What Is a Transportation Management System? TMS Explained
The global economy is filled with incredible opportunities. But there are downsides, too. Globalization has in some ways increased the difficulty of moving products. A single load can move between multiple countries, using a combination of truck, train, and rail. And a different transportation company may operate each segment of the journey.
Many businesses use a transportation management system (TMS) to handle and automate all those moving pieces. In this post, you’ll find out what a TMS is and why one might be a good fit for your organization.
What Is a Transportation Management System?
A TMS is cloud-based software. It helps you get products where they need to go with the greatest accuracy and lowest cost. Everyone from huge carriers to small operator-owned truck drivers uses them.
Why Do Organizations Need a Transportation Management System?
Basically, Amazon has spoiled everyone. Today’s consumers want what they want, and they want it right now. And they want the shipping to be free, too.
According to a report called “The State of Shipping in Commerce,” customers’ expectations of shippers are higher than they’ve ever been. A startling 39% of abandoned carts on e-commerce sites were due to lack of free shipping. Another 26% were due to slow shipping.
That puts tremendous pressure on retailers and on everyone in their supply chains. It affects their entire distribution network, from sourcing materials to manufacturing products to getting finished products to their destination.
Who Uses a Transportation Management System?
Any business that needs to move goods from one place to another quickly and accurately uses a TMS. Examples include:
- Brick-and-mortar retailers
- E-commerce sites
- Manufacturers (inbound for raw materials and outbound for product delivery)
- Businesses that provide outsourced logistics services
What Does a Transportation Management System Do?
TMSs analyze many variables and provide insights. They help organizations streamline and even automate the complex process of moving goods from one place to another.
That’s a general description of a TMS, but let’s take a look at some specific ways transportation management systems add value.
Building the Perfect Load
Building the perfect load is the holy grail of transportation and logistics. And that’s exactly what a TMS is designed to do.
What does it mean to build the perfect load? It depends, and that’s why it’s so hard.
Shipping a single load may mean switching back and forth between trucks, container ships, and trains. One vendor may handle the whole thing, or a different provider may be in charge of each mode of transport.
At any point on the route, one organization may need to pool its shipment with the shipments of other businesses. Why? To maximize load capacity, for one thing.
And there’s one more aspect to building the “perfect load”: Nobody wants a deadhead on the road because an empty truck is a waste of resources. A TMS can help logistics managers find a load that needs transport.
A transportation management system uses artificial intelligence to weigh all those variables. Then the TMS comes up with a plan that identifies the best shipper or shippers and modes of transportation. It can even consider factors such as a carrier’s history of on-time-deliveries, accidents, and niche specialities (such as providing temperature-controlled shipping options).
To sum up, transportation management systems simplify and automate an important decision based on multiple variables.
When your organization first begins using a transportation management system, you and your colleagues may discover you’ve had some blind spots. For example, you may discover that while you thought your chosen carrier provided the lowest price, its record of late deliveries actually makes it more expensive.
Choosing the Best Route
Choosing the best route is important for cost control and for on-time delivery. Transportation management systems use algorithms based on real-time data to choose the best route for a particular delivery.
“Isn’t the shortest route the best one?” you might ask. Often it is. But a TMS also looks at many factors, including traffic, weather delays, and construction delays. This capability is especially important when the route includes hand-offs from one carrier to another. It also matters when crossing international borders. And it’s vital when moving from one mode of transportation to another, such as ship to rail.
Providing Real-Time Tracking of Your Shipments
Saving money isn’t the only benefit of a TMS. It also gives you real-time tracking of all your shipments.
Let’s say you see that a shipment’s running ahead of schedule. You can notify the receivers.
What if you see that a shipment is delayed? You can identify and solve the roadblock. This is especially important when a shipment has to be temperature-controlled. Knowing that there’s a delay and having the opportunity to take action can make the difference between an on-time delivery and a truck full of wasted goods.
Improving Warehouse Efficiency
Once your organization’s supply chain is working dependably, you may find that you can decrease the back-up inventory stored in your warehouses. In addition, knowing when to expect a delivery allows for more accurate scheduling. It frees employees to complete other tasks rather than waiting for a truck that’s running behind. And wouldn’t you rather have employees working instead of waiting around?
Managing Back-Office Processes
Shipping generates so much paperwork. But transportation management systems can take that paperwork into the cloud and make it work for you. Let’s look at some examples of this.
Providing a Home for Important Documents
All the shippers you work with will require bids, contracts, compliance documents, and other important paperwork. A TMS stores these documents in a searchable database. If you ever need to show proof of compliance for one of the many regulations shippers have to deal with, you’ll be able to get that proof quickly and easily.
Managing Invoice Processing and Payment
Transportation management systems can automatically audit invoices. How? By looking for invoices that are outside of expected parameters. Once the TMS has flagged an invoice, it can look for mistakes. These can include erroneous charges for lift-gate fees (which is when the recipient charges the carrier for using the recipient’s lift gate to move heavy loads).
Even better from a time management perspective, a TMS can automatically pay invoices that pass its audit.
A transportation management system can also generate reports that clearly show each carrier’s performance rate. You can then use that data to negotiate better rates with carriers.
Providing In-Depth Visibility Through Custom Dashboards and Mobile Apps
It’s important to be able to see where every shipment is in real time. But that’s just the start of what you can do with a TMS. Robust transportation management systems use multiple layers and types of data. By creating a custom dashboard, each user can see the information they rely on the most at a glance.
Custom apps can extend that capability—and more—to anyone in the organization. They make communication a snap. Drivers can customize their profiles to show whether they’re on track to make their arrival time. They can also track their fuel consumption.
Transportation Management Systems Cast the Role of Shipping in a New Light
In this article, you learned about the most important ways a transportation management system can add value. You found out how the complex global economy makes them necessary. And you learned some tips for using them.
But there’s one main thing to remember. By using a transportation management system, you can turn the shipping portion of your supply chain from a cost center into a strategic asset. You’ll make better decisions in the short term. Also, you’ll be able to use the insights you gain to provide long-term strategic guidance to your organization.
This post was written by Patti Podnar. Patti is a Copyblogger-certified content marketer experienced in writing for a variety of industries: logistics and supply chain, industrial internet of things, IoT, digital transformation, sourcing and procurement, retail, etc. The thing that enables her to write about such a wide variety of topics is a deep understanding of how content should drive business goals.