Five Critical Success Factors for a TMS Implementation
Over the past two decades, the business case and benefits of transportation management systems (TMS) have been well documented by industry analysts and others, with companies saving 5-25% or more on their transportation spend, depending on how inefficient their transportation processes had been.
To achieve those benefits, however, companies must first successfully implement a TMS. What are some lessons learned from companies that have done it right?
In May 2019, we asked our Indago research community -- comprised of supply chain and logistics practitioners from manufacturing, retail and distribution companies -- to tell us which factors were the most important to successfully implement a TMS. Here’s what they said:
All of the factors listed in the chart are important to ensure success. If you take the top three factors from the survey, and aggregate the rest, you end up with these five critical success factors:
- Define your needs and goals to select the “right” TMS solution and partner;
- Put together a cross-functional team with a strong leader;
- Develop a detailed project plan;
- Understand your integration and connectivity requirements;
- Keep your TMS tuned because implementation does not end at go-live.
Source: Indago, May 2019 (n = 23)
All of the factors listed in the chart are important to ensure success. If you take the top three factors from the survey, and aggregate the rest, you end up with these five critical success factors.
Define your needs and goals to select the “right” TMS solution and partner
To quote Yogi Berra, “If you don't know where you are going, you'll end up someplace else.”
Applying this logic to a TMS, if you don’t know what you want to achieve with a transportation management system, both today and in the future, you might end up disappointed with the final outcome.
Therefore, the first step to implementing a TMS successfully is making sure you have done all of your homework to select the “right” solution and partner. The “right” TMS for one company might be the “wrong” TMS for another. Determining which solution and vendor is right for you begins by thoroughly understanding your current processes and defining your desired future state.
Where are the capability gaps? Which metrics do you need to improve? Do you plan to redesign your distribution network? How are your customer delivery requirements changing? Do you foresee using more parcel or dedicated/private fleets in the future? Which systems does the TMS need to integrate with, and what type of data needs to be shared? What would your power users like to see in a TMS solution?
The more questions you ask and analysis you conduct up front, the greater the odds for implementation success. One company I know spent a year conducting its TMS evaluation and selection process. My initial reaction was, “Wow, that is way too long.” But as the transportation executive in charge of the project explained, by investing that much time up front to select the right solution and vendor for them, the company saved a lot of time and avoided a lot of surprises and issues during the implementation phase.
The “right” solution and partner often come down to factors that go beyond a checklist of features and functions, such as:
- Innovation: Is the vendor’s R&D roadmap aligned with your near- and long-term needs? How quickly can the vendor add new functionality that you need?
- User Experience and Training: How configurable is the solution? Is it intuitive and easy to use and learn?
- Implementation Time and Effort: Can you start realizing value in weeks or in three to four months?
- Partnership: How easy is the vendor to work with? How responsive will they be to your needs? Can they teach you new things? Are your cultures and objectives aligned?
Simply put, if you short circuit the upfront analysis and evaluation process, you reduce your chances for implementation success.
Put together a cross-functional team with a strong leader
One of the biggest mistakes a company can make with any technology implementation is to outsource the responsibility for success. Yes, you can engage with a third-party firm to lead or assist with the implementation, but this does not mean that you wipe your hands clean of all responsibility. You also have to roll up your sleeves and actively participate in the implementation process.
Who needs to participate? Ideally, you will have a person dedicated full time to the project. This project leader doesn’t necessarily need to be a transportation expert; he or she just has to know enough about the process, requirements and goals to lead the effort successfully. The person also needs to have strong communication skills, have the ability to identify bottlenecks and resolve them quickly and be able to keep everyone involved with the project motivated and on track.
Various stakeholders, such as IT, finance, customer service, warehousing, procurement and sales, need to be involved at different stages of the implementation project. There is one group in particular, that must be included on the team: TMS power users. As one of our Indago members stated, “You need to involve primary users during all rounds of RFQ presentations, throughout the selection, so undiscovered requirements are not found during the implementation planning phase.”
