TMS Implementation and Criticality of Rate Maintenance

An issue that constantly comes up both during and after TMS implementations is the amount of work, resources, and the details required to maintain rates within TMS, and how much a company underestimates or under prepared, for this critical work required in TMS. This is more pronounced for a company that has many lanes and had to maintain thousands of rates.

On one side the challenge would be with system rigidity, for example if a company is moving to a more structured TMS such as OTM, BY, SAP etc. from either a smaller system that is somewhat less rigid in how rates are created or from an environment where the daily load planning and rating processes are managed manually, then the rate maintenance could be one of the bigger challenges during TMS implementation.

Another challenge would be on the people side when there are not enough resources to manage the workload or lack the skills in effectively managing the routing guides. The work required to maintain these rates in a dynamic transportation environment, where local and global supply chain changes will have a constant impact on negotiated rates, would mean a need for continuous updates to TMS rates.

Rate management is one of the complex processes in a TMS system, requiring uploads of multiple csv/spreadsheet files and many times companies use external or internal tools to automate and standardize the rate creation process, thereby reducing effort and input errors in the TMS. Teams often build SOPs to standardize naming conventions for regions, zones, tariffs, rate offerings, services, charge codes and other parameters, and all these efforts are to address the key requirement of uploading rates into TMS in a timely manner, as changes happen to rates.

The Role of Carrier Management in Rate Maintenance

For any TMS, the activity of configuring rates/tariffs is key in driving how effectively loads will be optimized, routing guides are followed, multi-stops are planned and fleet vs. common carrier decisions are made.

Carrier management (CM) team is usually responsible for maintaining rates in TMS but also support logistics teams, such as logistics coordinators, planners to make sure the carriers and routes they serve are accurate. They help the settlement and finance teams, with the discrepancies in the invoice charges from carrier vs. the charges created by the system during rating, in addition they also resolve issues related incorrect carrier assignments on loads, incorrect routing guide configurations etc.

Many times CM team creates a routing guide, based on carrier costs, carrier capacities, commitments, performance, equipment type, product or commodity types etc., and these could reside in a spreadsheet or another form outside the TMS that becomes a reference for LC’s, however if the rates within the TMS are not configured using this same routing guide, that’s when LCs face the challenge of reconciling the rate, route the load  manually or perform workarounds, and this increases the time spent in planning which could be eliminated with proper configuration of rates.

It is best that CM team works with TMS specialists, who have a deeper knowledge in considering all required configurations for a TMS, in updating the rates within TMS.

Rate Maintenance Considerations

For a load to properly follow a routing guide and assign a carrier with best cost and service performance, TMS system needs to be configured by considering many factors such as

1. Geography: Rates based on geographic specificity, such as location to location rates, postal/zip codes, zones/regions, states, country level or a combination in between.
2. Performance: Carrier performance grading based on the review of carrier on-time pickup, on-time delivery and other criteria.
3. Capacity and Commitments: Daily, weekly, monthly carrier capacity on a lane and the commitments negotiated with the carrier for each lane.
4. Effective and expiration dates of rates.
5. Modes: Such as TL, IM, LTL, Parcel, Ocean.
6. Equipment types, wait times, business hours and others.

In addition to the above configuration of rates, the following factors also contribute to how a load is assigned to a particular carrier or which tariff/rate is used.

1. Latitude/longitude: Location lats/longs will determine how accurately distances are calculated and hence how accurately rates are calculated.
2. Itineraries: Which define whether there are intermediate stops such as hubs, depots or specific routes that need to be considered based on customer needs.
3. Zones/regions: Maintenance of zones to properly include all postal codes, cities, locations/facilities within a region, can help a proper multi-stop load planning.
4. Facility business hours/calendars: This will help accommodate pick/drop and transit time calculations for each load, and the availability of dock appointments at a facility.
5. Carrier business hours/calendars; This will help how tender wait times are calculated, which can impact the water fall tendering and to see the carrier availability for a load.
6. Carrier equipment type configurations.
   1. Based on specific company needs such as a flatbed truck or fifty-three-foot trailer or a tanker, a specific rate can be configured for an equipment type.
7. Dock constraints, opening closing hours, any other restrictions that will determine dock availability for inbound/outbound loads at a facility for a specific tariff.

A TMS specialist of a company can help review these different configurations to allow a TMS to assign proper rates and routes that will help plan an optimized load.

The Need for a Periodic Review of Tariffs

Tariffs specifically need a frequent review such as quarterly, monthly, or as necessary, in addition to the rates negotiated annually, where the company is in a more dynamic supply chain environment or where the business is in a growth trajectory and need to manage their costs effectively. With the advent of brokerage firms that provide dynamic rates through API connections or providers that host and facilitate freight auction, a company has many options to consider in creating a routing guide that minimizes the overall transportation costs and improve the effectiveness of rate structure in the TMS system.

With every new release cycle of a TMS, many vendors are offering new features to simplify updating TMS rates. A company’s TMS specialist along with carrier management team, can help configure the system to rate the loads optimally and get the least suitable cost for each load.

In Summary

For proper routing, assigning a best rate, and reducing the manual interaction on each load, having a good tariff/rate data and all associated configurations within a TMS is critical. The need for a carrier management/procurement team and TMS specialists, both the skills and size of the team, who maintain these configurations is vital, which ensures a better load planning and reduction in transportation costs for the company.

In general, consider the following for the best rate assignment to each load:

1. Resource Needs: Having correct staffing, a skilled carrier management team and TMS specialists with deep TMS configuration knowledge is the first step towards a better rate maintenance.
2. Process Standardization: Secondly, for creating and uploading thousands of rates into a TMS, process standardization, creation of SOPs and using any tools for automation will reduce time and errors for this hugely challenging task.
3. Rate Maintenance – Periodically checking the tariffs for inconsistencies with any change in business needs, adjusting rates, and uploading accurate rate files will help maintain optimal carrier and cost assignments.
4. Other TMS Configurations – such as business hours, calendars, wait times, docks, equipment types, itineraries, zones, dock constraints, multi-stop etc., will also contribute to a better load planning and rating.