Initial One Time Set-Up Fees
File Integration: One-Time Cost
There are three ways to accomplish the electronic OMS file exchange. Each impacts pricing and real-time updates.
Freight management data connectivity that is listed below are the options in order of cost and complexity. (The lower the cost, typically the lower in real-time updates.)
Spreadsheet ($5,000 to $10,000)
File are exchanged via an Excel or .CSV file.
Shipper order file.
Return file from LSP that includes cost and BOL information for tracking.
The shipper would either need to continue the tracking of the shipment via a portal provided by the LSP or LSP would provide a status summary email, as required by the shipper. In many cases, this status file can be an Excel spreadsheet which is loaded back into the buyer's system for direct semi real-time data updates.
FTP Flat File ($15,000, plus or minus $2,500)
Same as the above file, but instead of portal or email updates an additional electronic file would be brought into the equation that would feed the shipment activity with updates until delivered.
Full EDI / XML interchange of acknowledgment of all shipment information ($35,000, plus or minus $5,000)
Number of EDI / XML connections with company systems.
Number of EDI carrier connections.
Number of FTP flat file connections.
Number of portals for query and input by carriers, internal departments and external sources.
Number of manual entries via the service provider.
The connectivity option a shipper chooses is typically based on the volume of shipments, complexity and the level of real-time visibility the shipper wants within their own system.
There are two reasons for this excessive cost:
The LSP makes the integration and start-up sound harder than it is to prop up pricing.
The upfront work is weak, meaning the file exchange and the data required to go into and then come back out of each system is not well defined, which causes code to be written and through testing multiple times.
Another aspect of not doing all the homework upfront is there is not enough research done to discover and vet a single file that can accomplish the desired results, which then drives the connection work to be multiple files and therefore multiple integration points.
In addition to the one-time file OMS interchange costs, there can also be one-time freight carrier interchanged costs also for tender and acceptance, along with tracking information.
The decision of how many carrier electronic exchanges will be determined by the LSP and MTS buyer. The reason for both to be a part of the decision is because the complexity and / or real-time updates required will be a part of the service level agreement (SLA) and monthly ongoing cost. Assume the cost of each carrier EDI / XML connection will be between $2,000 to $5,000 per carrier.
General Set-Up, Training & Travel: One-Time Cost
Outside of the file interchange costs, a buyer of managed transportation services will typically see set-up charges and travel expenses (if required) within the pricing proposal.
There are several standard functionality, reports, user set-ups that are already included in a managed TM program. Various LSP's have variations on how they look at this cost, so on the low end expect $5,000 and the top end may approach $25,000. Again, complexity of the program will drive this cost. Many of the small to medium size shippers incur $5,000, so do not let this number scare you away from the solution. Travel would be invoiced as a pass through.
A note to add under the section of one-time costs is they are typically charged on an hourly basis, which can be as low as $100 an hour to as high as $250 an hour. The point to be made here is vet the work fully before jumping in on the actual program efforts. Multiple change orders during the process will drive unnecessary delays and budget overruns.
Before moving onto the monthly management fee associated with a freight management program, we must give a word of warning to buyers. We have seen where shippers have been charged upwards of $250,000 for the one-time initial set-up charges. Please do not let your company be taken. Ask the hard questions and look at as many possible freight management companies as possible from the largest 3PL logistics providers to the medium sized ones.