Quick payback
Geoff Comrie, Transite’s founder and CEO, says Olympia’s
story is just one example of what he calls the “low-hanging
fruit” that shippers could easily pick by using transporta-
tion software for carrier selection. While today’s TMS suites
include everything from load planning and routing to car-
rier performance tracking, carrier selection offers “the
biggest ROI of anything in TMS,” Comrie contends. He
adds that depending on the size of a company’s freight
spend and the magnitude of inefficiencies to be addressed,
the payback time can be as short as a few months, espe-
cially if a shipper is paying for just the carrier selec-
tion module and not an entire TMS suite.
Comrie says the use of a TMS to automate the
carrier selection process adds value for shippers
in multiple areas. It eliminates the time
required to pore through routing guides to
match carriers with loads and lanes. It
improves customer relations by enabling a
shipper’s service reps to provide customers
with routing information instantly instead of
keeping them on hold while they look up data.
And it enables the creation of advance ship-
ment notices, an increasing requirement for
consignees, notably retailers.
TMS also takes the guesswork and inac-curacies out of routing decisions, no small
matter when you consider the amount of
money at stake. The Council of Supply Chain
Management Professionals estimates that U.S. businesses
spend $750 billion a year on transportation and logistics
services, and Transite contends they traditionally overpay
by about 20 percent.
What’s more, on inbound transportation, the use of a
TMS can transform a company’s shipping department from
a cost center into a profit center, Comrie says. With proper
carrier selection, a shipper can control a vendor’s inbound
routing (to ensure, for example, that it uses the lowest-cost
provider), pay the freight directly, and effectively mark up
the shipping charges on the outbound distribution.
This controversial tactic is being used more frequently,
and the carrier selection tool within a TMS facilitates the
process. “Using TMS, a lot of shippers have become
tremendously savvy in making money in transportation,”
says Comrie.
Going global
Internationally, the benefits can be just as meaningful,
though the process can be more complex given the additional steps that accompany an international shipment. For
example, Perry Ellis International, a Miami-based maker
and distributor of apparel, accessories, and fragrances,
turned to a TMS to help it better manage its 14 international service contracts.
Ellis chose a solution developed by Management
Dynamics Inc. (MDI), a global trade management software
provider based in East Rutherford, N.J. According to a case
study supplied by MDI, the software has enabled Ellis’s
logistics team to do side-by-side comparisons of carrier rate
and service options and to calculate in seconds the total
“landed cost”—the bottom-line charges for door-to-door
delivery of an international shipment. In addition, the system’s auditing feature identified and resolved about
$220,000 in overcharges showing on the bills of lading, the
apparel maker says.
Nathan Pieri, senior vice president, marketing and product development for Management Dynamics, describes his
company’s TMS as the international trade version of
Expedia, the online travel site that lets users compare multiple travel options simply by entering specific search
parameters.
Management Dynamics’ TMS solutions are offered on an
on-demand or software-as-a-service (SaaS) basis, meaning
that instead of buying software and installing it on their
own servers, customers “rent” the application from the vendor via the Internet. Pieri says prices start in the “low five
figures” and escalate depending on the volume of freight
tendered.
Slow on the uptake
In theory, the myriad of benefits should make TMS a no-brainer investment. But that doesn’t mean everyone is buying. An April survey by supply chain technology provider
LeanLogistics found that while 70 percent of executives
believe a TMS could improve and streamline their transport procurement functions, more than 80 percent still
relied on manual methods. This despite Lean’s estimate that
automating the process could reduce the time companies
spend identifying and selecting carriers by as much as 75
percent.
Part of the reluctance to switch can be traced to cost. A
traditional TMS software license can run about $250,000,
according to research firm Gartner Inc. But price is no
longer the barrier it once was. The on-demand or SaaS
model, which promises lower up-front costs and pay-as-you-go pricing, has emerged as a viable alternative, espe-
