Investing in a TMS (Part 4): IT Functionality

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TTS Technology SolutionsIn continuation of our extensive look into investing in a TMS, I want to turn your attention to the impact of TMS implementation on your IT department. Understanding your IT capabilities and where they lie with relation to a potential TMS is just as important as all other considerations including operations, accounting, and business plan integration. Your TMS investment will only add value to your company with complimentary IT capabilities.

Ask yourself the question, “Are my IT capabilities robust enough to handle this extensive new system?” Most companies will answer “no.” With that being the case, it is very important to understand the system requirements for a TMS and whether the cost of incorporating new requirements is within reach.

IT TMS Requirements

Your first step should be to consult with your IT department and develop their requirements for a TMS to ensure that you select one that they can support. The IT department needs to prepare estimates on hardware requirements for the various systems that interest you as well as estimated power requirements. Understanding how those requirements will interact with your current power supplier and generator will also help avoid possible power outages.

Moreover, IT needs to plan and implement required disaster recovery process updates before installation of the new system. One trap many departments fall into after long hours of planning is failing to test the plan. Once the software is installed, the IT department should block out times to make the system inaccessible for testing. They also need to consider how often to make back-ups and how to recover data lost before a back-up takes place.

As with any sophisticated program, training is essential for both the IT team and the end users. Make sure an IT person is present during TMS consideration, bidding and system installation. It is important for IT to know everything from support to programming. Assign at least one person for training on every aspect of the technology to help users with all difficulties. Subsequently, assign one IT person per department to help troubleshoot any issues.

On the other side, make sure the interface is easy to work with for end-users. When determining the right TMS for your business, consider how to deliver training to the appropriate audiences. Ask yourself the following questions:

  • Are online courses available?
  • How good is the help system contained in the software?
  • Will the responsibility to provide the training fall on my company of the software providers?
  • Will training need to be conducted face-to-face?

After determining your IT department’s requirements and capabilities, limit selections to the transportation management systems that work with your technology platform. If you have enough capital to upgrade your entire IT platform, then evaluate the most sophisticated TMS for your needs. However, few businesses can afford such systems and instead sift through their needs to decide what operations are most important for integration and have the best usability for your customers.

Investing in a TMS (Part 3): Understand your Back-End Functions

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As we continue our discussion on what makes a good TMS, I would like to turn your attention to the needs of your accounting department. It is very common for company executives to overlook how a TMS may benefit or be a detriment to their accounting department’s needs. However, there are significant opportunities for a new TMS to act as a catalyst to improve accounting processes and reduce accounting costs.

TMS Accounting Functions

At the beginning of the evaluation process, determine which manual steps can be accomplished electronically. For example, an exceptional TMS can automate the entire payables function, saving time and money for smaller firms who manually receive invoices and cut checks. A system that auto-generates commission reports, calculates commissions, and produces checks provides an efficient way to conduct business.

TTS TechnologyWhile many TMS programs have built-in accounting functions, most companies choose to integrate it with their existing accounting procedures. So, when selecting a TMS, keep in mind the ability of integrating it with your current accounting package and whether the TMS you are considering has experience integrating with your accounting package.

Accounts Receivable personnel must be able to invoice customers through a variety of means including Electronic Data Interchange (EDI), paper invoicing, consolidated invoicing and email invoicing. I have found that a good TMS will support all modes of communication with regards to invoicing and successfully integrate with accounting programs to provide all required documents, such as Proof of Delivery.

Also, the ability for the TMS to retain required documents from carriers is very important as it directly impacts the function of generating bills. Look for a TMS that allows users to enter documentation into the system in multiple ways, such as scanning, faxing and emailing. For example, 3PLs work with carriers with varying means of documentation. Some carriers have the ability to complete all documentation online and want to work with a 3PL that accepts their documents electronically. Other carriers may still mail in their documentation, requiring the scanning of documents into the TMS.

