Is SaaS and TMS a Good Mix?
You’ve read about Software as a Service (SaaS) technology and want to explore the possibility of using a transportation management system (TMS) as part of a SaaS model. Is this a good option for your organization?
The answer is…it depends.
A number of shippers have approached us with this type of question, and some have gone on to adopt SaaS-based TMS solutions.
Cost has obviously been an important factor for these shippers, and another central issue has been control.
Shippers that are interested in SaaS-based TMS solutions often want to maintain a high level of tactical control over their freight management systems. The SaaS model facilitates this because the service provider hosts the application, and the shipper chooses which tasks they want to carry out. For instance, they might prefer to tender their own freight rather than leaving this to the provider.
Of course the company must possess the required in-house resources to take full advantage of such an arrangement. That includes a logistics team capable of managing the day-to-day flow of freight transactions.
Even if a shipper chooses to have these resources and to exercise a lot of control over their tactical decisions, TMS power users can still be part of the service package. These outside experts provide analytical capabilities and support the shipper’s freight operations in key areas such as continuous improvement.
A less obvious advantage of combining SaaS and TMS technologies is that the hybrid service can enhance the logistics department’s credibility. The client team is outsourcing carefully selected portions of the company’s freight management needs, while retaining hands-on control over operations.
The challenge is deciding whether you can handle the additional tactical burden, and finding the right balance between costs, control, and supply chain efficiency.
Shippers with fragmented supply chains and many process variations are generally not good candidates for this kind of TMS solution. The complexity of their operations can erode the benefits of the technology.
For example, critical to the success of SaaS-driven TMS suites is being crystal clear about who has responsibility for specific tasks such as settling freight payments. This level of clarity is achieved during the sales cycle, and specified in the service contract. But it is difficult to allocate responsibilities in this way—and to adhere to the details on a day-to-day basis—if the client company is made up of many disparate management centers that follow their own practices.
Take, for example, an organization where the corporate procurement function buys truckload transportation, and follows the route guide developed in collaboration with the TMS solution provider. Corporate has a firm handle on the costs involved, including the savings they achieve by using the route guide. However, the company’s satellite facilities tender their own freight, don’t take advantage of the core route guide, and hence fail to realize the associated savings.
The picture can become even more complicated where international freight networks are involved, and the shipper’s offices are scattered across multiple countries.
When considering the SaaS option, shippers should think about what level of tactical control they require, how much of the strategic work they wish to take on, and to what extent they are looking to rely on the provider’s analytical and continuous improvement expertise.
The growth of SaaS services represents a major step forward in information technology, and can enhance TMS performance. But you have to be certain of what you want from the technology before tying it to a TMS solution.