TMS cost

Worth the Investment: Understanding TMS Cost and Benefits

By
JJ Singh
Blog

The logistics and transportation process is complex and challenging, prone to errors and complications, and quite costly to fix. In that context, the transportation management system (TMS) serves as the nerve center of transport operations, making it an existential need for shippers and carriers looking to ensure seamless logistics.

Although still quite fresh on the logistics scene, the TMS industry is on track to reach $31 billion by 2030, a testament to its value for supply chains across the globe. That said, investing in a TMS solution is highly subjective, with businesses continuing to be on the fence about investing in one, and which one to pick amongst the myriad offerings in the market.

To answer that question, we must consider the cost of implementing and maintaining the Transport Management System and then juxtapose that with benefits, such as reduced shipping cost, improved efficiency, increased visibility, reduced errors, and improved customer satisfaction.

In this article, we will explore the answers to that question and how shippers can leverage it for maximum transport efficiency.

What is a Transport Management System (TMS)?

The TMS is a technology solution shippers, supply chains, and logistics partners can leverage to simplify and optimize transportation.

From maintenance to scheduling, tracking, and collaboration, TMS works to tie in all relevant stakeholders across the entire transportation process. In a world where transportation is increasingly nuanced and decidedly complicated, the TMS allows operators to take back control of the entire process. For instance, with the TMS, more shippers can compare rates and quotations from carriers, track their delivery records, choose the best routes, and plan and manage the transportation process for more throughput.

Although it is a game changer for these logistics operations, the impact of the application on logistics management depends on the type of solution and how much the business is invested in using it to transform the entire process.

Benefits of The TMS Solution

The ability to leverage TMS solutions in a supply chain is a game changer in the world of transportation management. It holds so many benefits for the average business and its supply chain. Some of these include:

1. Enhancing Efficiency in Logistics Operations

The TMS solution streamlines logistics operations, allowing for effective planning, scheduling, and management of the entire process and its personnel. This enhances operational efficiency.

2. Optimizing Inventory Management

Enhancing the logistics process cannot be done in isolation. It heavily relies on a streamlined and optimized inventory management operation. The application achieves this by improving demand forecasting, streamlining supplier management, consolidating shipments, and automating the entire logistics process, which, in turn, impacts inventory management.

3. Improving Carrier-Shipper Relationships

With the TMS solution, shippers can better manage and track their carrier’s performance. This helps with communicating expectations, identifying areas of negligence, and then working with the carriers to improve the overall operation.

4. Boosting Supply Chain Transparency

The visibility solution that the TMS provides, which includes GPS tracking and route optimization, allows all stakeholders to know and monitor every step of the logistics process. This enhances planning and collaboration across the board.

Initial TMS Cost and Implementation

Although the cost of implementation depends on the nature of the TMS application and the features the logistics operations require to be unlocked, there are common factors to consider when picking a TMS solution.

1. Upfront Software and Hardware Cost

The TMS software solution requires a hardware system with certain specifications to work properly.

These hardware systems should not be used exclusively for the TMS and must meet the required specifications. If your business already has this hardware, it can only focus on installing the software. The TMS works on large computer screens but can also be accessed remotely. The installation cost will depend on the provider and the variety of features the supply chain requires. Some will require more than others.

2. Training and Onboarding Expenses

Training and onboarding can be quite expensive, especially when the business has a large team, but it is critical to the solution's success.

If it is your first time using the TMS application, then chances are most of your team members have never come across the solution. They will require ample training if they are to successfully leverage the solution for optimizing the transportation process.

On the other hand, if this is not the first time using a TMS solution and the business is just changing providers, extensive training may not be required. The team would possibly only need to understand that particular application, considering they already understand the TMS and how it works. The principles are generally the same across different applications.

3. Integration With Existing Systems

The TMS is a powerful application. However, it will struggle to deliver logistics and transport efficiency on its own without the help of other applications, such as the:

  • Warehouse Management Systems
  • Inventory Management Systems
  • Order Management Systems
  • Integrated Scheduling Capabilities
  • Accessible Telematic Insights
  • On-Demand Supply Chain Visibility Software
  • 3rd-Party APIs

Integrating with these applications may cost the business money. However, they are necessary because all applications will optimize a different aspect of the supply chain, including logistics management.