On the accounts receivable side, it is important to show payments received to ensure the aging is accurate. An accurate aging allows for the accounts receivable personnel to focus their efforts on the exceptions, instead of the whole pie. Make sure your TMS will include this function, allowing the accounting department to quickly find and address outstanding bills.

TMS at the Back-End

Another back-end function to keep in mind when evaluating a TMS is claims management. By having your TMS track claims, all your information will be stored in one place, allowing personnel to more easily administer claims while determining and correcting freight and carrier problems.

The ability to monitor or track carrier compliance by approval requirements is an additional advantage. With a comprehensive TMS, approval requirements can easily be established to ensure that both trucks and brokered shipments are in compliance. If additional tracking is needed, you can arrange for outside vendors to help ensure that all carriers meet your requirements with this function.

In addition, your TMS should have the ability to attach documents to a record in your database, allowing you to add contracts to a customer or carrier. The ability for a TMS to track and record documentation will save time and effort, which will result in more accurate accounting for the company and all its constituents.

The ability to quickly sift through available documentation to determine if a dispatcher is profitable, or if an account is generating revenue according to your goals, will be invaluable to your business.  A good TMS will allow for this without having to go through a lot of steps to make that determination.

As logistics and transportation companies continue to invest in transportation management systems, it is highly important to not only understand how they can benefit your direct operations in scheduling loads, but also analyze their ability to streamline your back-end operations in accounting, compliance, claims and record maintenance. By making these functions as automated as possible, firms can reduce their overhead and employment costs without sacrificing quality by using a more efficient system.

Investing in a TMS (Part 2): Understand Your Operations Needs

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As our national economy continues to limp along, companies continue to purchase Transportation Management Systems (TMS).  What is it about a TMS that companies find so necessary that they would continue to invest in them even when the economy is struggling?  The answer to that question is simple: Return on Investment (ROI).  The ROI on a TMS must facilitate the “buy” decision through a number of different avenues.  One of the biggest avenues is in the Operations of the business unit that will utilize the TMS.  To extend the series, let us take a look at how operations affect your purchasing decision, focusing on the 3PL/4PL market specifically.

Operations Needs

When choosing a TMS, it is essential that you base your decision on your preferred methods of transportation.  All methods of transportation require some of the same information such as shipper, consignee and bill to parties. However, each mode of transportation also requires unique information specific to that method.

For example, many 3PLs offer multiple modes of transportation, so they must focus on acquiring a TMS that easily moves freight in all of the modes they currently utilize. Each mode requires different data elements that 3PLs need to track and pass on to all parties for a successful engagement.

4PLs have the ability to operate as a conventional 3PL, but often offer enhanced services along with the services offered by the 3PL.  Functions such as reverse logistics, order optimization, bid and capacity procurement and information dissemination are some of the additional offerings a 4PL should take into consideration when making their purchase decision.

As stated above, perhaps the largest area to gain ROI is in your operations.  Before engaging in a search for your TMS, sit down with your current operations staff and document their requirements.  Look for processes where efforts are duplicated on a daily basis and where, if these processes were electronic, the operations staff could utilize their time on other tasks that require manual intervention.

When deciding on a TMS, it is also important to understand which of your current services need optimization for efficiency and productivity.  If your customer plans and schedules their shipments, consider a TMS with an easy-to-use end-customer experience that connects you with your customer. Consider the ability to interact with all your constituents as a base line of a good TMS.

It is also important to consider making Electronic Data Interchange (EDI) an integral part of the communication efforts based on the methods by which your constituents communicate with you and ensure that the system supports those capabilities.  These benefits enable them to easily post their scheduled shipments and you to easily source their shipping needs.

Address your communications down to the lowest level of sophistication, such as a driver making a phone call from the truck stop regarding arrival time. By allowing for this low level of sophistication up to the highest levels, it is possible to increase productivity and efficiency for your brokers and your customers. Furthermore, computerizing your overall communications efforts allows the operators more time to deal with exceptions.

