TMS: SaaS or Sus?
I have nothing against client SaaS (Software as a Service) TMS engagements per se. We currently have the option available for shippers wanting to staff, train and build an in-house transportation team as part of their strategy. Over my 25+ year career I’d guesstimate ~15-20% of enterprise shippers choose this path (I also realize this is an “N of 1” for the Modern Wisdom or Huberman Lab listeners). The vast majority of enterprise organizations do not do this. It is not “wrong”, but it is definitely the exception and not the rule. My challenge with SaaS TMS engagements, and my general belief they may not be the best option for many shippers boils down to two factors. First: solutions for small to medium shippers are generally one-to-one tender solutions and the cost must be weighed against factors that aren’t “systems”. Secondly, in instances where TMS application is appropriate, Enterprise clients often receive poor implementation/staff training and the value expected never materializes. To reiterate, over a 25 year horizon of selling 3PL and 4PL solutions, the shippers I’ve interacted with are either looking for a 4PL provider, looking to outsource, or looking to have someone take over running and/or replace their TMS. The count of shipper's who’ve said “we implemented an enterprise TMS and everything about how we utilize and execute within it is going swimmingly” is less than 20%. Thus, as the kids say, there’s a high potential they’re sus (Also, if you see me in person and I actually say this word out loud you have my permission to punch me in the face. I am #old).
As with anything, cheap and easy has to be weighed against total value. I’ve seen many a small shipper beam with joy at the deal they got implementing an entry level SaaS TMS. Look I can choose amongst LTL carriers! I can pick a truckload carrier from the list! And kudos to them: if you aren’t a high-volume shipper or you’re currently managing everything in excel these are in fact great first steps. Every shipper should have a base understanding of service and cost. I applaud anyone on the journey who is using the best tools available from a budget and availability standpoint. There are several factors I would weigh as a small shipper however. How am I vetting the carriers I utilize within system from a contractual and insurance standpoint? Will the differential in a claims payout wipe out whatever money I saved in comparative LTL rates? Who is looking at minimum order quantity asking why am I shipping three different three pallet orders per week (or often the same day not master billed!), and what is the savings if I change my customer’s buying habits? Could I get faster service and fewer touches if I built pool point or multi-stop truckload shipments? When one has a spend of less than a couple million dollars in freight, I would weigh the cost of SaaS TMS against outsourcing to a 3PL with the tools and practices to best manage the business from a risk, process and invoicing standpoint. It is a tradeoff of the 3PLs margin versus your cost of systems and people, but you get access to the processes and risk mitigation practices of much larger shippers.
On the more enterprise side (5M to multiple hundreds of millions in freight spend), we’re left with the sub-20% who I‘ve seen successfully implement TMS and the other 80% looking back trying to figure out how they lit so much money on fire. As De La Soul says: “Stakes is High”. Implementation and training are often the first hurdle. Some risk is simply inherent to any type of systems or consulting engagement, TMS or not. Some can be chalked up to the difference between software people vs. logistics practitioners. However, the single largest challenge I’ve seen is the vigilance and rigor required to utilize the tool in a way that makes the juice worth the squeeze. Set aside wide variance on initial onboarding and training. Staff turnover, absences, process controls and lack of knowledge of best practices often leaves shippers with underwhelming results. Remember: garbage data in equals garbage data out. As a function of our sales process, when trying to gather historical data to understand where and how to potentially add value, I cannot tell you the amount of poor or lacking data produced out of a client’s existing TMS because of x, y and z reason that the business isn’t managed holistically. And it’s not just shippers that have this issue: we come behind other 3PLs and Transportation Management providers who sell a good game but didn’t train and develop their teams appropriately. If your transportation 3PL is really a trucking company, or a warehousing company, or a broker, or a tech company masquerading as a broker (historically brokers made money)……they probably view TM/S as a means to an end to make their money and the shippers wants, needs and deliverables are tangential.
The first two letters of TMS are Transportation Management. Systems are a tool to accomplish that goal. But tools are only as good as the training of the practitioner. Spike Lee/Mars Blackmon was wrong: it was not in fact the shoes. When evaluating whether or not to buy an off the shelf TMS or SaaS subscription, think hard about if it’s a shiny object or if it’s truly a tool which can be wielded in a manner that will produce the desired result. Everyone in the market has Transportation, everyone can buy Systems, but the crux is who will have the Management. As a shipper: take strong inventory as to if this expertise and training exists in house, or should it be a larger factor in what solutions you go to market for. I would argue it should be the largest.