The ROI of a TMS: What to look for and how to calculate yours

Whether you’re a manufacturer, retailer, distributor, or anyone else who ships freight on a regular basis, investing in a transportation management system (TMS) will almost definitely help you to lower your shipping costs. But while TMS solutions have existed for years and have dramatically increased in features and functionality during that time, many still struggle when it comes to locking down exactly how to explain their value — and more importantly, how much it will save them.

In day-to-day business, the focus is typically placed on ensuring that shipments go out on budget and arrive on time. So the idea of investing in a tool that could optimize transportation management often gets pushed aside. And when it comes to creating cost savings, it’s often considered easier to uncover those savings somewhere else, rather than putting time, effort, and money towards a TMS.

However, changing factors in the industry have brought a strong focus onto uncovering better methods for delivering savings at the shipment level. Rising transportation costs, tightening capacity, broader mode utilization — all the current challenges make it both more important to find new ways to adapt and brought an increase to the average ROI of investing in a TMS, while also making it more difficult to establish an accurate ROI projection.

To help guide your decision on how exactly a TMS like Shipwell’s could benefit your organization, we’ve outlined some of the top features to look for, and how much you can expect them to save you.

Optimization

A TMS that is capable of consolidating your orders to optimize loads, routing, and scheduling can deliver significant and rapid savings to your operations. Optimization capabilities could include those that allow for the usage of preferred carriers, a range of modes from which to select the lowest cost, load optimization, and more. According to Gartner®, "the average ROI on a TMS solution that includes optimization capabilities can provide an ROI of between 2% and 15%."

Procurement

One common supply chain challenge that leads to a TMS purchase is the fact that procurement and transportation operations tend to be siloed as two separate functions. However, a TMS that enables transportation managers to take control of the procurement process and gain better visibility into things like rates and carrier or lane performance can greatly benefit your organization. Gartner rates the ROI of procurement capabilities at "between 2% and 10%."

Automation

Automation is another area where a TMS can provide significant savings, not just on cost but on the time spent performing daily tasks. From payments and contract creation to tracking alerts and exception management, the ability to automate time-consuming manual processes helps to eliminate the risk of human error while allowing for decisions to be guided by accurate real-time data from across your supply chain. According to Gartner®, "automation capabilities could generate an ROI of between 1% and 3% on freight cost savings alone for your organization."

Analytics

With a TMS that’s plugged into all aspects of an organization's supply chain, data collection and analytics can play a big role in determining the level of value it is capable of providing. From carrier and lane evaluation to predictive pricing insights, accurate analytics and reports provide shippers with visibility into their operations and spend that can allow them to make better decisions and guide strategy. Gartner® calculates the ROI of analytics capabilities at "between 1% to 3%."

How to calculate your own ROI

A TMS can enable you to transport freight from its start to delivered with greater efficiency and reliability, which of course can help you save money and drive value for your business. Investing in a TMS can also help with things like improving customer service, managing inventory better, and increasing warehouse efficiency. But there are a lot of factors to consider before jumping into an investment if you want to ensure you’ve found the right fit for your organization.

According to Gartner®, “Failure to understand your organization’s level of transportation complexity and lack of a clearly defined scope of the proposed transportation management system (TMS) solution can significantly impact its projected ROI.”

If you’re looking to avoid these pitfalls while putting together a case for implementing a new TMS solution, Shipwell is currently providing complimentary access to Gartner’s highly detailed and informative guide on establishing an accurate ROI prediction for your investment. From what to look for in a solution, to how to measure and define your own organization’s needs, it can help to guide you toward an ideal solution.

Gartner, How to Calculate and Measure the ROI for a Transportation Management System, Brock Johns, Oscar Sanchez Duran, 18 November 2021.

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