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Transportation Management Systems (TMS) have evolved significantly over the past five years and today’s platforms are more powerful, cost effective, and flexible than ever before. As a result, businesses are rapidly implementing new TMS solutions. According to Transparency Market Research, “Transportation System Management Market 2014-2022, the compound annual growth rate for TMS through 2022 is 12.2 percent. However with this growth, many companies are struggling to successfully implement their TMS. How do you avoid the same fate?
"By identifying the value drivers for your company, then defining requirements and the supporting business case, businesses are more often able to fully generate the ROI on their TMS implementations"
After working with clients across industries, we see two main challenges facing TMS implementations. First clients lose sight or fail to identify the value from TMS at the beginning of their project. This starts with the business case and identifying your company’s specific needs, and aligning those throughout the phases of the project. Next clients under estimate the reach of TMS across the supply chain and in doing so, do not include all the crucial stakeholders. When companies are not able to execute the change management, they will fail to capture the value. The key to success and overcoming both challenges is finding and demonstrating the value.
A successful TMS implementation requires a change in mindset. That shift in thinking needs to move toward a business “value-based” approach and away from a “technology” implementation based approach. They should not be based primarily on costs, track record or a bigger is better mentality. The bottom line is that TMS solutions are not one size fit all. By defining your specific needs you can navigate the landscape of providers and align with those who will deliver value to YOUR organization.
A value-based approach benefits the organization because it focuses on finding the right value for your specific needs and objectives. Every decision you make during the lifecycle of implementation should be viewed through that value driving lens including system selection, integration, implementation phases, KPIs, processes and organization design. Below we explore the following steps to ensure a value-based approach to successful TMS implementations.
Define the value drivers and focus on aligning vendor selection with key value drivers
Create a holistic view of supply chain; clearly define the roles, responsibilities and needs of all supply chain partners and functions in the future state operating model
Identify all stakeholders (internal/external) and the change impact of TMS to make change stick
Knowing exactly what you want to achieve with a TMS in place is the primary driver for selecting the right system and vendor. Organizations should not assume one size fits all because every business has different value drivers, investment rationales, and requirements for a TMS. The key is making sure the system is the right fit for your company and doesn’t have too many extra capabilities beyond what is required to deliver on your specific goals. . However, buying future capabilities now can be a distraction and cost more than you expected. For many, the better option is to implement fewer capabilities, capture value, and then expand in the future.
It is important to focus on functionality that aligns with your pre-defined value levers and requirements. One way to explore and test alignment of your goals and the system is to have vendors use your data for demonstrations. This allows you to see the “true” picture of the TMS as it relates to your exact requirements and expected value drivers. Another way is to use a modeling tool like PwC’s logistics value qualifier (LVQ) to take historical shipment data and determine ROI from TMS and what it could have done or saved them. This becomes the foundation for constructing the business case and making the case for change.
Holistic Supply Chain
In thinking on how to derive value from the TMS, it’s important to consider that the implementation is usually not driven by, or within the control of, the distribution and logistics function. Instead, one of the most important roles in TMS implementation for the distribution and logistics team is to make sure the system is fully integrated across the operation. The success of the TMS is directly linked to how well an organization links new capabilities and insights from the TMS across the full supply chain (suppliers, customers, materials management, manufacturing, warehouse operations, accounting, finance, etc.). One client looking to implement an inbound solution was challenged because logistics couldn’t get suppliers to use the system for their shipments. The client’s supplier management group wouldn’t engage with the team or ask suppliers to use the system. By identifying what was different for the suppliers we found it reduced their workload by having fewer overall shipments. Demonstrating this benefit created the case for changeand interest and adoption from the suppliers was significantly improved.
Creating a successful future state requires a holistic view of the benefits and outputs from the TMS to support your value drivers. All stakeholders should be informed and involved with the implementation to understand the impact to the end-to-end processes.
The impact of a TMS requires change across the entire organization. In fact, change management on the functional side is more difficult than most organizations realize. Without proper cross-organizational change management, there are limited levers for driving value. For example, if an organization is looking to consolidate shipping to create cost savings, the sales organization needs to be well aware and have the tools in place to work with customers on their shipping needs, timelines, etc. Otherwise, the benefits aren’t realized and the full value of the TMS is not delivered. One client had identified significant savings from consolidating customer shipments into fewer deliveries. However the sales team refused to present this to customers. After conducting a stakeholder analysis and including customers, we learned that customers valued having fewer shipments to receive and embraced the changes. This allowed the client to realize the savings from the consolidation.
By staying true to the value-based approach, an organization remains focused on why a change is required in order to capture value. That also allows for a higher level of engagement across stakeholders to determine how to capture that value, what operational changes need to occur, and who to work with directly to make those changes happen. Too often logistics executives will say “here’s the value” without getting the rest of the organization on board with the change. The danger with staying in siloes and not working across key functions of the organization, is that people too often don’t fully understand what the value is and thus leads them to not understanding how to implement and get results from day one.
By identifying the value drivers for your company, then defining requirements and the supporting business case, businesses are more often able to fully generate the ROI on their TMS implementation.