The 2 Critical Checkpoints You Must Pass Before Buying a New TMS
Recently, I spoke with a small freight brokerage (about $25M in annual revenue) and discovered that their ‘off the shelf’ TMS adequately stores critical data about their customers, carriers, and back-office administration, and also creates rate confirmations.
However, this freight brokerage still intended to buy a new ‘off the shelf’ TMS which would cost them over $170,000, or more, depending on what additional features they purchase. All these additions come at a significant cost; upfront, installation, and adoption. So, I asked the brokerage owner:
What are you trying to achieve by buying a new TMS?
Do you need more visibility into your sales cycle? Is your reps’ process too manual? Are you looking to more accurately identify and address areas of concern? The brokerage owner could not provide a clear answer to my question. This conversation is not unique, I have similar conversations with freight brokerages of all sizes, big and small, almost every day.
Most freight brokerages think that a new 'shiny' TMS will solve all their problems— it won't. This thinking is understandable, in any case. Before the emergence of disruptive technologies, the main piece of technology brokerages relied on for the past 25 years was their TMS. As a result, most brokerages are caught in the 'habit' of buying and upgrading their TMS without clearly defined strategic objectives.
In reality: there are things a TMS can do and things a TMS can't do. In most cases, what brokerages need isn't a new TMS, rather they need to use the TMS as a foundation and build on that to provide enhanced capabilities that a TMS alone isn’t equipped to provide.
Freight brokerages must clearly define their strategic objectives before buying a new TMS. Without clearly defined goals— whether that is solving a problem, capitalizing on new opportunities, or both— you will likely make costly investments that will yield little to no return. In this post, I discuss:
What a TMS can do vs. what it can’t (and shouldn’t) do
The single most important capability of a modern TMS
Third-party solutions that can address critical aspects of your business without your having to buy a new TMS
Checkpoint 1: Jack of All Trades, Master of None
As Kris Tryber explained in another post, a TMS is simply a central database that freight brokerages utilize to store critical data about their customers, carriers, and internal administration. They are a necessary centerpiece of technology that a brokerage uses to run their business. However, there are limits to what a TMS can do.
Example: imagine that one of your goals is to more precisely match loads with carriers. In this case, you don't need to buy a new TMS. Your current TMS likely offers sufficient historical data on carriers and a search function to help you do basic load matching. However, more advanced load-matching cannot be executed by a TMS because of the sheer computational power required for Machine Learning (ML). These solutions can’t be achieved using an on-premise server or your TMS provider’s server.
Another example: a client of mine previously used their TMS to engage carriers at scale by using its automated email blast feature. However, since the brokerage is so large, they have thousands of carriers that can be matched to any single load opportunity. So, when they run this simple automated email function, their servers can't handle generating the mass amount of emails. As a result, their system either stalls or shuts down entirely because a TMS is not built on systems that scale.
A TMS is not designed to perform more sophisticated functions beyond data storage and management, such as intelligent load matching, automated engagement, document management, project management, and accounting. However, a TMS is the foundational platform from which you can integrate additional solutions to assist you in achieving your business goals.
Rather than buying a new TMS, you can integrate a 3rd party solution that operates in a Software as a Service (SaaS) environment and is hosted on the cloud. These systems allow you unlimited scalability when you need it, and the capability to dial back resources when you don’t.
Checkpoint 2: The Single Most Important Capability of a Modern-Day TMS
A modern TMS should have an Application Programming Interface (API) that allows a brokerage to implement 3rd party solutions to solve challenges (or capitalize on opportunities) that a TMS can’t do alone. For context, when Parade connects to your TMS using API you’ll gain capabilities in the following areas:
A brokerage should have the freedom to add robust solutions to expand the capabilities of their TMS. If your TMS does not have an “open API” (what’s needed for modern integrations), an alternative method without buying an entirely new TMS is to export data via a File Transfer Protocol (FTP). Regardless, a 3rd party provider or vendor should be able to make the integration process as frictionless as possible so you can focus on what you do best; move more loads, strengthen your carrier networks, and streamline your operations.
Freight tech is a growing industry, and chances are, there are many tools that can come together with your TMS to ensure you achieve your business goals. So, before you buy a new TMS:
Identify the challenges you are trying to solve, or the opportunities on which you are trying to capitalize.
Determine which challenges and opportunities your TMS can help you with, and which are outside of its wheelhouse.
Identify if there are any technologies that can help you optimize your workflow.
Be sure that your current (or new) TMS is integration friendly.