Also, consider the level of interaction your operations requires and your business goals surrounding order processing. For 3PLs/4PLs, the ability to quickly enter orders either electronically or manually is critical. Increased speed in order processing gives the company more time to perform more proactive tasks.

Lastly, when it comes to carrier selection and management through a TMS, it is necessary to determine the criteria needed to approve or decline a carrier. Look for a system that can track the insurance requirements your contract places on the carriers.  Tracking government data such as the status of a carrier’s authority or their current safety rating or CSA BASICs scores are other critical data that must have a home in any good TMS.  Then look for a system that allows you to enter your own rules for carrier selection as well as store data such as rates and FSC tables. Also, make sure the system can assist you in picking carriers for shipments based on criteria and data point constraints the end customers may place on the 3PL/4PL.

Every day, your operations employee covering the loads fights the battle of finding low-cost, efficient transportation alternatives and capacity for their clients. Understanding their operations needs along with your future business and sales objectives is critical when making a decision to invest in a TMS.

The Basics of BASICs

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Currently, there is a debate raging on the floors of the house and senate surrounding the Federal Motor Carrier Safety Administration’s (FMCSA) 7 BASICs scores. The transportation community is in an uproar over this new scoring system, stating that it will cripple the nation’s transportation and logistics industry. These scores were developed for the sole purpose of protecting the safety of United States citizens. The alert levels for each BASIC were established to help the government decide which carriers need “focused attention” on a specific BASIC area.

While this is very important, the data points provided by the government for the shipping industry to use leave quite a bit to be desired. The FMCSA’s own website has a notation on it in the Safety Measurement System page that reads:

“Readers should not draw conclusions about a carrier’s overall safety condition simply based on the data displayed in this system.”

If this is the BASIC, then why display it all?  If a reader is not to draw any conclusions from the data, simply making the data available causes confusion.

Further compounding the issue is a lack of direction on how the data points are to be interpreted.  I am not going to spend much time here talking about the government’s lack of direction or interpretation which is one of the scoring system’s biggest problems. However, I will say that because these scores are so difficult to interpret and so variable, it leaves the shipping public in doubt as to their selection of carriers. The problem here is that any shipper who uses a carrier with a BASIC in alert status could be drawn into a lawsuit for negligent entrustment.

The Seven BASICs

For the moment, I want to focus on the BASICs scores and the governmental alert levels and how it affects the shortage in truck capacity. For reference purposes, here are the 7 BASICs on which the FMCSA is attempting to provide scores:

BASIC's Description

For the sake of this discussion, let’s assume we have 11 carriers in a specific size category (peer) group, and the alert level for the BASIC being measured is 70%.  To determine a carriers’ rating on any specific BASIC, they are compared to how well they address the need of that BASIC relative to their peer group.  The score given represents the percentage of carriers who perform that specific BASIC better than the  carrier whose score is being evaluated.  With that in mind, Carrier A does better than every other carrier in its peer group, therefore it earns a score of 0%. Carrier B is second-best out of the 11 as only one carrier performed better than them, so they earn a score of 9%. And so on until you get to carrier K, who came in last with all the other ten carriers performing better than them, so they receive 91%.

Because any carrier whose score is 70% or above will be subject to governmental intervention in an effort to improve their score, the fitness of carriers I –K could be called into question. This will motivate shippers to refuse to do business with them. What happens to Carriers I, J and K when no one uses them to haul freight?  They cease to exist and the peer group shrinks to 8 carriers.  The transportation industry is already experiencing severe shortage in truck capacity. With BASICs in place, that capacity will only continue to shrink. As this peer group shrinks more carriers will be forced out of business until only three carriers remain. See chart for example.

Example

While getting carriers off the road who have demonstrated behavior patterns that are dangerous to the public was one of the original goals of CSA 2010, and in my opinion the most important aspect of the system, using a peer group review basis for determining the score on any BASIC is going to leave the shipping public without a clear path.  The lack of a clear and constant score for each carrier leaves too much to interpret by the shipping public.

