Magazine Article | June 1, 2003

Take Control Of Your Shipping Costs

Source: Field Technologies Magazine

A TMS (transportation management system) solution could help you save at least 5% to 10% on your shipping expenditures.

Integrated Solutions, June 2003

Have you put enough thought into how you ship your products? Taking a closer look at how your products get to your customers could save you money. For example, something as simple as picking the right carrier could save at least 5% to 10% on shipment costs. "TMS (transportation management system) is a solution that addresses the fundamental components of transportation execution. This includes shipment creation, rating, routing, consolidation, document creation, monitoring, and freight reconciliation," says Doug Metcalfe, director of business development, transportation solutions at Irista (Milwaukee, WI). Irista is a software developer of supply chain logistics software, featuring integrated order, inventory, warehouse, and transportation management functionality. Now that you know what it is, it's equally important to know how a TMS can benefit your business, how much it will cost, and what type of solution is right for your shipping needs.

Manage Your Shipping Cycle
"The benefits of TMS are improved customer service, synchronization of processes and information, and management of the entire shipment cycle," says Metcalfe. One way to improve customer service is with rating, which allows you to choose a carrier based on what you want to ship and how soon the recipient needs the product. "There are three types of ratings. The first scenario is when the customer finds a carrier and asks for a rate of the service they want performed. In the second scenario, a customer looks for the carrier with the least cost to get the item from the warehouse to its destination. In the final scenario a customer says, 'I am moving product from here to here; tell me who can do that and how much will it cost?'" explains Steve Blough, CTO and founder of MercuryGate Technologies, Inc. (Apex, NC). MercuryGate Technologies develops software solutions for shipping and transportation processes.

Additional benefits of TMS include tracking, load optimization, and route optimization. To synchronize processes and information, versions of TMS solutions offer tracking. "I'm rating and selecting the right carriers, assigning to those carriers, and now I'll be able to get messages back from the carriers," says Blough. More sophisticated versions of TMS bring load and route optimization into the equation. Load optimization helps you to optimize the space on each truck for shipments. A route optimizer helps you to route jobs based on time requirements, miles, drivers, etc. "These are mathematical engines to solve complex transportation problems. Route optimizers are particularly useful in unconstrained, high volume, multi-modal environments," notes Metcalfe. However these types of advanced features may not be beneficial to you. "If you're shipping small packages, an advanced version of TMS that includes route optimization may not be necessary. Typically people think of route optimization from going to LTLs (less than truckload) to truckloads," says Blough.

Cost Vs. Your Needs
Cost often plays a key role in the decision you make to implement new technology. "Cost is always a barrier, especially in these economic times," explains Blough. "The biggest barrier is getting the mind-set that it is important to manage freight." Costs can reach prices in the six-figure range, depending on how advanced the system is and how many sites are involved. "A single facility doing batch connections could be in the $10,000 range. If you integrate the system with more applications, such as ERP (enterprise resource planning), CRM (customer relationship management), or AP (accounts payable), you're looking at the $50,000 to $75,000 range. For multiple sites the price is usually in the six-figure range," says Steve Smith, president of Pitney Bowes Distribution Solutions (Stamford, CT). Pitney Bowes is a provider of integrated logistics solutions for multi-carrier shipping and transportation management.

When looking at who needs this type of solution it is important to consider your need for looking at data during the shipping process. It's more appropriate for high-volume shipping than for low volume. "The verticals that we see implementing and benefiting from these solutions most often are manufacturing, wholesale, publishing, and printing. Insurance and legal companies are also implementing TMS solutions," according to Smith.

Integrate TMS For A Total Solution
By interfacing TMS with other applications, the solution can become a complete part of your shipping cycle. "A best-of-breed solution would involve a WMS (warehouse management system) that passes orders or shipments to the TMS. The TMS then passes the information into a load optimizer and through a route optimizer. A route optimizer comes up with great routes, but it's the load optimizer that makes sure what was planned will work," says Blough. From this point you can come up with a loading scheme for the trailer that can be passed back to the WMS to make the picks. The entire process is more efficient from WMS to loading because things are properly sequenced. Now, when items are picked they can go right into the truck and not have to be staged again. A TMS can also be interfaced with an AP application. This allows the bill to be inserted into the package right when it is shipped; cutting out a few steps and further improving efficiency.

Before you implement a TMS solution, it is important to keep in mind the preparation necessary for the integration aspects. "Customers need to be prepared to handle the integration effort on their side. They have a responsibility to do linkages to current systems. Often times, customers do not need their own IT staff to take advantage of a TMS solution. The expertise needed may be provided by the vendor or the work can be outsourced," explains Smith. From choosing a carrier to integrating TMS with other applications, a TMS solution allows you to control the entire shipment cycle while reducing costs.