A Transportation Management System (TMS) is positioned between an
Enterprise Resource Planning (ERP) system and a shipping distribution
model (e.g. TL shipping). There are three ways a shipper can implement a
TMS:
TMS Software versus 3PL
Depending on the wants and needs of the shipper, both TMS software and 3PL have unique advantages. When comparing a TMS product to a 3PL, the advantages of each-pertaining to cost, control, and carrier options-can be summed up as follows:
Cost
The cost of 3PL depends on the type of provider a shipper uses - a standard 3PL provider, a service developer, a customer adapter, or a customer developer. Standard 3PL providers and service developers offer a limited range of standard logistical services and a limited range of value-added logistical services, respectively. Therefore, they are not a logical choice for TMS management. That leaves customer developers and customer adapters, both of which perform comprehensive shipping management.
Compared to the cost of transportation management software, the cost of using a customer adapter or a customer developer can seem exorbitant. Although the management function is outsourced, it is still handled by logistics experts, who earn an average salary of $75,000-$90,000 a year.
Control
Outsourcing the TMS function to a 3PL provider relieves the shipper of controlling the function directly. This is what some shippers want, but for shippers preferring to perform their own freight audit and enjoy having control over the shipping process, using logistics software creates a happy medium. This is because it eliminates the cost of maintaining an in-house logistics department, yet it allows the shipper to control the TMS function within the company.
Carrier Options
TMS software supplies shippers with the largest number of shipping options. The number of shipping options that a 3PL provider considers is often unclear. Some providers use electronic posting systems that match available loads with available carriers, while others have beneficial business relationships with a select group of carriers, and use them for the majority of shipments. Using logistics software instead of 3PL is known to reduce shipping costs by ten percent in the first year, and the broader range of carrier options it supplies is one reason why.
Conclusion
Transportation management software provides a cost effective way for shippers to perform a freight audit along with other TMS functions, particularly when compared to maintaining a TMS product within the company. Outsourcing the TMS function to a 3PL provider is also less expensive than the in-house approach, but it does not offer the same flexibility as TMS software in terms of cost, control over the shipping process, and carrier options.
- Create a TMS in-house
- Outsource the TMS function to a Third Party Logistics (3PL) provider
- Use transportation management software
TMS Software versus 3PL
Depending on the wants and needs of the shipper, both TMS software and 3PL have unique advantages. When comparing a TMS product to a 3PL, the advantages of each-pertaining to cost, control, and carrier options-can be summed up as follows:
Cost
The cost of 3PL depends on the type of provider a shipper uses - a standard 3PL provider, a service developer, a customer adapter, or a customer developer. Standard 3PL providers and service developers offer a limited range of standard logistical services and a limited range of value-added logistical services, respectively. Therefore, they are not a logical choice for TMS management. That leaves customer developers and customer adapters, both of which perform comprehensive shipping management.
Compared to the cost of transportation management software, the cost of using a customer adapter or a customer developer can seem exorbitant. Although the management function is outsourced, it is still handled by logistics experts, who earn an average salary of $75,000-$90,000 a year.
Control
Outsourcing the TMS function to a 3PL provider relieves the shipper of controlling the function directly. This is what some shippers want, but for shippers preferring to perform their own freight audit and enjoy having control over the shipping process, using logistics software creates a happy medium. This is because it eliminates the cost of maintaining an in-house logistics department, yet it allows the shipper to control the TMS function within the company.
Carrier Options
TMS software supplies shippers with the largest number of shipping options. The number of shipping options that a 3PL provider considers is often unclear. Some providers use electronic posting systems that match available loads with available carriers, while others have beneficial business relationships with a select group of carriers, and use them for the majority of shipments. Using logistics software instead of 3PL is known to reduce shipping costs by ten percent in the first year, and the broader range of carrier options it supplies is one reason why.
Conclusion
Transportation management software provides a cost effective way for shippers to perform a freight audit along with other TMS functions, particularly when compared to maintaining a TMS product within the company. Outsourcing the TMS function to a 3PL provider is also less expensive than the in-house approach, but it does not offer the same flexibility as TMS software in terms of cost, control over the shipping process, and carrier options.
Re-hauling our companies transportation management system has really been the right choice. It has a major impact on several other aspects of our company. Refining the process with software and other means is something I don't regret looking into
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