Transportation Management System: Meaning, Importance, and Benefits
Transportation management systems help manage various transportation activities such as shipping, tracking, and delivery. A transportation management system (TMS) — also referred to as a transport order management system, transportation management solution, on demand transportation management system, 3pl transportation management system, or integrated transport management system—benefits businesses by providing cost savings, improved efficiency, and enhanced visibility into transportation operations, and can bring benefits across the entire supply chain. These transportation solutions also help companies and their logistics service providers or third party logistics providers manage transportation complexity, elevate their logistic transportation management, and provide reliable transportation data. Many of these tools include a web based transport management system and/or a transport management system app.
Let’s explore the meaning of a transportation management system, the importance of transportation management, and the benefits that a transportation management system can provide to a logistics operation.
What Is a Transportation Management System?
A transportation management system is a software system used to plan, execute, and optimize the transportation of goods. It is often used by logistics and supply chain management professionals serving manufacturers, distributors, retailers, and other industries.
Transportation management software fits within an organization’s structure by providing a central platform for managing all aspects of transportation, from route planning and carrier selection to shipment tracking and invoice management.
Transportation management systems allow companies to automate and streamline their transportation processes and managed transportation services, resulting in cost savings, improved efficiency, and better visibility of their supply chains, at various stages of execution.
The functions of TMS software include route optimization, which helps companies find the most efficient routes for their shipments, taking into account factors such as distance, cost, and delivery time. Data analytics provides valuable insights to help companies gain insights into their transportation operations and make data-driven decisions.
Additionally, freight auditing and payment functions within the transportation management system may be transportation management system requirements for some firms, as they help companies track and audit freight invoices to ensure that they are accurate and that the company is paying only for the services that it has received.
Carrier management allows companies to manage their relationships with multiple carriers, including tracking carrier performance and negotiating rates, ensuring the company gets the best carrier based on its parameters including price and service levels.
Who Needs a Transportation Management System?
A transport management system is essential for logistics and supply chain professionals working for manufacturers, and distributors who must manage their inbound and outbound shipments.
Companies that may use TMS software include logistics providers that manage multiple modes of transportation, including trucking, rail, and ocean shipping, and retail companies that need to control the delivery of goods from suppliers to their warehouses and stores. Some companies select their TMS provider through a transportation management system rfp.
One example of TMS software is nVision Global, whose IMPACT TMS provides the visibility and management of global shipments from creation through delivery.
Oracle Transportation Management is a cloud-based TMS software that offers advanced features such as real-time shipment tracking, carrier compliance management, and automated invoicing.
Another example is TransportGistics, which provides simple, incremental solutions to improve, monitor, and enforce compliance among partners. Its TGI:TMS reduces, uncovers, and avoids excessive costs through planning, execution, and analytics.
Why Is a Transportation Management System Important?
A transportation management system allows companies to optimize their transportation operations by streamlining processes, reducing costs, and improving the overall efficiency of their supply chain.
Transportation management systems can automate many tasks, such as carrier selection, route optimization, and shipment tracking, saving time and money. Additionally, transportation management software provides valuable data and insights to help a company make better decisions about transportation and logistics.
Benefits of Using a Transportation Management System
Transportation management software provides several benefits for businesses that ship goods.
Here are some of the key benefits.
Improved Efficiency
Transportation management systems automate many manual tasks involved in supply chain planning and execution, such as route optimization and shipment tracking, saving time and reducing errors. Additionally, TMS software provides real-time visibility into transportation operations, allowing businesses to quickly identify and address any issues that may arise.
An example of improved efficiency as a benefit of using a transportation management system is a retail company that ships products to customers. With the help of TMS software, the company can plan the most efficient routes for their delivery trucks, taking into account factors such as traffic, distance, and delivery times.
Using the transportation management system to optimize routes, the company reduces the number of miles driven and the amount of time spent on the road, resulting in significant cost savings.
Better Customer Service
With TMS software, companies can provide more accurate and up-to-date information about shipments to their customers, including real-time tracking and delivery status. It helps customers make better-informed decisions and reduce the need for customer service inquiries.
For example, a company that uses a transportation management system to manage its transportation operations can provide customers with real-time tracking information for their shipments. Customers can see where their product is in transit and have a clear expectation of when it will get delivered.
This capability helps companies plan their operations and reduce the need for customer service inquiries about delivery status. Additionally, the company can use the transportation management system to proactively communicate with customers about any potential delays, helping to build trust and improve customer service.
Compliance and Safety
A transportation management system helps ensure compliance by providing tools for monitoring and tracking compliance-related information, such as driver hours of service, vehicle maintenance records, and emissions data.
The software helps improve safety by providing tools for monitoring and managing driver behavior, such as tracking speeding. Additionally, TMS software helps plan safer routes by considering weather and traffic conditions.
