Choosing the right TMS for your small or medium-sized business can be challenging due to the massive selection of these tools on the market. In addition to deciding on the features you need, you should compare different prices and select the best one. Several factors go into choosing the right TMS and can significantly affect implementation costs.
Depending on the following features, you may need to pay $10k to over $500K for your TMS solution.
Your choice of TMS depends on who it’s developed for and on what platform you get it. Each platform offers different features, affecting the prices as well.
A custom-built TMS can cost higher than other versions because of the features and the development process. That’s the difference in prices you can see in any custom-built and off-the-shelf product. A custom-built TMS allows you to integrate any feature the business needs that you can’t find in pre-built tools.
Getting a customized TMS may not be cost-effective if you have a small to mid-sized business. You can benefit from any TMS software capable of covering basic features.
However, considering the unique benefits may justify the added costs. When you build your own TMS, you have full ownership and control over every part of the tool. You can add or tweak features down the road after getting feedback from your staff. This way, the tool perfectly matches your business operations and gives you a competitive edge.
One of the best ways of developing an in-house TMS is to ask your IT department to do the job. This way, you can develop the tool at a much lower cost than outsourcing it. In addition, you can handle implementation and upgrades within your own company, reducing costs significantly.
However, if you decide to outsource the development, the cost of the transportation management system will depend on the developer company’s rates. You should expect to pay at least $200k, but the price can increase depending on your desired features.
Still, outsourcing the development of the TMS software for your company can be highly justifiable. You own the software, so you don’t need to pay subscription fees. In addition, you may decide to sell or rent the software as a SaaS, generating income for your company.
There are tons of pre-built TMS tools that you can choose to fit your business industry, goals, and requirements. These off-the-shelf solutions generally cost less than custom-built tools because they offer features that a wide range of businesses can use. In addition, they offer different subscription and payment plans that let you choose based on your budget. Depending on the platform you implement the software on, you can have two TMS types, on-premise and cloud.
On-premise TMS is like the legacy software we purchase from developers or vendors and install on our devices. You purchase the software from the vendor and operate it on your network after installing it on your servers. Thus, you should consider infrastructures and hardware when using on-premise solutions.
You need your own IT team for support, maintenance, and updates installation. You may also be able to customize some features or add new ones if your business needs them. As a result, you should consider extra costs you should pay down the road.
The initial cost of purchasing an on-premise solution can be $10k to even $500k. You purchase the ownership of the software, making it a one-time purchase. The prices vary widely because of the reasons discussed later in the article.
Another pre-built TMS solution is available on the cloud. Cloud-based TMS is offered to many users through the internet, making it flexible and cheaper than other types of TMS. In addition, since the software is web-based, you don’t need any hardware or infrastructure to house it. The TMS is on the vendor’s servers, where they install all updates and features. As a result, it’s perfect for a small or mid-sized business without a dedicated IT team.
The purchase plans are also less expensive than on-premise TMS. You don’t need to purchase the ownership of the software, so you’ll only pay monthly subscriptions for the services you use. Some vendors offer their products on a per-customer basis. So, you only pay for each shipment when you have incoming or outgoing cargo.
Depending on the features you get, the vendors of cloud-based TMS tools may charge you $5-$500 a month. If you pay per customer, the prices can vary between $1 and $5 for each shipment. That’s a great price, especially if you don’t have many shipments every month.
As mentioned, the overall cost of a cloud-based system is less than an on-premise solution. The upfront cost is lower because you don’t purchase the software’s ownership. Plus, it has a faster implementation process because other users have purchased and utilized it before, solving potential issues.
Most TMS tools allow you to choose among a few plans offering various features. You may find a tool with minimal features, allowing you to apply carrier management only. Such a tool can be as low as $5 a month, regardless of the number of your monthly shipments. Another one may charge you $500 a month but offer everything you could want from a TMS tool, automating every step of the process.
Basic and pro versions can vary widely depending on the functionalities they offer. Most TMS vendors lower their rates as the number of your customers increases. Thus, if you have 50 shipments a month, you’ll pay less than when your shipments reach 100, even if you use the same services.
Getting a transportation management system for your business is more than purchasing software from a vendor. It involves a lengthy process of preparing your company’s infrastructure, configuring your software, and implementing the tool. You may need to integrate other software, such as warehouse management or accounting tools, into the TMS.
Implementing the software may be an entirely different process that doesn’t fall under the vendor’s responsibility. You may need to hire another team or use your own IT department. If you outsource the implementation process, you should expect to pay extra fees to the consultants.
They may work full-time or part-time, charging you hourly. The number of consultants and the length of implementation affects the final cost. Depending on the company and the work involved, they may charge you $100-$200 an hour. Because implementing a TMS platform can take four months to a year, you should add up the costs of consultation and integration.
However, many vendors don’t charge you extra for implementation. That’s particularly the case with cloud-based solutions, which are easier to implement.
As beneficial and crucial as it is, getting a TMS can be a huge financial burden for your business. Therefore, you should weigh all the financial aspects before choosing the right TMS for your small or medium-sized business.
It’s vital to ensure the TMS provider has transparent cost structures to avoid hidden costs. Negotiate all the plans, upfront costs, and services to clearly understand what you need to pay for. Some providers set up and implement the software for free, while others don’t. These hidden costs can affect the software’s ROI if you don’t consider them in your planning. You should negotiate the following costs with the TMS vendor:
Purchasing a TMS program is the first step in the lengthy process of optimizing and automating your transportation. After setting up the software, you’ll run into issues requiring vendor support. The developer may offer upgrades, or you need further customization to match the software with your business goals.
All these scenarios require thorough negotiations with the vendor to see if you’ll need to pay for these services.
Preparing and training your staff on how to use the software is a fundamental step in implementing TMS. The vendor may need to train your IT team even if you have a dedicated IT team that trains your staff. It can also take a long time before the staff becomes proficient and the tool is fully operational.
Most vendors have free trials that enable your staff to get used to the new system before installing the actual software. So, talk to the vendor to predict all these scenarios before signing a contract.
When you integrate a TMS tool into your supply chain management software, different parties may be involved. Vendors, shippers, drivers, or brokers may need to access the software on their devices. As a result, you may require mobile apps in addition to PC software. That’s an essential point to negotiate with the vendor. They may charge you extra for providing the mobile app, which can be a substantial additional cost.
You should also make sure that the software is compatible with your hardware. For example, if the software has high system requirements, you may need to upgrade your old hardware. This will incur massive costs, which you should predict before purchasing the software.