Paul Stewart, Of Counsel, Jackson Shields Yeiser and Holt, LLC, and an industry friend, is working with members of Congress to get this information removed.  In an email sent to many people in our transportation industry, Paul urges everyone to support this effort:

One of our efforts at ASECTT will be to approach all House and Senate leaders of oversight responsibility for the FMCSA for the initial limited purpose of eliminating that portion of the SMS website (BASICS) which so inaccurately depicts more than the majority of registered carriers, and almost all smaller carriers.

We urge you to review ASECTT’s website (ASECTT.blogspot.com) and to join with us. If you are a broker or shipper, we ask that you endorse a letter which we will send to Congress asking it to direct the Agency to take down publication of SMS Data.  If you agree with this objective, please fill out the attached link and support this worthy cause. http://bit.ly/s8ginb

For the reasons Paul mentions, and the simple Basics of BASIC I have outlined above, I also urge you to support this effort to get this useless information removed.  You can follow the link above and join the effort.

TTS Approaching One Millionth Shipment

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As the New Year draws near, TTS, LLC is pleased to announce the approach of its one millionth shipment.

Since TTS’ inception in January of 2006, its core value has been to be the best agent-centric organization in the industry.  “It is because of our commitment to the support of our agents that we are reaching one million shipments so quickly,” said President and CEO, Andy Cole.

While other 3PLs were cutting back during the recession, TTS continued to invest in tools and support for their agent network. As they enhanced their services for their current agents, TTS achieved an agent retention rate that is much higher than most of its competitors. In addition, TTS set aggressive agent recruitment goals in order to expand across the U.S. and internationally, all of which they have achieved. Their strong approach to agent retention and recruitment enabled TTS to reach this breakthrough in shipment volume rapidly.

TTS Approaching One Millionth Shipment

TTS anticipates hitting its millionth shipment sometime in the next thirty days. Reaching this milestone within six years is significant for TTS. Not many 3PLs can boast such a rapid growth in shipment volume in such a short time.

TTS provides the best customized services in the industry to their agent network, which enables them to provide full transportation and logistics support to their clients.  Currently, TTS has 62 agents’ nationwide working with clients in every step of the supply chain and transportation process.

“Our sole focus is to provide world class support to our agents and their customers by providing them best in class technology, support services and a strong carrier base.  This allows them to do what they do best- provide great service to the customer, ”said Cole.

With the continued dedication to enhancing their agents’ business, TTS’s aim is to reach two million shipments even more quickly.

Investing in a TMS (Part 1): Know Your Future Business Needs First

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In these tough economic times, companies everywhere are focusing on controlling or eliminating costs as a means of achieving a higher bottom line.  One of the areas that many companies are looking at is investing in a TMS.  Companies realize that purchasing a good TMS system allows them to be more productive with fewer people.  It helps them eliminate billing issues, which results in a higher level of cash flow.  Finally, their customers are demanding more services be performed by the 3rd party and more information being shared back to them in an effort to enable them to become more productive on their end while controlling head count.

In a recent survey of transportation industry professionals, 70% of respondents said in 2012 they would increase their investments in IT with 53% of money allocated to researching and implementing transportation management systems (TMS). But how many of those professionals have mapped out how their technology investments will not only address current critical needs, but also maintain productivity in the future?

Many companies jump into investing in new technology without first understanding their corporate goals and end up having to retrofit that technology into their business plan. In our industry does technology build the business or do business needs build the technology?

Before investing in any technology, whether it’s a TMS, mobile applications, business intelligence or customer relationship management, map out your business plan including your current and future IT needs.

Anticipate Your Future Needs When Investing in a TMS

When evaluating your current needs, determine whether the current technology will still be productive three years from now. Anticipate how your objectives will change over the next few years. The technology that is most valuable to you now could become obsolete in two to three years. If you anticipate your goals changing, try to find a technology robust enough to evolve with you. If that is not possible, evaluate the importance of your immediate needs. Do they justify investing in a technology that can’t stand the test of time? If a merger is a part of your future, then you might want to scale back spending on IT to meet current needs, as your platforms may be replaced with those of the acquiring company.

