5 Tactics to Reduce Costs and Enhance Efficiency With TMS Integration

Almost exactly 1 year ago, I wrote an article for Talking Logistics regarding my top tactics for estimating TMS implementation duration and budget. Readers seemingly latched onto this single statement with some skepticism:

 

The Impact of Integrations on TMS Implementation

While I can understand the skeptics’ perception that the cost of licensing or subscription fees to acquire the TMS would be the primary ‘cost’ line item, in my 25 years of implementing logistics technology like TMS, it is very rarely the case. In fact, for most shippers with annual freight under management (FUM) greater than $250M, the implementation line item can be 2-3x the subscription. Furthermore, the “long pole of the tent” of implementation time, and therefore cost, resides in the design, build, and testing of integrations.

If a TMS investment is on your radar, in this article I will reveal some key tactics we leverage with our clients to help better understand and quantify integration effort before they become “budgetary shock” issues during an implementation. I will also lay out some emerging tactics for the shipper to understand how to mitigate these integration costs.

A Brief History of TMS Evolution

First a quick TMS history lesson to help us get anchored on the realities of modern TMS integration requirements.

Implementing a TMS 25 years ago was simple: orders came into the black box, loads came out (2 integrations). Back then, TMS were designed to be “planning systems” and some other enterprise application was responsible for the “execution” and “payment” of the freight (usually an ERP). Implementation timelines circa 2000 were 3-6 months, and most of the time and complexity was “inside” the TMS – configuration and validation of solution quality.

In the early 2000’s, TMS vendors began rapidly expanding capabilities into supporting transportation workflows such as inbound, tendering, and freight invoice audit. In this period of time, TMS sales greatly accelerated as the market matured with “mainstream” buyers outpacing “early adopters.” Vendors took these dollars and reinvested into yet more capabilities and workflows including global planning, global multi-modal tendering, and contract freight procurement.

The Current State of TMS Integrations

Fast forward to today, and shippers are looking to connect their TMS with myriad solutions like fuel indices, real-time visibility, yard management, dock and appointment scheduling, traffic and weather, and many more.

So, for a “basic” domestic shipper looking for a TMS to automate planning, execution and payment for primary and secondary network over-the-road freight (i.e. TL and LTL), we would estimate at a minimum to be between 10-15 integrations.

For each integration object, there needs to be a design, documentation, the integration coding, and unit test. Depending on complexity, 10 integrations could total between 1000-1500 hours of labor. The math is simple, but it quickly becomes meaningful – especially considering most shippers today are prioritizing requirements for an average of 40 integrations. In 2022, one of our more complex implementations recorded over 140 objects, most of them integrations.

Strategies to Minimize Integration Costs

So, what can a modern shipper do to minimize this cost, while still achieving some level of automation?

• Early Integration Planning
  Determine your operation’s integration requirements before you select the TMS vendor. Most shippers will ignore integration requirements until well into the TMS implementation design. By that point, budgets are typically fixed, and the implementation timeline is set. Given integrations are the largest driver of implementation time and cost, this is completely backwards.
• Understand the Basic Math
  When Design + Build + Document + Test Time is <= 2 years of accumulated manual effort to Extract + Transform + Upload + Troubleshoot the same process, then automate the job with an integration.
• Use the ‘Crawl, Walk, Run’ Model for Automation
  Consider retaining some manual effort while still providing your system with data import & export capabilities. Nearly all TMS will have some form of ‘file uploader’ that typically leverages file formats that most business analysts will be able to decode. Leverage this method until development resources free up to chip away at integration development.
• Leverage Agile Methodology for Post-“Crawl” Development of Integrations
  This approach may work better in some organizations where IT resources are already deployed in sprints or increments. Agile approaches can yield quick and effective results without the significant overhead of a project team organizing around 40-100+ integrations in one go.
• Consider Purpose-Built iPaaS Solutions for Logistics
  Many Integration Platform as a Service (iPaaS) solutions exist, but only a couple focus exclusively on logistics and transportation data flows.These platforms can attach directly to existing IT infrastructure, including legacy middleware applications you likely already use. In many cases, iPaaS allows shippers to connect one integration platform to the TMS and have many integrations ready to deploy “out of the box” or with light configuration. Some iPasS even have pre-built connectivity to carriers for shipment execution (i.e. Tender, Accept/Decline/Shipment Status/Invoice), which greatly minimizes or removes the need for dedicated EDI connectivity.