Ongoing TMS Costs

The TMS is not a one-time fix, especially because the logistics operation is not a one-time event. However, this means other costs will be associated with leveraging the solution even after the initial setup. Some of these costs include:

1. Subscription and Licensing Fees

Many TMS solutions, especially those of a third-party provider, work on a subscription model. That means there aren’t many installation costs for hardware and the application. However, these applications are hosted on a third-party platform, and the business can access its features through subscriptions and licensing. This makes it an ongoing process, and for many operators, this is ideal because it helps them avoid much of the initial cost of implementation.

2. Maintenance and Support Fees

This mostly applies to businesses that have built or hired a third party to build their TMS solution. The maintenance cost is periodic and, again, will depend on the nature of the solution. Maintenance and support fees occur when the business wants adjustments, a change of hardware, or, in some cases, a breakdown of the application.

3. Upgrade and Scaling Expenses

Many businesses that leverage the TMS solution run small logistics operations that do not require many of the typical features of the average TMS. However, as these operations continue to grow, they typically want to scale the TMS to match the growing operations. This means they want an upgrade to other features that will simplify and scale a large operation to accommodate this growth. It will come at some cost to the supply chain, whether it is an in-built system or a subscription-based platform.

Key Benefits of Supply Chain TMS

Although the initial and ongoing cost of the supply chainTMS can be daunting, the benefits have been worthwhile for businesses leveraging it. These stories highlight some of those benefits:

Achieved cost savings and efficiency improvements

A global consumer electronics manufacturer faced significant challenges in its transportation process.

With a complex supply chain involving multiple suppliers and distribution centers worldwide, the company struggled with high transportation costs, frequent delays, and a lack of visibility into shipment status. These issues resulted in increased operational costs and reduced customer satisfaction. In response, the company undertook a comprehensive analysis of its existing logistics network, identifying bottlenecks and inefficiencies. This strategic planning led to the successful implementation of a Transportation Management System (TMS) to optimize its transportation operations.

The TMS was integrated with their Enterprise Resource Planning (ERP) system to ensure seamless data flow and real-time tracking capabilities.

The company also conducted training sessions for its logistics team to use the new system effectively, and the results were transformative. Optimized route planning and load consolidation reduced transportation costs, while real-time tracking improved shipment visibility, allowing proactive issue resolution and enhanced customer communication.

Delivery times were reduced, significantly boosting customer satisfaction. The TMS also facilitated better supplier collaboration, leading to more reliable and efficient supply chain operations. Overall, it saw substantial cost savings and operational efficiency improvements, reinforcing its market position.

Optimizing Financial and Operational Capacity

A logistics provider specializing in perishable goods faced unique industry-specific challenges.

The nature of their cargo required precise temperature control and timely deliveries to prevent spoilage. Additionally, the company dealt with stringent regulatory requirements and complex customs procedures, adding complexity to its transportation process. To address these challenges, the company implemented a customized TMS tailored to their specific needs.

The integration process involved working closely with EKA Solutions to develop features such as temperature monitoring, automated compliance checks, and real-time alerts for any deviations.

The impact was immediate and significant, drastically reducing spoilage rates due to improved temperature control and timely deliveries. The automated compliance checks reduced the risk of regulatory penalties, saving the company substantial costs. Operational efficiency improved with streamlined customs procedures and better coordination between warehousing and transportation.

Financially, the company saw a substantial increase in profitability due to reduced losses and operational savings. The TMS enabled it to provide more reliable and efficient services and solidified its reputation in the perishable goods logistics market.

Leveraging EKA Solution’s TMS Solution

EKA Solutions is dedicated to transforming operations to increase productivity and empower growth. With our innovative, cost-effective, and user-friendly platform for carriers, brokers, and shippers, we prioritize transparency, efficiency, and robust capabilities. Our platform enhances overall transport logistics, integrating seamlessly with existing systems for real-time operations and strategic freight management solutions. Connect with us today and see the difference.