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How to Quantify the Cost Saving Benefits of a TMS for Parcel Shipping

While ROI can be used as a rudimentary gauge of a technology investment’s profitability, it can be a challenge to build a business case and quantify the cost saving benefits of a Transportation Management System (TMS) for parcel shipping without familiarity or experience with the technology. The following is a summary of the benefits, both hard and soft, that would comprise the cost savings portion of a typical ROI analysis.

1. Intelligent Carrier Selection

Using a TMS for parcel shipping to automatically analyze carrier rates within the shipper’s transportation network and select the lowest-cost carrier has shown to reduce overall transportation spend from seven percent to two percent depending on the volume, mode, and service levels used by the shipper. Larger savings are found when the shipper is either shipping heavy products and using more expensive LTL or FT moves or needing to compare LTL to parcel.

2. Automated Business Rules

A TMS for parcel shipping with advanced business logic can “filter” transactions through the shipper’s business rules, attaining even higher levels of automation. For example, if a shipper implements a promotion offering free shipping when the order amount is greater than fifty dollars, the TMS for parcel shipping will execute the shipment according to this rule.  Rules can run exclusive of each other and can be turned on or off in one click.  Cost savings achieved via business rules can be high, driven by labor savings, customer personalization, or customer service.

3. Integration with the Supply Chain

In many cases, the shipping function is a standalone process at the end of the supply chain. But when shippers integrate the TMS for parcel shipping with supply chain systems, shipping is now a seamless process within the business.  The TMS for parcel shipping accepts downloads of expected orders from the ERP or Order Management System and sends back key shipping transaction information for real-time status updates throughout the organization.  Product handling during fulfillment is reduced and customer service is improved.  Cost savings in this sector can be substantial when coupled with multiple modes of transportation that have traditionally been disconnected from the overall process.

4. Increased Functionality

Adding new capabilities to the existing shipping workflow will add cost saving benefits.

  • Address Validation: Correct the address to avoid carrier surcharges.
  • Shipment Consolidation: Intelligently group and rate shipments to the same or similar destinations.
  • International Shipments: Automate this complex shipping process to eliminate bottlenecks, reduce errors, meet compliance requirements, and increase efficiencies.
  • Multiple-Mode Shipments: Execute all shipments (parcel, freight, international, etc.) from the same system.
  • Multiple-Location Control: Use the same, centralized system across all shipping locations.
  • Drop Shipping: Outside vendors can use the system to ship to customers, reducing overhead and improving information regarding the shipment.

5. Improved Customer Service

Using a TMS for parcel shipping has been shown to markedly improve communication and better serve the customer. Proactive functions like email notifications and immediate track-and-trace with the carrier significantly decrease calls to customer service.  Ultimately, satisfied customers yield repeat customers and increased business.

6. Carrier Performance Review

With all shipments from all locations in one system, shippers can use Key Performance Indicators (KPIs) to track carrier performance and facilitate better carrier contracts and rates. Specific KPIs such as cost/mile/delivery can be easily calculated through basic reporting.

Reduce Transportation and Fulfillment Costs Today

With more than 1,500 collective years of experience and a strong track record of success in a broad spectrum of industries including consumer products, retail and e-commerce, technology, and manufacturing, Logistyx TME, a state-of-the-art Transportation Management System for parcel shipping, has supported mission critical supply chain execution for more than 1,000 customers worldwide.

Learn how to choose the right TMS for parcel shipping for your unique shipping environment.  Download the e-book: Logistyx Quadrant: Choosing a TMS for Parcel Shipping.