With more than half of transportation and logistics companies looking to invest in TMS to take advantage of its healthy ROI and increased visibility, it is important to thoroughly understand your current and future business plans and how TMS platforms fit into those plans before making any commitments.

Social Media as a Load Board

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In 2004, Facebook changed the face of the Internet by better enabling users to connect and share information.

As social media extended beyond just being a platform to connect with friends and family to a business marketing tool, professionals have used it for a myriad of purposes. We have made new business partners, maintained brand reputation, shared vital information, provided immediate customer service, and gained feedback from our customers. However, just as we have found a great benefit from social media, hackers and scammers have also found ways to manipulate social media for their purposes.

Businesses in the transportation industry can just as easily be hacked or scammed online as any other. As we already know, many carriers and brokers have already lost money from being scammed through online load boards. One of the biggest trends I’m seeing in our industry is the use of social media as a load board. While it is understandable for professionals to seek out a different way to find and book loads, we must remember that platforms like Facebook and LinkedIn do not validate any information to prove that their members are legitimate business professionals.

Dangers of using social media as a load board

With so many transportation agencies jumping into the social media mix, it is vitally important to use these platforms strategically and not be blinded by all their benefits. It is much easier for a scammer to target companies via social media because of the lack of security measures to prove legitimacy. However, that should not stop you from using social media to network and share information with your colleagues or to manage your company’s brand.

Rather, before engaging in social media, adopt a comprehensive social media policy for your employees and executives, which details best practices for sharing information online. Be very careful about the information you provide online. For example, if a person gives out too much information about their company’s logistics, that information can be used to scam money from the company. Double check all content before sharing it and think about whether that information will be beneficial or hazardous to your business.

Social media is a medium to share expertise and opinions and build connections, so it is inevitable to meet future business partners on these platforms. When establishing business relationships with people met on social media, use the same validation strategies as you would if you were signing a partnership agreement with them. Before engaging in a business partnership:

  • Collect contact information and business references
  • Complete background checks
  • Validate active authority
  • Verify the company’s address, phone number
  • Validate the company’s insurance policy

It is always better to exercise caution when making connections online. Always use common sense and beware of using social media as a load board because of the lack of security. When just getting started, be sure to research and implement a social media policy. Monitor the information shared and use standard business practices when making business partners online.

Broker Freight Liability Insurance: Difficult to Obtain but Important to Have

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Picture this:

You have brokered freight and your carrier calls to inform you that an accident occurred while the freight was in transit, causing personal injury and significant property damage. Soon afterwards, a suit is filed claiming negligence on both the carrier and broker, even though the broker had nothing to do with the accident. This probably has happened to you or a colleague you know.

In today’s highly litigious society, lawsuits and lawyers have quickly become the anathema to solid business practices. Instead of the company setting its own course to navigate commercial currents, company executives discover that they must steer through the unfamiliar and seemingly treacherous waters of litigation. This trend is no more apparent than in our own transportation industry, where with so many people and organizations handling freight, blame can rest on any number of individuals.

Within the last few years, claims of negligence have extended to everyone who has anything to do with the shipment, including the broker. Carriers who are used to these kinds of suits typically have at least a $1 million auto liability policy. However, brokers and freight forwarders are just starting to be hit hard by these suits and are now scrambling to find a way to protect themselves.

With lawyers trying to glean every cent they can by suing all parties involved with a freight transaction, it’s becoming more important for brokers to have broker liability coverage to protect their business from becoming bankrupted by one of these suits.

However, as this insurance is only now gaining traction, broker liability risk is not covered by many underwriters. The insurance industry is just now coming to the conclusion that offering this type of policy is a good idea and a potential money maker. So, even though there is a high demand for broker liability insurance, there is a lack of supply to provide good, comprehensive policies.

