Without visibility into the supply chain, shippers lack the much-needed data to determine what works well and how to address performance issues, making the benefits of a transportation management system (TMS) clear—from efficient carrier selections and invoicing to faster pivots and logistics workflows.
But implementing a TMS is a significant investment of financial and staffing resources. TMS providers offer access to their software and the initial implementation at a cost. However, shippers should also be aware of internal expenses, such as IT, legal, or financial costs.
Whether supply shortages, natural disasters, or labor strikes, evolving supply chain obstacles demand agile transportation management. Let’s break down the two main components of TMS pricing, from up-front implementation expenses to invisible internal costs.
1. System costs
System costs include all of the expenses organizations pay a TMS provider to gain access to their sophisticated software and coordinate the implementation and any software customizations. Explore the three components that make up a shipper’s total system costs.
The implementation fees comprise the initial costs of implementing a TMS. It has two components: the activation fee and the configuration fee.
An activation fee is a one-time flat fee for access to the TMS technology. The configuration fee is an hourly rate accounting for the time it takes TMS providers to program any customizations and integrate the TMS with the shipper’s systems, including their enterprise resource planning (ERP) software and carrier network.
The subscription fee comes in one of two forms. It may cost shippers a certain price per transaction, meaning the shipper pays a fee for each transaction executed through the platform. Alternatively, they may pay a flat monthly subscription fee, allowing the shippers to execute a pre-set number of shipments. For example, for $5,000, they may be able to execute 5,000 shipments every month. If they go over that number, they pay a cost-per-shipment rate.
Third-party license fees
This is an additional fee that shippers pay TMS providers to integrate the TMS with their third-party applications. For example, they could have to pay an SMC license or PC Miler license fee.
2. Internal costs of ownership
The total cost of TMS ownership includes costs from the provider and costs for internal operations, finance, legal, and project management teams supporting the implementation. Shippers must examine the internal resources they will need to support a successful TMS integration—and the cost of altering their existing IT systems to accommodate the new TMS technology.
The power of customization
When shippers buy a TMS directly from the software provider, they can customize key aspects of the TMS dashboard. While some shippers may be wary of the additional implementation cost, it is important to note that this cost is often rendered insignificant by customization’s long-term benefits.
Automating customized logistics tasks and smoothing the overall supply chain management process can ease workloads for all teams involved in supply chain management and accelerate global supply chains.
Lower TMS costs with managed services
For shippers interested in lowering TMS costs, choosing a managed TMS can be an efficient solution. Managed TMSs significantly reduce the internal costs of implementing a TMS. Instead of leaving it to shippers to leverage this powerful technology across their shipping process, they can outsource management to the TMS proprietor. The outsourcing team will assign resources specifically devoted to the shipper’s shipment operations and leverage deep expertise and extensive resources.
At CTSI-Global, we take on a client-focused approach to TMS pricing, using our in-house HoneyBee TMS™ solution. Every shipper has different needs, goals, and challenges. We work with our clients to build customized TMS packages and dashboards so shippers pay for features that meet their company’s specific objectives.
Invest in more intelligent supply chains. Contact CTSI-Global to start realizing the benefits of holistic, innovative logistics technology.