of the SMB market and overcome some of these barriers to implementation. In the video, Jason highlights some of these advancements, including providing more targeted feature sets (i.e., eliminating features that aren’t needed or wanted), developing more intuitive and easy-to-use user interfaces, and cloud deployment with affordable and transparent pricing.

One of the biggest advances is the growing use of APIs. As Jason explains:

Where before you had to load rates and then simulate them, and you had to set up EDI, more and more carriers today are exposing functionality from their core systems via APIs or web services that other systems can consume. So while in the past a TMS would have had to implement a rating engine and try to get it to work close to how each carrier’s rating engine works, now the LTL carriers, and increasingly truckload carriers, expose their own rating engines that a TMS can connect directly to and pull that authoritative copy of the rates. And you can also use APIs to schedule pickups, generate bills of lading, grab PRO numbers, and get tracking info — all of these things can be handled through machine-to-machine communication in real time.

EDI is like mailing a postcard to somebody and hoping they get it. APIs are more like having a real live phone call with somebody. This changes the economics not only of what’s involved in building a TMS, but it also allows for much quicker setups — from weeks and months down to hours or even minutes.

I encourage you to watch the rest of my conversation with Jason for additional insights on this topic, including how the business case for a TMS is different for SMB companies compared to large shippers. Then post a comment and share your perspective!

For related commentary, see “TMS in the SMB Market: The Evolution Toward Software-as-a-Self-Service