Services as Substance: Why TMS Alone Will Not Drive the Sustained Savings Shippers Seek
The 3-Hour Diet, the Fat Flush Plan, Cabbage Soup Diet, Grapefruit Diet . . . With the dozens of diet plans out there, how does a person who wants to lose weight know where to start? Should you sign up for the plan making the boldest promises? Is it better to hitch your wagon to the latest fad?
I was recently perusing Transportation Management System (TMS) providers’ websites, and I was surprised by the bold claims that some were making. Putting myself in the shoes of a supply chain executive, I felt like someone trying to sift through the weight loss promises being peddled by today’s countless quick-fix diets.
The TMS websites were promising “guaranteed ROI,” easy online savings calculators, and more. While I am not trying to discredit these providers, I do want to call attention to the question of immediate versus sustained supply chain savings.
Let me draw on the diet analogy again. Eating only grapefruit or cabbage soup will surely result in some weight loss, but I wonder if these short-term successes are sustainable in the long haul. After all, isn’t it long-term health that we really seek?
Similarly, in the world of supply chain and transportation management, shippers appreciate a quick bang for their buck when they purchase a TMS. In fact, they should assume some level of immediate savings if they are implementing a TMS for the first time. In this context, those providers’ guarantees and quick savings calculators may seem reasonable.
What shippers really want to know, however, is how the provider proposes to deliver sustained savings. If only I had a nickel for every time I’ve heard this question: “Once your TMS has saved me money in the first year, how do you drive savings in future years?”
Many providers do not have a convincing answer to that question. Most will appeal to sustained cost avoidance, rather than sustained savings. In short, their answer is: “If you stop using the TMS in future years you will be back where you started.”
That may be true, but sustained cost avoidance is not what shippers want; they want new savings each year.
The answer that providers should be giving—assuming they can truthfully say it—is “Our program is engineered to drive year over year savings. We offer a rigorous, process-based solution in which our logistics experts leverage the TMS technology to uncover savings opportunities.” A TMS on its own cannot be relied upon to drive continuous savings; rather, shippers should look for a program that incorporates services—highly-trained people and proven processes—with technology.
What are the key signs of a program built around services? Here are a few that shippers should be looking for if they want their provider to effectively drive savings year over year:
- A proven set of management routines to evaluate data and bring solutions for how to improve carrier performance and supplier compliance.
- A culture of continuous improvement and best practice sharing.
- A proven plan for recruiting, training and retaining talent at the provider.
- A roadmap for innovation and introduction of cutting edge technology.
These are a few key signs of an effective managed transportation program. Leading providers offer even more extensive services, and shippers can get a sense of this by asking some key questions. For example, does the provider invest time and money in supply chain research with leading universities? Do they host industry thought-sharing forums? Do they apply Six Sigma-based process improvement methodologies to all accounts? If the answers are yes, then you have found a provider committed to long-term innovation and partnership with clients. Only that kind of forward-thinking culture can push your organization to be better, and help realize the goal of sustained savings.
No provider can predict an exact level of savings in year three or year five. Three years from now, your network will look different; you will have new suppliers, new carriers, new modes, and new customers. Instead of asking a provider to tell you how much they can save you in year three, ask questions like: “How will your team of logistics experts uncover opportunities for continuous improvement? What types of consulting and network engineering services do you offer? What account management routines do you employ, and how are your people aligned with my organization’s KPIs?” Ask for references and talk to current customers about their experiences.
I often hear customers talk about “building a business case.” I like that phrase, but a business case does not have to be a detailed multi-year savings plan. Instead, it should identify the anticipated level of short-term savings that the TMS can drive (e.g. through optimization, routing guide compliance, freight pay streamlining). Then, the business case should focus on why the provider offers the best chance for achieving sustained savings; this is where people, processes, and a culture of continuous improvement matter the most.
Take a look at the results. After a short time eating only cabbage soup, dieters probably look a little thinner. How do they look after a month? In need of some real substance! When asking for savings projections in your TMS search process, make sure you understand what substance a prospective provider can deliver besides technology to drive the savings you want, both immediately and every future year.