The modern supply chain is increasingly complex, with many modes of transportation management operations and regulatory concerns impacting the industry’s day-to-day operations and long-term goals.
A transportation management system (TMS) is a core piece of supply chain management technology that utilizes automation and real-time data to streamline processes, reduce errors, and keep costs low. A TMS is specifically designed to handle the planning and executing of shipments and optimize the entire process for industry players—from shippers and brokers to third-party logistics (3PL) firms.
With the right TMS, businesses in the transportation industry can positively impact their operations with enhanced customer service, increased productivity, and maximized cost-efficiency.
What is a TMS?
TMSs provide the ability to coordinate specific information about orders with carrier system data. TMSs handle everything from finding and comparing carrier rates and services to booking shipments and tracking loads through delivery.
The overall supply chain management market includes designing, executing, controlling, and monitoring supply chain activities. TMSs greatly help with transportation logistics within a company’s supply chain management and automating processes to continually find ways to save time and money, such as through tracking on-time performance and accurately handling invoicing.
Major TMS features include real-time visibility into the supply chain, automation across functions, dashboards, reports, and visualizations connecting and measuring all aspects of transportation. TMSs also manage deep data pools on every aspect of transportation, shipping, and business operations providing analytics and reporting.
A good TMS replaces outdated and inefficient manual transportation operations with an automated approach to planning needs, optimizing routes, managing carriers, and executing and tracking shipments.
Why You Need a TMS
With a growing freight transportation market, rapid e-commerce expansion, increased logistics outsourcing, and the shift to Software-as-a-Service (SaaS) options, TMSs have never been more timely. They help with accelerating freight brokerages, adding or expanding managed transportation, reaching a larger customer base, sustaining sales growth, diversifying into new products, expanding retail channels or products, and adding wholesale distribution.
A TMS also enables dynamic pricing through a combination of market data and artificial intelligence. This makes buy-sell for complex contracts easy to set up, gives instant access to historical truckload freight rates for quick decisions informed by comparative analytics, and sets intelligent pricing rates using machine learning to spot market rates.
Centralizing your data in a TMS makes it quick and easy for onboarding carriers who need access to data across contracts, tax forms, and insurance. Transportation Management Systems can also regularly update with changes to integrated systems, including changes made to the U.S. Department of Transportation safety data. And finally, the TMS includes an integrated map display for better route planning, tracking, and decision making.
3 Major Transportation Management System Operational Benefits
Here are the three major operational benefits of a TMS
A TMS Enhances Service
Real-time visibility into the status of shipments provided by TMSs has a wealth of positive benefits that enable companies to enhance their customer service. Customers receive timely alerts for deliveries and delays, but—more importantly—when service disruptions arise, the TMS empowers companies to immediately implement corrective actions for on-the-fly adjustments to minimize the negative impact on their customers.
Customers value companies that give them the tools to make the best decision for their business needs. TMS analytics and reporting compile data on key performance indicators—such as shipping cost, time of transit, on-time delivery rates, and damage rates—so customers can configure, design, expand, and fine-tune their own analytics.
Internally, these insights can address issues such as rate discrepancies and on-time service performance to automate invoicing and better understand where efficiencies and potential cost savings might be found.
A TMS Increases Productivity
Integrating a TMS into existing software—such as enterprise resource planning (ERP) software and warehouse management systems—reduces the need for repetitive manual data entry. This helps to minimize mistakes due to human error and saves time that would have been spent correcting mistakes. Integrating these systems also allows for a record of orders that can be tracked from the distribution center through transportation and delivery.
Having total supply chain transparency in real-time provides valuable and relevant data for improving inventory strategies. When companies have visibility into orders and confidence around on-time delivery, they can more accurately forecast their inventory needs, improve their inventory planning, and implement inventory reduction strategies.
A TMS also improves supply chain efficiency through load and route optimization. Collected data and analyses inform strategies that lower expenses through practices like utilizing fewer vehicles and saving on fuel by optimizing routes.
And finally, by automating payment processes, a TMS reduces the chance of errors while dramatically reducing the amount of paperwork involved in these procedures.
A TMS Maximizes Cost-efficiency
Automating the billing process reduces paperwork and errors and also provides measurable savings in freight invoices by catching inaccurate charges and duplicate payments. TMSs allow for transportation accounting, with built-in freight payment, consolidation and auditing services, and electronic invoicing.
A TMS compares received invoices with original shipment rates and automatically approves payment and creates customer bills when the amount matches. Because the process is automated, the accounting department only gets involved when there are discrepancies or exceptions.
The TMS-powered billing process provides a very direct view into bottom-line savings, but the full range of efficiencies and improvements in transportation management operations enabled by a TMS add up to significant savings. Everything from improving customer service to optimizing inventory has a bottom-line impact.
At the most basic level, a TMS enables cost-efficient transportation through three core functions:
- Selecting the best carrier option
- Choosing the best-suited route
- Creating speed and efficiency across the operation
And the main objective of a TMS is focused on the bottom line—reduced costs for both the business and the end customer.
How to Choose the Right TMS for Your Business
A TMS is an important piece of the supply chain management picture, but the options can be confusing because there are so many to choose from with wide-ranging features and functions. Everything from a basic system serving as a one-trick pony to fill a specific business to modern, complex TMSs capable of expanding and growing to meet ongoing business needs.
When comparing transportation management systems, pay attention to three key factors: visibility into real-time transportation pricing, understanding market rates to source carrier capabilities, and tracking and managing existing freight.
A transportation management system (TMS) comes in on-site and cloud-based system formats. A cloud-based TMS is easier to implement—therefore requiring less time spent on training and installation, faster deployment, and less maintenance. A cloud-based system is updated remotely, keeping it up-to-date with new features and security.
Optimize Your Operations with a Transportation Management System (TMS)
The core benefits of a transportation management system are clear: they automate processes to improve service, increase productivity, and save money. To learn more about how a TMS can simplify transportation for shippers, brokers, and 3PLs, download our eBook, Optimize Your Operations with Fully Connected Transportation Management.