Transportation Management System Logistics: Evaluating Your Options

Research shows that a freight transportation management system can cut the cost of shipping by up to twenty-five percent in the first year, but for many shippers, implementing a system for managing freight transportation can impose financial hardships. Traditionally, such experts perform transportation management – an expense most small and midsize businesses can ill afford (hiring these experts can bring a six-figure payroll increase).

How can shippers manage freight distribution without hiring an expensive team of experts?

Traditionally, the answer has been to outsource to Third Party Logistics (3PL) providers-entities that set shipping arrangements between shippers and carriers. In theory, 3PL is a beneficial arrangement for shippers that do not staff experts because the logistics function is outsourced, and the need to hire experts is eliminated. However, for companies that need or prefer more control of the shipping process, using a 3PL provider can be frustrating.

When they opt for 3PL, shippers relinquish a degree of control over the shipping process. Depending on the quality of the 3PL provider’s logistics resources, the price of the relinquishment can be steep. Good 3PL providers leverage a variety of resources to identify the best carrier arrangements, but many 3PL providers use limited resources -a fact that their customers remain unaware of.

If you use a 3PL provider whose resources are limited, your ability to negotiate the best carrier arrangements is also limited.

Replacing 3PL

If your business needs to save money on transportation management, 3PL is a fair option, but it is not as affordable or empowering as logistics software-a class of applications that perform the logistical calculations traditionally performed by experts. By replacing 3PL with a program that provides this function for a Transportation Management System (TMS), you can resume control of the shipping process and reduce your costs in two ways:

  • By paying less for the program than you pay for 3PL
  • By negotiating better carrier arrangements via expanded shipping options

Research shows that TMS software can reduce the cost of freight transport by ten percent in the first year. For many businesses, such a cost savings can be a financial life raft, but receiving it requires a decisive step in a new direction-implementing a TMS application instead of renewing a 3PL contract. When they learn how painless the changeover can be, most shippers are ready to make the switch.

Easy Implementation

TMS applications are designed to support the existing shipping process. Before supplying an application, the provider analyzes a business’s shipping process in depth, creating a program that addresses each need. As the needs change, new options can be added to the existing options, creating a program that evolves with the shipping process.

TMS applications are available on a web-based model or an in-house model. To simplify the implementation process, acquire remote system access, and preserve investment capital, most businesses opt for the former. To learn how TMS software can improve the economy and efficiency of your business’s transportation management system, contact a provider of logistics software today.