What Is a Transportation Management System?

Transportation Management System
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Technology has revolutionized most aspects of our lives in recent decades. It significantly affected how we consume media, how we do our shopping, and even how we interact with each other. Therefore, it shouldn’t be surprising that a key aspect of the US economy – the moving of goods, materials, and freight – has also been impacted by technology. The Transportation Management System (TMS) has become a common topic of discussion within supply chain and logistics circles, as more and more organizations are turning to these systems to manage their ever more complex and digitized operations 

Transportation management systems represent the next logical step within today’s fast-changing marketplace. Companies of all sizes are looking into TMS software, trying to learn more about the technology and see how it will help them save time, reduce costs, improve customer satisfaction, and optimize their operations.

What is a Transportation Management System?

According to Gartner, “a TMS (transportation management system) is used to plan freight movements, do freight rating and shopping across all modes, select the appropriate route and carrier, and manage freight bills and payments.”

To put it somewhat differently, a TMS is used by organizations to digitally manage their freight operations, in place of traditional methods of management, such as phone calls, emails, and spreadsheets. Transportation management systems are an excellent fit between a company’s Enterprise Resource Planning (ERP) system and its Warehouse Management System (WMS). The TMS helps connect the two to increase the overall efficiency of the supply chain. All orders that flow between these systems will create continuity, speeding up the time from the initial customer order to the final delivery.

At its core, a typical transport management solution will have freight ratings, booking, and tracking functionalities. More advanced systems will also incorporate freight pay and audit, reporting, dashboards, and other modular features that can be added based on the users’ preferred customizations. In terms of the benefits of TMS, users can expect the following:

  • Reduce costs and grow their bottom line.
  • Save time and allow their team to focus on other value-added tasks and projects
  • Improve customer satisfaction.
  • Increase supply chain visibility and get more accurate insights into the company’s operations to make more informed business decisions.
  • Streamline collaboration between partners and other supply chain stakeholders.
  • Scale and grow your business faster.

The Core Features and Functionalities of a Transportation Management System

As we mentioned previously, every basic transport management system should be able to provide the following core features:

  • Rating Capabilities – Logistics managers that use a TMS will have a much easier time finding rates for their customers’ orders, as well as booking those orders for delivery.
  • Booking Capabilities – Instead of having to call each carrier or visit their website, logistics managers can use this basic functionality of their TMS to see all of their negotiated rates presented side-by-side. They can pick the rates with the best price-to-service level more easily and effectively.
  • Tracking Functionalities – Most transportation management systems are also tracking shipments from the warehouse to their final delivery destination.

Together, these three core features will help improve operational efficiencies and increase the supply chain visibility of an organization.

Additional TMS Features and Upgrades

While most TMS platforms provide the aforementioned rating, booking, and tracking capabilities, more advanced systems offer additional functionalities. These can sometimes be added as modules, meaning that logistics managers only pay for what they need. In other cases, they may come as a complete package deal with their TMS. Below are some of the common features of more advanced TMS platforms.

  • Freight Pay and Audit – This feature will help companies by automatically auditing each carrier invoice. Some TMS systems will be able to indicate which bills are within a given threshold and can be paid, while also calling out others that do not fall within the predetermined limits. This makes it easier and faster for financial teams to pay their carriers and helps them avoid overpaying by mistake.
  • Freight Estimates, Settlements, and Payments – The TMS software should also be able to quantify the delivery costs based on the desired freight shipping process, cargo weight, and distance. Similarly, it should enable your finance team to handle all invoices, payments, and vouchers, allocate costs, and allow for match-pay tolerances.
  • Order Integrations – An integration between the TMS and ERP systems can greatly increase the speed and accuracy of the booking process. As the order information flows directly and automatically from the ERP system to the TMS, users will never have to re-key the information. This automated process will eliminate any incidence of user error at this stage, which could lead to incorrect deliveries or other incidents.
  • Product Visibility and Shipping Support – Full product visibility will be able to showcase the entire shipment status from beginning to end. In some cases, it will also allow for the rating and routing of packages.
  • Load and Route Optimization – Some TMS systems also offer load and route optimization and consolidation. The TMS software can suggest which are the most efficient and cost-effective freight shipping methods for a group of orders. This allows logistics managers to book their loads more quickly and effectively.
  • Warehouse and Yard Management – Some systems are also able to keep track of real-time information originating from the warehouse. Such a system will allow the user to oversee all truck and trailer movement across all manufacturing, warehousing, and distribution facilities, streamlining both warehouse and yard management.
  • Reporting and Analytics Capabilities – The analytics capabilities of more advanced TMS solutions are a major incentive for many companies when they are interested in integrating such a platform into their own logistics processes. The actionable reports and dashboards provided here will allow users to better understand the many details of their freight spend and make strategic decisions based on this mission-critical data. These can also be used to analyze and evaluate carrier key performance indicators (KPIs) and total freight spend by item while providing more actionable insights to decision-makers.
  • Risk Management – With the auditing process being automated and the cross-border reporting being taken care of, logistics managers will not have to worry about any national or international shipping risks.

