Today’s transportation environment is definitely a challenging one for shippers, particularly for transportation managers. Transportation costs are increasing due to a rise in energy costs, a growing driver shortage, increasing carrier regulations, improving freight volumes, and a limited investment in transportation infrastructure. Executives are putting pressure on their transportation managers to reduce these shipping costs while at the same time improving or maintaining customer service levels. The first area where those in charge of shipping place their focus is on carrier pricing—the belief being that if they can just get lower rates out of their carriers, then everything will be fine.
But what happens when the call to action for carriers to reduce their rates results in the same pricing that has been in place all along? Or worse yet, the carriers actually respond with an increase to their freight rates? Unfortunately, this is the reality that most shippers are currently facing. Savvy transportation managers know that if they are to reduce their logistics costs, then they need to take a more holistic view of their supply chain.
When attempts to reduce carrier rates fail, it’s time to implement transportation process improvement strategies that lead to long-term cost savings. In order to supplement the effort towards these process improvements, a growing trend is to invest in transportation management software (TMS). In order to justify the investment in a TMS, transportation managers must present a detailed analysis of the return on investment (ROI) that a TMS can provide. This paper describes how those in charge of transportation can compile a formal ROI analysis, as well as “sell up” the proposition of a TMS to upper management.
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