Because underwriters are just beginning to write these policies, it is critical for brokers to thoroughly review them and make sure the policy they choose is aligned with their business objectives. There is no easy or quick way to identify a good policy. To determine the best coverage, policies need to be assessed based on the type of business in which the broker engages.

When you evaluate policies, weigh the cost of higher coverage limits against your budget restrictions. You should at least get a $1 million liability policy as it is now becoming inevitable for brokers to be sued for negligence; being prepared with the same minimum coverage as the carrier can go a long way. In my opinion, if you can afford a higher policy you should get it because one bad accident can quickly exhaust the minimum coverage.

Also pay close attention to who is listed as the carrier on the bill of lading. Many customers often list the broker as the carrier because they have no direct relationship with the company carrying their freight. However, many policies will not cover a broker if they are listed as such.

While it is not yet required by law, stay ahead of the game by researching, budgeting for and purchasing broker liability insurance as you move into 2012. While it is difficult to sift through the options and haggle with insurance companies, the protection will be well worth the effort.

The $100,000 Surety Bond, Why You Need It

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In my last article, I discussed some thoughts and concerns centering on the increase in Load Board Scams, along with some steps that carriers, brokers and agents can take to help prevent becoming a victim.  The Federal Government is actually taking steps to assist in this effort (Yes, you read that right!).  The first step is the Fighting Fraud in Transportation Act of 2011 and the $100,000 Surety Bond.

Imagine a world where you can get on the load boards, schedule a shipment, and know beyond a shadow of a doubt that the company you are working with is a legitimate broker or carrier and that you won’t be scammed out of your money and left with a large tab.

H.R. 2357 The Fighting Fraud in Transportation Act of 2011 is the first step to achieving that reality. Introduced in June of this year, the bill outlines several policies to make transportation regulation more effective:

  • A requirement for brokers and freight forwarders to carry a $100,000 surety bond instead of $10,000
  • Stricter regulation of broker surety companies so that they fulfill their obligations to brokers and forwarders
  • Significant penalties including unlimited liability for freight charges for those operating without the required authority
  • A requirement that there must be at least one corporate officer who has met minimum training standards or equivalent experience in all broker or freight forwarder firms

With the full support of three influential transportation groups, the Transportation Intermediaries Association (TIA), the Owner-Operator Independent Drivers Association (OIDA), and the American Trucking Associations (ATA), this bill is likely to become law.

Increasing the Surety Bond

One of the most controversial aspects of the proposed regulation is the increase in the bond cost for brokers and freight forwarders from $10,000 to $100,000. With the larger bond amount, there’s greater bond liability. This makes sureties stricter and raises the bar for freight brokers and their financial condition, making it harder for scammers to stay in business. While this increase is designed to weed out deceptive brokers, it may seem ominous to the small brokerage firms that the transportation industry was built upon.

The problem with this lies in the fact that not all brokers and freight forwarders are large companies. Most, in fact, are small family-owned businesses with limited cash flow. Having to post the $100,000 bond could be very challenging for these firms.  However, not all is lost. By partnering with large 3rd party logistics companies like TTS, LLC, small broker firms retain ownership of their business, while benefiting from the wide variety of services, such as full bonding, provided by the 3PL.

TTS fully supports the Fighting Fraud in Transportation Act of 2011 for a variety of reasons.

  • We support a carriers’ right to be paid the amount they negotiated as their freight rate without having to wonder if they will be paid at all
  • We believe that with the stagnant economy in general, scams are going to continue to proliferate
  • We support the higher bond requirement because we believe it will make it more difficult and cost prohibitive for scammers to enter the game

The end result of these changes will make for a more stable market place which will allow for carriers to be paid with greater certainty.  Once this happens, the carrier community will be able to eliminate the non-paid freight factor when quoting rates. This will allow 3PLs like TTS to lower their costs to the end customer while everyone realizes a slight uptick in profits.