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Is it possible to outsource transportation management systems?

An expert explores two ways to outsource transportation management systems.

There are two approaches to outsourcing transportation management systems:

1. As a managed service. This is the hosting of the technology and IT operations, usually by the technology company. Hosting can be for a single tenant or multi-tenant environment. Transportation management systems are in the cloud and are the fastest growing segment in the supply chain market today.

2. The other option is Business Process Outsourcing, where the process is managed by a third party. Specific to transportation, the logistics service provider (LSP) would also manage the technology.

Transportation management systems (TMS) were an early adopter of the Web, which enables the required integration between multiple parties from simple to complex journeys. Transportation software is almost exclusively a cloud instance. One thing to note, unlike ERP, TMS cloud providers do not discriminate between large or small companies, so small companies can take advantage of the rich services and technology provided. However, there are many price points and a variety of TMS cloud products in the market to choose from.

A good cloud transportation management systems product will have an established network with a large selection of carriers and customers in your market sector. For example, if you supply retailers the TMS should already have the protocol for the big retailers. Or if you are in automotive, the TMS should have industry standards for communications and the required connects to OEMs. The preferred carrier network and routing guides should be included as well. For international business they should have the big ocean carriers and should be able to find rates and do bookings.

They key to outsourcing is that the TMS should have a fairly complete set of functionality that will manage your process, end-to-end.

Another popular method of outsourcing the technology is having the LSP manage the technology. Users' outsourcing expectations have grown on just how much technology their logistics service providers should have. The rationale is easy to understand: Why not have the service provider be responsible for the whole process? Often there is a blend of roles -- a co-managed environment. Freight forwarders, as well, are constantly looking for new ways to serve the customer. Being an IT provider is a real opportunity for these organizations because there is often greater margin on IT-related services than pick, pack and ship operations. In fact, having complete information allows the LSP to do a more effective job in managing their customer's logistics needs.

Next Steps

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This was last published in July 2015

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What problems have you had in outsourcing transportation management systems?
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Too many exceptions in the business rules which do not allow the system to get the savings.
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