Insights for Procuring a TMS in a Large Company
Investing in a transportation management system (TMS) can be more complicated for large organizations that have to reconcile the needs of multiple business units in different geographies. The business models and associated markets can vary widely as well, for example if the company has grown through acquisitions.
Enterprises that devote enough forethought and planning to the decision can resolve these differences and turn the process into a rich learning experience.
What buying decision approach should you take: centralized or decentralized?
In my experience, the centralized buying approach wins hands down for the following reasons:
- It builds consistency and common practices. Staff turnover is less of an issue when activities are centralized because training programs tend to be more structured.
- It offers clear operational benefits when buying truck capacity. Take, for example, situations where multiple suppliers send shipments to a crossdock on the inbound side. Having a central planner to manage the different types of shipments is more efficient than employing many planners across the network of suppliers to manage their own movements through the crossdock.
Having a centralized corporate procurement function already in place is valuable. But, to be most effective, the team must have transportation expertise, and its buying practices should be aligned with the company’s culture as well as the demands of its freight network. Having a team that understands the unique demands of freight management enables them to make more informed TMS buying decisions. For example, they understand the importance of lane density and can procure more cost-effectively by leveraging cargo volumes across the network.
Now, some might argue that each region or location is more familiar with its specific transportation demands than a corporate buying team. However, these views of the freight network are myopic, and trying to accommodate them by allowing each unit to buy TMS technology independently leads to a hopelessly fragmented management system. Besides, modern TMS solutions can be configured to meet global as well as local needs.
So, how do you prepare for the process of acquiring a TMS?
Creating a comprehensive picture of what is expected of the TMS in each business unit is an intrinsic part of your RFP, and drives the buying decision.
- Build template documents that describe each facility in the network. Standard profiles should include details such as the volume and type of freight moved, and special requirements such as the use of special types of trailers.
- Capture pertinent information on suppliers and create flow diagrams for the main freight management processes in each facility.
- Use profiles and flow diagrams to determine a theoretical business case for a TMS investment by facility. What service gains and cost optimizations are being targeted?
This sounds like a lot of work, and it is, and it is one of the strongest reasons why it’s usually best to use a third-party—such as a consultant—to complete the work. In addition to taking the burden off the shoulders of your team, the third-party is an outsider that does not carry any organizational baggage.
Delving into how freight transportation is procured and managed across the network exposes inefficiencies and roots out inconsistencies. And the exercise highlights areas where you can improve the network. For example, rather than focusing attention on a low-volume supplier with good performance, finding ways to lift a large-volume supplier with mediocre performance, or to wring more volume out of high-performing vendor, usually pay bigger dividends. You may find that flawed pricing structures are causing route guide leakage. For more on this, see The Stale Rates Research: Benefits of Frequent Transportation Bids white paper.
Taking this measured, detailed approach aids not only in the selection of the TMS provider, but also during the TMS implementation process. Learning a lot about your freight network and being able to provide this information to the TMS implementation team will help ensure proper TMS alignment, structure, and overall implementation success.
Procuring a TMS suite is not a trivial exercise, and in a widely dispersed organization, you may have to fit square pegs into round holes and bridge unexpected operational gaps. But TMS technology is now incredibly versatile and continues to develop in line with shippers’ expanding global and organizational footprints.
What experience have you had in going through the TMS purchasing process? We welcome your thoughts and opinions!