By: Chuck Papa, Senior Vice President of Transportation Management, Transplace
*Article originally appeared in Inbound Logistics.
When it comes to managing transportation operations, shippers are often at a crossroads. They may find themselves asking the questions: Should I implement a transportation management system (TMS) in-house or via software-as-a-service (SaaS)? Should I outsource everything to a Managed Transportation Services (MTS) provider? Or take a hybrid approach?
Not all companies’ strategies and core competencies are the same. It’s important to remember that the right path for one company may not necessarily be the best path for another – there are a number of different scenarios to consider when an organization has the need to improve their transportation capabilities and performance. So, what are the factors that organizations need to consider to determine whether an in-house TMS, SaaS or MTS is right for them?
Factors to Consider: Software-as-a-Service Model (SaaS)
The software-as-a-service model may be a good fit for organizations that have a commitment to fully staff their operational team but have hit entitlement on their performance capability and need technology to get them to the next level of improvement. The value of a SaaS environment is the ability to to gain access to a TMS system without having to make a significant IT investment. SaaS mitigates the need for internal IT resources and does not require any capital expenses up front. Additionally, this model ensures that shippers are running the most recent technology without having to continually upgrade, minimizing overall infrastructure impact.
However, the SaaS route does require an ongoing investment into the team and resources surrounding it. From an operational perspective, the shipper still needs to maintain the master data within the system, develop their team, retrain new staff members as turnover and growth occurs, and continue to operationalize the technology and new capabilities as they become available from a process management perspective. When deciding if SaaS is right for their organization, shippers need to determine if transportation management is a core competency for them and if they are willing (and able) to invest in and continuously develop the processes and human capital needed to successfully utilize the technology in their daily operations.
Factors to Consider: Managed Transportation Services (MTS)
When considering managed transportation outsourcing, the maturity of the organization may come into play. A TMS requires maintenance as well as a continued investment in the team that utilizes the technology. For those organizations that do not continue to make the investments in the people and the process (unlocking new capabilities in the technology as they become available) typically see a degradation of performance after a few years. And those shippers that have a legacy of five, seven or ten years of an in-house TMS or SaaS may be interested in handing over certain services to a third party in order to drive more long-term results.
An MTS provider’s industry expertise and proven processes can help by maximizing the technology and driving meaningful, sustainable benefits such as enhanced network visibility and new opportunities for savings. Collaboration with a third-party provider, and leveraging its extended network, can provide numerous optimization and cost saving benefits; for example, co-loading and load sharing with other shippers – beyond what a single shipper may be able to achieve on their own.
Results from a TMS or SaaS solution are easy to realize in the first few years because of the initial investment in training and change management that occurs with the implementation process, but in order to see long-term success, companies must sustain the resources, commitment and investment in not only the technology but also the accompanying operations. Therefore, Managed Transportation Services might become a more appealing option as an organization matures. Additionally, a hybrid approach to managed transportation is a viable option – shippers can choose to outsource only certain pieces of the supply chain puzzle (e.g. keep procurement in-house but outsource day-to-day execution).
The Key to Successful Shipper-Provider Relationships
As shippers are evaluating potential managed services providers, there are a couple of key things to consider. The most important aspect of a successful managed services relationship is transparency and open communication. In any outsourced relationship, a well-defined structure and frequent communication between the two parties is critical.
The right provider should be focused both strategically and tactically. Is the provider going to help the organization drive performance? What is the provider doing that is innovative, and what continued innovations will they bring to the team? How is the provider going to drive value and ongoing success in the long term?
This is an ongoing partnership, and shippers must realize that even after turning over certain processes to a third party, they will need to continue to be involved in their operations. The biggest mistake a shipper can make is assuming they no longer need to be involved.
Finding the Right Solution
There is no “one size fits all” approach when it comes to managing transportation operations, so each shipper needs to carefully consider each option before making a decision. Factors such as network complexity, level of investment in the technology, processes and personnel, as well as the organization’s level of competency in this area will help guide the decision.