In a room with 100 TMS software providers, there are likely at least 300 pricing schemes to choose from, ranging from “free” to hundreds of thousands of dollars annually. Striking the balance between cost and value is critical for shippers seeking to engage transportation automation and optimization software. But, there is no free lunch. Just ask the burly fellow in this image that has been making the rounds on the web.
It’s safe to say this guy was probably less than satisfied with the “savings” he “gained”. What this image comically illustrates is that we get what we pay for in life. This is not to say that companies must spend a fortune on TMS. Rather, a best in class transportation automation tool is both highly effective at driving savings as well as cost effective to buy and operate. However, there is, as the image notes, “always someone willing to do it cheaper”. And this is where the danger lies. Here are some ways that the “cheaper” solutions wind up actually costing way more in the long run.
- Misleading pricing: Similar to the current practice among airlines of offering a very attractive airfare, then “nickel-and-diming” the passenger for essentials (luggage fees, in-flight beverages, movies, even pillows and blankets) some TMS providers offer low subscription and/or implementation fees and then make up the difference by charging for essentials like support, training, testing environments and more. A good provider offers transparent pricing that is largely all inclusive, ensuring clients fully understand the total cost of ownership and aren’t surprised when the bill comes.
- Limited functionality: Not to knock automation tools provided by 3PLs, but often times, these tools are rudimentary, with limited features and functionality. Many 3PLs have taken to offering such “value adds” to entice shippers with the promise of “one-stop-shopping” at more discounted rates than those offered by true enterprise software providers. Large volume shippers opting to “save” money this way are frequently disappointed when their complex supply chain management requirements are imperfectly addressed (at best) or largely unmet (at worst). The costs incurred managing work-arounds to bridge the gaps in these systems cost more in labor and missed opportunities (late deliveries, shorter lead times, increased spot-market exposure, etc.) than these solutions save. Note this is also true of “discount” solutions sourced outside of 3PLs too.
- Unsupported solutions: Being a transportation expert doesn’t automatically translate into being a transportation automation technology expert. Some providers capitalize on the misconception that technology is a panacea – a cure-all for transportation challenges. An architect may be able to design a skyscraper but may have little experience welding girders and pouring concrete. Similarly, a supply chain manager may be an expert on his network but unschooled in how to fully leverage TMS technology to unlock the promised savings. Providers that drop an “off-the-shelf” technology solution on a customer at a low price (but offer no collaborative partnership for the duration of the contract term) do their clients a supreme disservice. This practice is typically behind the numerous “failed implementation” stories we’ve all heard about.
In closing, none of this should be interpreted as an argument in favor of paying exorbitant costs to a TMS provider. It is just a reminder that there is always someone willing to sell you something cheaper. However, as this recent white paper explains with respect to how quickly one can expect to recoup investment into a world-class TMS, these systems, properly implemented, pay for themselves in a timely way. So you’re better off selecting the best one for your needs as opposed to the one with the smallest price tag.
(h/t to Joe Lombardo from Ege Avenue for the image)