How can you cut costs with a TMS?
Published on 10 February 2018
Transportation is a strategic challenge for industrial companies and large retailers. According to numerous studies, using a TMS (Transport Management System) can substantially cut costs. Here is a quick overview of the benefits gained in profitability and customer satisfaction.
Improve your transportation performance
The improvement of your transportation performance relies on 3 main factors:
- In terms of strategy, the focus is on your distribution approach. A company can decide whether to outsource or reintegrate transportation into the company by creating a centralized department.
- In terms of tactics, you must ask yourself how you can improve the performance of transportation within an existing structure. Three options are available: benchmarking against your competitors, launching a call to tender for transportation services or investing in a TMS or Supply Chain Visibility information system.
- In terms of operations, companies have a wide range of levers to use: changing carriers or method of transportation, optimizing loads, reducing mileage, etc.
Reduce costs by optimizing transportation flows
Although cost reduction is a prime goal, the cuts should not negatively impact delivery times. Companies should thus aim to optimize transportation by using these 4 operational levers:
- Distance: reduce the distance products and orders travel;
- Loads: strive to fill your trucks to maximum capacity;
- Shipment processing strategies: opt for the most effective order processing strategies to reduce delivery costs;
- Prices: seek the best price based on a full load.
TMS solutions integrate management tools capable of determining the optimal truck load in real time as well as the best delivery routes to cut significant costs. However, to satisfy both customer and company needs, these solutions need to remain flexible. For that, think about planning and using different delivery strategies.
Some real cost savings thanks to TMS
Studies recently carried out come to the same conclusion: within one year of implementing a TMS, companies increased their cost savings by 5 to 10%. Furthermore, a study conducted by Supply Chain Digest estimates annual cost savings on freight to be between 5 and 15%, with an overall reduction in transportation costs, including staffing and management costs, coming in at 10 to 30%.
In 2014, ARC-Advisory Group reported a reduction in transportation costs from between 5 and 10% according to more than 40% of respondents with 23% announcing savings over 10%. Since, the percentage of companies that saw reductions over 10% has increased, as revealed by the 2017 version of this study, with average cost savings remaining steady.
On the same topic: Optimization of transport costs: TMS in the front line
What’s interesting with a TMS implementation is that companies don’t just seek financial gains but also real time visibility on their shipments. Over the past year and a half, Gartner advisory firm has observed a growing interest among companies to implement a TMS that will allow them to control their transportation flows and inform their customers of delays.