What KPIs to Track With Your TMS System?

For many organizations, simply streamlining and optimizing the day-to-day processes is not enough when it comes to their TMS software. They are looking for a platform that also allows them to track specific key performance indicators that help them evaluate how these processes are working. Among the most useful KPIs, we can include the following:

  • Fuel Efficiency – By tracking shipments and optimizing their fuel consumption, logistics managers can reduce their freight costs, build a more sustainable supply chain, and remain in compliance with all environmental initiatives mandated by the government. 
  • Shipment Yields – A low yield per mile, for example, can sometimes indicate an issue with fuel consumption. Every shipment’s yield can be broken down and examined for any underlying delays or extra costs.
  • Delays – Random inspections, paperwork issues, or unexpected traffic delays can all influence your per-mile shipment yield, increasing your transit time.
  • Loading and Unloading Times – While these particular key performance indicators don’t seem as important on the surface, they can add up over time, resulting in dead-time or having to reroute shipments. They are particularly useful in yard management.
  • Maintenance – Maintenance metrics help avoid any unforeseen down-times later on, and they will allow you to anticipate when your fleet may need to be replaced.
  • Damages – Keeping an eye on when, where, and why accidents and damages take place will help logistics managers identify the root causes and avoid and/or minimize them.
  • Productivity – This KPI will highlight how easily and efficiently shipments are being transported. If this metric is low, companies will tend to experience more delays, higher costs, and other related issues.

What is The Future of TMS Software?

As customer expectations keep rising, same-day deliveries and real-time shipment updates are also becoming more common. Constantly changing global trade regulations are also forcing supply chains to innovate and keep pace, oftentimes by investing in transportation management systems. And as the TMS market continues to expand, there are several innovation trends that we should keep our eyes on. These will include some of the following:

  • IoT Fleet Monitoring – Internet of Things (IoT) sensors and devices will make real-time fleet monitoring commonplace, helping to increase visibility, lower maintenance costs, reduce fuel costs, minimize delays, and improve safety.
  • Blockchain This technology can be used to build complex integrations between shippers, carriers, and customers while improving track and trace transparency and traceability across the entire supply chain. It can also be used to significantly increase data security.
  • Digital Assistants – Chatbots will offer real-time conversational responses related to shipment information, greatly improving customer satisfaction.
  • Artificial Intelligence and Machine Learning – By applying machine learning to historical data and trends, TMS platforms will be able to predict with a much higher degree of accuracy any at-risk shipments and help to plan capacity accordingly. Artificial intelligence will provide more accurate recommendations in terms of alternate delivery routes during periods of high traffic.

Conclusion

The market for Transportation Management Systems has never been more dynamic and competitive. Between 2020 and 2025, the compound annual growth rate (CAGR) is over 13%. In 2018, over 38% of shippers and 67% of third-party logistics providers had invested in TMS. With more and more retailers and logistics companies increasing their backhaul support services and reverse logistics, they are also looking towards TMS as a tool for the entire process. Many TMS systems will take the information from multiple providers and several different routes, organizing them into a single document.

The shipping manager will use it to make quick and informed decisions on how to effectively move freight from one place to another. In addition, retailers are turning towards omnichannel systems that can incorporate online, catalog, mobile, brick-and-mortar, as well as other sales channels under a single umbrella system. This puts the TMS on center stage as it can increase the visibility of all shipments from a single place. Such a bird’s eye view will greatly increase the effectiveness of the decision-making process of everything involving the transportation of goods.

As an experienced third-party logistics professional, Logistics Titans is at your service. Our multi-modal TMS platform provides full-scale automation throughout the entire shipment lifecycle. It can also be unified with over 200 automation integrations, including direct integrations with all major carriers and load boards. This means that your business can go from quote to delivered without any manual intervention.

In addition, our TMS solution has a unique rating capability that pools all shipping prices across the United States, displaying the most competitive rates in a single, user-friendly portal. And since its intelligent rating engine also integrates with the whole logistics services ecosystem, all 3PLs and asset carriers can display their rates in real-time. Our app-based system requires no hardware installation, can be used for tracking and tracing systems, and will offer real-time and on-demand shipment visibility. It will also enable drivers to capture proof of delivery and send directly from the app. Contact us today for more information!

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