Part of any successful company's shipping strategy should involve budgeting for transportation management system (TMS) software solutions. As technology continues to evolve, it opens doors for businesses of just about any size to incorporate the many resources the right TMS can offer. All it takes to have benefits like carrier and procurement management, route and load optimization, market data, invoicing, audit & pay, and more at your fingertips is adding this cloud-based software to your operation. So how do you budget for this addition?
How Much Does a TMS Cost?
The cost of a TMS has come down considerably over the years, thanks to the advent of cloud-based platforms (which also add the benefit of ongoing updates & improvements to the software). Budgeting for TMS software then comes down to consideration of four elements:
- The initial purchase cost of the software
- The cost of implementation
- Ongoing licensing costs
- Support costs
Breakdown
Most of the above components are pretty self-explanatory - shop the market for leading TMS solutions to see how much the initial purchase price is, and what's included. When it comes to ongoing licensing and support, the same is true that it varies by company. While there are still licensed TMS software options out there, cloud-based seems preferable for both cost and ongoing updates and support. Plus, cloud-based solutions tend not to require dedicated in-house IT staff to maintain - saving staff time and cost. The component above that's a little more complex? Implementation.
Implementation
The cost of implementation varies greatly by a number of factors - number being the key word there. Your company should have counts of:
- Internal and external users
- Integration points
- Total carriers
- Carriers to directly tie into the TMS
- Customers
- Modules required
- Custom modifications needed
All of these elements put together land you at the cost of implementation (and also speak to how simple or complex the process will be). The higher the number on each one correlates to higher costs of implementation as you may expect, though scale can come into play after awhile for the largest companies.
Focusing on that last bullet - custom modifications can make the implementation pricier, more time-consuming and in the future, can make upgrades trickier (negating some of those cloud-based advantages). So ensure that what you think you need is actually needed in this regard - as staying as close to the base product as possible tends to be a smoother route.
Also remember that any changes from the initial assessment heading into implementation - like a modification of system requirements - can add to the implementation cost, so making a plan and sticking to it is key. When it comes to implementation, a certified integrator can help you with each step of the process - from planning to execution. In fact, many TMS software vendors will point you to a recommended partner to make things easier for your business.
Additional Cost Considerations
On top of what's listed above, there are a few additional cost considerations to keep in mind. Some outside software packages may be needed to incorporate full TMS functionality when it comes to things like rating tables, shipment track and trace, routing optimization and more. Working with an integrator helps in this regard as well, as the integrator can ensure these add-ons work seamlessly.
Cloud transaction pricing is another element above and beyond the licensing and support costs. Depending on the provider, a TMS may either offer pay by transaction or pay by a block of transaction options. A typical cost per transaction runs between $1 and $4 - with variation based on the total number of transactions. There are some TMS systems that claim to make these transactions free, but know that those typically require use of proprietary contracts with less functionality - often pushing users into a paid tier anyway.
If you have questions about any (or all) of the above, or if you need a certified integrator, we can help. At InTek, we are a certified MercuryGate TMS reseller, integrator and support provider - with experts ready to take you through every step of the TMS process. Just fill out our quote request form and we'll be in touch to get you started. For more information about InTek, or logistics and supply chain issues in general, check out our Freight Guides., including one on all things TMS.