Ron Lazo, VP at Manhattan Associates, underscores this point in a recent podcast titled “Tech Solutions for the Supply Chain: What, Why and How”:
It's important for an organization to note that implementation does not equal adoption. So change management at a high level really should be focused on preparing users for the new system, reducing resistance toward the system and influencing the users' attitude toward the system.
The bottom line is that the buck ultimately stops with you. If you don’t invest the time and resources necessary to adequately support the implementation project, then you’re setting yourself up for failure -- or at best, an implementation that will take much longer and cost much more than planned.
Develop a detailed project plan
You have a leader and you have a team: now what needs to get done? Who will be responsible for each task? Which tasks are dependent on others? How much time, and what budget and resources, are allocated to each task or phase? What are some important milestones and due dates along the way?
Those are some basic Project Management 101 questions that need to get defined, documented and communicated to the team. Going into all of the details of a TMS implementation plan is beyond the scope of this post, but I want to highlight two items that you shouldn’t overlook:
- Problem resolution: When problems arise, and they will, what is the process for resolving them? How are problems documented and communicated? Who gets involved? Is there an escalation process? Defining a problem resolution plan from the start and getting buy-in from everyone involved will help you get over the bumps in the road quickly.
- Training: Don’t skimp on training; the investment will pay off quickly. The more users know about the TMS and its capabilities, the more effective and productive they will be using it.
Lazo also shares some insights related to TMS project planning in the podcast:
A TMS project requires upfront visioning for future state business requirements and processes. So without this well-defined vision and project strategy, you can't really start planning for success … [Visioning] leads to solid project planning and project management. It helps with the process engineering that is underway. It also helps chart your training strategy and your communications, which are all keys to success and begin with proper planning of pre-implementation and they carry through the project lifecycle to project go-live activities. And then, I think equally important, is to prepare the resources that are part of the project team for a full commitment to the project and have that reinforced by executive management.
Finally, be realistic and honest about the project plan. Leave some room in the budget and timeline for the unexpected -- because the unexpected will happen!
Understand your integration and connectivity requirements
A transportation management system doesn’t exist in a vacuum. It has to exchange data and information with a variety of internal systems, such as warehouse management and order management systems, and it has to communicate electronically with many external trading partners, including carriers, suppliers and logistics service providers. And since these trading partner networks are continuously changing, establishing and maintaining connectivity with hundreds or even thousands of partners is an ongoing challenge.
Therefore, it’s not surprising that our Indago members ranked “understand integration requirements with other apps” as the most important success factor for a TMS implementation (tied for first with “having a cross-functional team”). A big reason why some implementation projects get delayed or go over budget is because companies fail to identify up front all of the touchpoints and data transfer requirements between the TMS and other applications. In many cases, especially if legacy applications are involved, custom interfaces need to be developed, which takes time and money. It’s one thing if you know this from the beginning and build it into the project plan and budget; it’s another if you discover it at the eleventh hour.
Similarly, companies need to determine their connectivity strategy and approach when it comes to carriers, logistics service providers, suppliers and other external trading partners. How will you onboard new carriers and trading partners? Will you use EDI, APIs, portals, third-party connectivity networks and/or other approaches?
For example, although EDI remains well-entrenched in transportation, the future of carrier and trading partner connectivity is Application Program Interfaces (APIs) and web services. APIs and web services provide more real-time data and visibility than EDI, along with other integration and maintenance benefits.
Keep your TMS tuned because implementation does not end at go-live
It takes time to set up and fine tune a TMS, particularly its optimization capabilities, so that it accurately reflects your transportation operations. And since your operations change over time — routing guide, rates, lead times, delivery windows, optimization constraints and so on — you need to continuously fine tune the TMS; otherwise, the quality of the output will degrade and you’ll end up thinking the solution is “broken” and stop using it. Unfortunately, many companies don’t review and adjust their TMS setup after the initial implementation. Simply put, a TMS is like a car – you have to schedule regular tune-ups or else its performance will start to degrade.