Which TMS is Right for You? The private SaaS model benefits

By George Moser and Peter Ward -- Supply Chain Management Review, 4/1/2008

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So for shippers that want more scalability and assurance that they will retain control of data and carrier relationships over the longer term, the perpetual license or transportation process outsourcing with private SaaS model may make more sense.

As noted in Exhibit 1, initial cash outlays from the transportation process outsourcing with SaaS, and multi-tenant SaaS models are lower than for the perpetual license model (whether hosted or not). The comparison of initial costs between the multi-tenant SaaS model and the perpetual license model certainly makes the former seem more appealing at first. However, for rapidly growing, increasingly global companies, the “total cost of ownership” of the multi-tenant SaaS TMS may, over time, exceed the cost of the perpetual license model, particularly if the fee structure is transaction based. A conceptual cost model of the three possible approaches to acquiring a TMS appears in Exhibit 3.

Exhibit 3- TMS Conceptual Cost Models

Transportation planning and execution is typically an evolving process within a company. Business and supply chain growth beyond the domestic market usually increases the volume and complexity of shipments. Supply chain visibility requirements become greater as the supply chain is stretched. However, this does not occur through a single event. The increased complexity of transportation processes usually forces companies to become more innovative in the supply chain arena over time. The ability of logistics management tools to keep pace with the volume and complexity can determine the success of the logistics strategy.

As previously noted, the ability to handle more complex, global transportation needs is increasingly critical, especially for smaller, rapidly growing companies.

For companies with a low level of transportation complexity and strategic innovation, such as a shipper in a commodity-based environment with primarily domestic truckload shipments and little mix in the modes, the transportation can be managed on spreadsheets.

As such a firm evolves with increased user and customer requirements, it may develop a custom or legacy TMS to handle such tasks as carrier selection and estimating delivery date and time. Load building and cube requirements are often developed here as well for transportation planning.

For more complex businesses, the basic and extended spreadsheets are no longer viable options. The homegrown TMS solutions do not have the capabilities required to optimize the shipments beyond a single constraint such as delivery date. System-generated carrier selection is required as is electronic communication with carriers and customers. The company also needs visibility to the shipment status and events for customers, both internal and external.

As the firm's business model changes and the complexities increase, the transportation needs change, and with them the tools required to manage the transportation processes. In order to determine the best fit solution, buyers need to look at the functional capabilities of the respective systems. These are compared in Exhibit 4.

There has been an increase in popularity in the Multi-Tenant SaaS model over the last five years, which has allowed companies to gain traction with a modern TMS. However, as previously described, this option has limitations in terms of scalability and global capability that growing firms ought to consider. Also, the Multi-Tenant SaaS model has characteristics of data ownership, security and carrier relationships that could be tricky at the end of a contract. The perpetual license model, with its relatively high initial costs, typically has none of these limitations. Further, it can have a lower total cost of ownership over the long run. The Transportation Process Outsourcing with Private Subscription SaaS shares the functionality, scalability and global capabilities of the Perpetual License model but with the low initial pricing of the Multi-Tenant SaaS model. For rapidly growing companies with an increasingly global transportation network, the partial outsourcing/private SaaS is worth reviewing in more detail.

Next: A closer look at the partial outsourcing/private SaaS model

In this article, Which Transportation Management System is Right For You?

• Introduction
• Using supply chain software to meet today's shipping challenges
• The private SaaS model benefits
• A closer look at the partial outsourcing/private SaaS model
• Planning ahead

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