What is a transportation management system (TMS)?

A transportation management system is a software system that helps companies manage logistics associated with the movement of physical of goods – by land, air, sea, or a combination of transportation modes. Part of the larger supply chain management system, TMS logistics software helps ensure timely delivery of goods by optimizing loads and delivery routes, tracking freight across local and global routes, and automating previously time-consuming tasks, such as trade compliance documentation and freight billing. A TMS system reduces costs for both businesses and end customers.

The emergence of cloud-based transportation management system software has leveled the playing field. Once the domain of only larger entities, TMS software is now being used by smaller companies that need an integrated digital system to compete in today’s marketplace.

Cloud-based technologies combined with growth in the e-commerce sector is spurring demand for TMS software. Grand View Research reports that the market for these systems is expected to expand at a CAGR of 16.2% between 2019 and 2025.

Key features of a transportation management system

What is a TMS system today? Modern TMS software includes features that can dramatically reduce complexity and improve efficiency. Key features include:

Transportation planning and execution: Streamline procurement and freight shipment with automated carrier rate comparison and booking. Choose the mode of shipment – air, ocean, truck, or rail freight – and plan the most efficient route for the transport of goods. Optimize loads and take advantage of real-time track and trace capabilities to monitor progress.
Freight management: Streamline the quote-to-contract process. Efficiently manage freight costing, order management, rate determination, and freight billing and settlement for both multimodal and intermodal transportation.
TMS dashboards, reporting, and analytics: Forecast transportation demand, analyze rates and profitability, and adapt quickly to adjust to unforeseen circumstances. With real-time visibility into all aspects of the transportation process, you can make immediate, data-driven decisions.

Benefits of a transportation management system

For any company that ships goods, there are many benefits to a modern transportation management system.

1. Cost savings

A TMS system offers significant cost savings – for both the enterprise and the end customer – in a number of important ways.

First, it reduces administrative costs. TMS software makes it easy to compare carrier rates to find the best option. It also automates the booking process, replacing time-consuming phone calls with efficient digital booking. The software streamlines, integrates, and automates processes, including auditing, contract, payment, and order scheduling, for greater efficiency –and fewer errors.

TMS also lowers shipping costs. By automating the rating comparison process, the software helps identify the most cost-effective options, including some that might be missed using a manual process.

Load optimization is another area where TMS trims costs. Building pallets with rule-based optimization helps companies gain efficiencies and operate at scale.

2. Real-time visibility

TMS software improves visibility – a critical consideration in a complex logistical process.

With real-time track and trace, you can track the movement of goods, whether shipped by land, sea, or air. Assess the efficiency of your operations and track KPIs on your TMS dashboard. And gain route efficiency: a modern TMS can generate optimal routing proposals dynamically, identifying shorter or less congested routes and adapting in real time to unforeseen obstacles.

3. Greater customer satisfaction

The ability to meet customer commitments is essential for any business competing in today’s global marketplace.

Due to the “Amazon Effect,” on-time delivery is now a more important consideration than ever. Customers around the world now often expect same-day delivery or, at the minimum, strict adherence to a promised delivery schedule. TMS software provides the visibility that is necessary to identify and address issues that might result in delays, customer frustration, and an erosion of customer loyalty.

TMS software can also improve the end customer experience by making it easy to track delivery progress and by simplifying the billing and payment process. Customers also often benefit from better rates negotiated by the business.

A TMS cockpit helps organizations optimize freight management, routes, and carriers, to name just a few key benefits.

How does a TMS system work?

Connected to carrier systems, a TMS system accesses, stores, and compares detailed information about carriers. It also includes functionality that allows businesses to optimize routes and transportation modes as well as track delivery progress.

A TMS system works in conjunction with other software as part of a broader supply chain management system – and most offer ERP and warehouse management system (WMS) integration. Each software system below performs a specific function; when integrated, they form a digital tripod that supports delivery of the end-to-end process.

Enterprise resource planning (ERP) handles accounting, order management, and invoicing.
Warehouse management system (WMS) helps manage warehouse functions, including palletization, order fulfillment, shipping and receiving, and inventory tracking.
TMS is responsible for freight management and route and carrier optimization.

Who uses TMS systems?

TMS systems are used by businesses that need to ship and receive goods on a regular basis. Spurred on by the pandemic, new digital e-commerce companies have joined the ranks of manufacturers, wholesalers, distributors, and retailers looking for ways to deliver goods quickly, efficiently, and cost-effectively.

Companies that can benefit from a TMS system include:

Retail, automotive, and manufacturing industries
Pharmaceutical and healthcare industries
Food service and restaurant organizations
Logistics providers
Aerospace, government, and defense organizations

Cloud TMS and new technologies

The cloud has made TMS systems accessible to more companies than ever – and has brought new capabilities and flexibility to the software. But other technologies are also having a huge impact on both TMS software and the transportation management industry.

Artificial intelligence (AI) brings a number of game-changing innovations to the industry. It can handle time-consuming, routine tasks throughout the process and deliver significant time and cost benefits. Even more dramatic change will come with the advent of self-driving trucks. When fully market-ready, these autonomous vehicles should not only reduce costs and increase safety but also act as part of an intelligent system that collects and analyzes more data than ever before. The insight generated is of huge benefit to freight brokers who are constantly juggling everything from global fuel prices to legal changes, as well as to their customers.

Machine learning can quickly make accurate predictions based on huge data sets. For example, machine learning can help businesses manage all-important trade-offs between cost savings and on-time delivery, considering factors such as delivery geography and real-time progress milestones to calculate the impact of more expensive single-stop deliveries versus cost-effective multi-stop deliveries.

Internet of Things (IoT) sensors collect invaluable information that can be used to identify equipment that needs to be serviced and maintained. As more equipment throughout the supply chain is equipped with sensors, the more efficient the process becomes.

Today, advanced analytics helps optimize routes and shipping modes, improve delivery times, increase fuel efficiency and profitability, and adapt to changes in transportation demand. As increasing volumes of data are generated, the role of analytics becomes even more essential.

Other technologies can also make TMS systems more efficient. Chatbots, or digital assistants, can reduce administrative costs by handling routine client queries. And blockchain brings track and trace transparency across the supply chain.

Enriched by new technologies, a modern transportation management system provides the automation, insight, and intelligent technologies that help companies shipping goods to thrive in the digital age.

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Transportation management FAQs

Transport management deals with the planning and execution of freight movement by looking after the details, such as whether it will move by land, sea, or air. It looks at other factors like carriers’ rates and services as well as compliance data and documentation.

Transport logistics is a subset of transport management that drills deeper. It adds the storage, handling, cataloging, and packaging of goods and services. It’s another layer of the details needed to move freight through a supply chain and ship it safely and efficiently from point A to point B.

Multimodal transportation refers to shipping that uses several modes like air, ocean, rail, and/or truck. Goods are often shipped under one contract. One carrier is legally responsible but uses subcarriers.

Intermodal transportation is about using different companies to handle the same shipment. Multiple carriers take on a single shipment using different modes. This type of transport provides more flexibility when choosing rates and prices but is more difficult to coordinate.

Less Than Truckload (LTL) is the name for a shipment that’s larger than just smaller packages but doesn’t fill an entire truck. Typically, these LTL freight shipments weigh less than 10,000 pounds. LTL carriers often handle parcels and smaller packages.

As the name suggests, Full Truck Load (FTL) freight refers to a shipment that fills most or all of a truck. These shipments can weigh up to 45,000 pounds – that’s roughly 30 pallets in a typical 53-foot trailer according to UShip.com

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