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.

Amateurs Study Shipping Rates, Professionals Study Logistics

Omar Bradley offered a truism, that amateurs study tactics, armchair generals study strategy, and professionals study logistics. This is just as true in the world of business as it is in the military. Logistics is the art of getting supplies where they’re needed so other functions can happen. In the modern business world, logistics means freight shipping – both internally and externally. In this field, freight rates and carrier rates are the price of doing business.

Freight shipping is one of those expenses that can be minimized, but never totally eliminated. It’s also a manpower time sink, and because of this, more and more companies are outsourcing their freight needs to third party logistics companies. These are outfits that have people who do nothing but look over the assorted rates and package deals offered by the major freight carriers and try to find the best deal possible for their client, with a nice commission on top for them.

All in all, third party logistics management makes sense for organizations that are above a certain size (too small, and they don’t generate enough volume to be worth the trouble of maintaining the account) and below a certain size (at which point the company can have an inside staff that does the same function for less).

Alternatives to third party logistics offers are in house logistics software. Much the same way that travel agencies quickly became redundant with online booking services, logistics software vendors are trying to render the third party logistics company obsolete. Building automatic data scrapers that can do the basic work of comparing logistics rates to different parts of the country or world is fairly straightforward, as is a price search algorithm.

While these systems primarily offer a way to avoid third party logistics fees, they also offer a bit more direct control over your company’s shipping needs, and some managers and executives like that hands on feel. They can also be used to significantly automate a lot of routine functions in the shipping department and the mail room. They can also be used to identify process problems – there’s a saying that every time something was sent out overnight, someone higher up in the chain didn’t do their job correctly, and when you’re looking directly at the costs of expedited shipping, it becomes easier to focus on the process issues that lead to it, than when you’re looking at a third party statement of account.

Ultimately, which one works best is a function of your business’ needs and internal culture; some businesses simply don’t want to bring that job in house. Others need to. Both are viable strategies depending on what your operation’s needs truly are.

Logistics Planning Software and Freight Shipping

Since the deregulation of the trucking industry in the 1980’s, trucking companies have offered an increasing range of shipping solutions that helps the manufacturer minimize shipping costs; one of which is less than truckload (LTL) shipping. In LTL shipping, companies that ship less than full truckloads of goods can save money by paying a fraction of full load shipping fees. For trucking companies, shipping earnings remain the same. They create a full truckload out of partial load shipments and receive payment from each company. For manufacturers, arriving at the optimal LTL solution usually requires the implementation of logistics planning software, which analyzes the cost of shipping and transportation needs in relation to product destination.

The obvious advantage of LTL shipping is that it allows companies to decrease shipping costs. But the downside is that products often take longer to reach their destination due to the multiple destinations implied by the shared load. In such cases, using logistics planning software to analyze a shipping situation instead of opting for standard LTL is the best way to integrate a solution that brings lower shipping costs while ensuring timely delivery. Whereas as LTL companies specialize in LTL, logistics software specializes in developing solutions that combine each element of the shipping process into a streamlined, cost effective delivery system. A company that requires freight tracking services in addition to simple pick up and delivery would benefit more from using logistics software than relying on the advice of an LTL shipping company.

Most companies that utilize logistics software consistently run a large number of products that are assembled at multiple locations before they arrive at retailers. At first glance, incurring the start up cost and service fees of logistics software might seem contrary to the goal of decreasing operating costs. However, studies show that companies who implement logistics software regularly reduce their shipping costs by ten percent in the first year alone. Exactly how is this savings created? In part, it results form the fact that logistics software eliminates costs associated with other logistical solutions, such as annual software maintenance costs, TMS software costs, 3PL costs, freight margins, gain shares and common rate base licensing costs.

While logistics software is popular among companies whose yearly shipping costs can amount to more than a small company’s annual earnings, it can also offer solutions for smaller companies. For example, a company that simply wants to improve delivery time can use the software to analyze road construction trends and highways traffic patterns. In either case, the software never fails to improve a manufacturer’s finances by making its system of delivery markedly more efficient.