A Transportation Management System (TMS) is an integral part of any Supply Chain Management system or software that is focused on transport logistics. These TMS systems facilitate the various interactions between order management systems and their place of distribution, such as a warehouse or distribution facility.
Transportation Management Systems have become a vital tool for shipping professionals of companies of all sizes. The system acts as the logistics core in a large combined network of shippers, carriers and customers.
The basic functions of a TMS are as follows:
- Coordination of all data points in a transport network
- Managing and organizing all inbound and outbound shipping needs, and optimizing order processing and transportation planning
- Analyzing important transportation metrics, including costs associated with various shipping companies, invoices, timelines and routing options
- Creating performance and financial reports to analyze the efficiency of the TMS
- Provide ease and expertise around shipping-related customer service and successful e-commerce practices
TMS used to be an expensive and exclusive option for large scale and mass-moving freight and e-commerce companies. Previously, many small businesses have not had the resources to implement a TMS effectively. However, the pricing of these types of software programs and systems have dropped substantially in the last ten years, with web-based solutions offering opportunity to even the smallest e-commerce businesses.
Main Advantages of TMS
- Reduces cost through better planning. This includes route planning, load optimization, and carrier mix and mode matrix.
- Utilizes analytical and informational data regarding cost and type of carrier, transit time, liability and overall routing options
- Efficiency: Thanks to the TMS software, it eliminates the need for many outdated procedures, such as manual tracking of shipments and manual reporting. This results in less human error and higher customer satisfaction
- Integration: TMS software provides a cohesive system from start to finish in the supply chain, including flexibility to change or audit delivery plans and complete those key supply chain requirements.
Not only can TMS provide updated and streamlined day-to-day operations, it can also be an extremely productive long-term business tool, thanks to its ability to store and interpret data. Companies can project benchmarks, budgets, and routing by calibrating many reports, including Freight Data Analysis Reports, Shipment Reports and Activity Reports.
It enables companies to track customer information so they can know their clientele and provide the best customer service. For example, when a customer places an order, the customer is no longer satisfied with the vague information that their shipment is “en route”. Rather, the customer wants to be able to pinpoint exactly where on the continent their package is, and exactly how many days the program estimates before it reaches the customer’s hands.
Further, a TMS has an ability to identify specifically where on a pallet or container a product lies. Thus, if a customer or carrier needs to reroute the package for any reason, it makes it easier to find. This leaves less room for error and a higher customer satisfaction rate. According to inboundlogistics.com, companies that implemented these TMS systems via Third Party Logistic companies reported a 5% sales increase in the following year. The TMS was highly regarded for satisfying all customer service channels, which is more important than ever in this competitive market, where customer satisfaction is paramount.
TMS’s future is bright, and it is projected that most shipping companies will be using a TMS within the next decade. As of today, one-third of all shippers is using TMS solutions to streamline their order management and shipping systems and to build a solid foundation for their business logistics. The TMS product is more accessible to a larger audience and has a very positive effect on all logistical operations.