An example of a TMS providing compliance and safety benefits would be a system that allows fleet managers to monitor the hours of service of their drivers in real-time. By ensuring that drivers are not exceeding the legal limit for hours on the road, the fleet manager can help prevent driver fatigue and ensure compliance with DOT regulations.
Additionally, the TMS can provide alerts if a driver engages in potentially unsafe behavior, such as excessive speeding, and allows the fleet manager to address this behavior before an accident occurs.
Data-Driven Decisions
A company is able to make informed decisions based on data-driven analytics in real-time. A TMS typically collects and stores data including shipping costs, delivery times, and inventory levels, which can then be analyzed to identify patterns and trends.
This information aids in optimizing logistics processes, reducing costs, and improving customer service. For example, a company that uses a TMS may notice that its shipping costs are higher than the industry average for a particular route.
By analyzing the data, they may discover that the route is congested during certain times of the day, causing delays and increasing costs. Using this information, the company may adjust the delivery schedule for that route, resulting in lower costs and faster delivery times.
How To Choose The Right Transportation Management System for Your Business
Here are vital factors to consider when choosing a transportation management system for your business.
Scalability
Scalability determines how well the system can adapt to changes in the volume and complexity of your transportation needs. Scalable transportation management systems will handle increasing shipments and routes as well as multi-modal transport, multi-party shipping, and global logistics.
Integration
The TMS software should integrate with other software and systems you use, such as your enterprise resource planning or warehouse management system, to ensure that data is seamlessly shared across functions and geographic locations and that processes are automated. Integration improves efficiency, reduces errors, and provides better visibility into your supply chain operations.
Additionally, the TMS should integrate with carrier and logistics providers’ systems, supporting real-time tracking, automated shipment planning, and communication. The ability to easily integrate with other software helps your business save time and money while increasing efficiency and accuracy.
User-friendliness
A user-friendly transportation management system should be easy to navigate, with a clear and intuitive interface. It should also be customizable to meet the specific needs of your business. Additionally, a user-friendly TMS should have various built-in tools and features that make it easy for your team to manage and track shipments, plan routes, and access data analytics.
TMS software that is easy to use and tailored to your business needs helps improve efficiency and productivity, ultimately leading to cost savings and increased revenue.
Cost
Transportation management systems should be cost-effective and offer a good return on investment (ROI). TMS software cost varies widely depending on the features and functionality provided and the size and complexity of your business.
Factors to consider are the cost of the software including recurring costs such as monthly or annual fees and costs associated with implementation and training. You should compare the pricing model of different TMS software options and weigh them against the benefits they will provide to your business to make an informed decision.
Benefits of Using a Transportation Management System
Let’s examine the benefits of implementing a transportation management system in your business.
Better Warehouse Efficiency and Productivity
A transportation management system improves warehouse efficiency and productivity by providing real-time inventory and shipping information visibility, automating and optimizing routing and scheduling, and streamlining communication and collaboration between warehouse and transportation teams.
It leads to improved accuracy and timeliness of deliveries, reduced labor costs, and overall cost savings. Additionally, TMS software provides advanced analytics and reporting capabilities, allowing for better decision-making and continuous improvement in warehouse operations.
Improved Supply Chain Efficiency
Transportation management systems improve supply chain efficiency by automating and optimizing shipping processes, such as route planning, carrier selection, and shipment tracking. It results in cost savings, increased visibility and control, and improved delivery times.
A TMS can also facilitate communication and collaboration among supply chain partners, enabling real-time monitoring and adjustment of logistics operations. Using a transportation management system helps organizations streamline their supply chain operations and improve efficiency, ultimately leading to increased profitability and a better user experience.
FAQs
Here are the frequently asked questions regarding transportation management systems.
What are examples of transportation management systems?
SAP Transportation Management is an example of a system that provides end-to-end supply chain planning and execution capabilities. Additionally, Oracle Transportation Management helps companies manage their transportation operations, including carrier selection, shipment planning, and freight payment.
What are TMS and ERP?
TMS is software that helps with route planning, carrier selection, shipment tracking, and compliance with regulations. On the other hand, ERP is software that helps businesses manage and automate various functions, such as finance, accounting, human resources, and supply chain management. An ERP system integrates data and processes across an organization. These disparate systems can be used in tandem to help companies connect sales and inventory with transportation.
Why You Should Implement a Transportation Management System
The main goal of transportation management systems is to improve the efficiency and cost-effectiveness of a company’s transportation operations by automating and streamlining processes such as route planning, carrier selection, and freight billing.
The effectiveness of a transportation management system lies in its ability to help companies reduce transportation costs and improve their overall supply chain efficiency.
By automating and optimizing transportation processes, transportation management systems help companies reduce the number of empty miles driven, avoid shipping delays and bottlenecks, and improve the utilization of their transportation assets.