The transportation industry is the vascular system of the global economy. From items we buy online to produce on supermarket shelves, everything goes through an intricate web of supply chains and logistics before reaching its destination.
Working on such a scale, a modern transportation operation is essentially a jigsaw puzzle. Countless little pieces need to come together perfectly, which can be a significant challenge. And that’s where a Transportation management system, or TMS, comes into play.
What is a transportation management system(TMS)?
A TMS, also sometimes called a transportation management solution or transportation management software, is a comprehensive logistics platform. It’s designed to help logistics providers plan, execute, and optimize the movement of goods, as well as ensure regulatory compliance.
As such, it’s one of, if not the most important solution in a modern transportation company. TMS software plays a central role in every aspect of supply chain management, from planning through procurement all the way to lifecycle and logistics management. That’s likely the reason behind the increasing adoption of such tools. The global Transportation Management System market is projected to grow from 13.5 billion USD in 2023 to over 33 billion by 2028, a CAGR of 19.7%.
Differences between a TMS and an ERP
An ERP stands for Enterprise Resource Planning. People often confuse TMS and ERP systems – but while they’re ultimately similar, there are several key differences. Those differences can largely be summarised in one sentence: a TMS helps you optimise your short-term transportation strategy, whereas an ERP helps you develop a long-term plan.
Going into a little more detail: While a TMS focuses on a specific part of supply chain management – namely, the physical movement of goods – an ERP system helps companies manage the larger picture. Such a software system aims to provide a unified source of truth between all departments and operations, as well as deal with data management and forecasting. It’s designed to manage various kinds of business functions: accounting, HR, marketing, sales, customer relationship management, business intelligence, and more.
The two often go hand in hand. For example, one of the most prominent TMS providers on the market is SAP, and they also offer an ERP system.
In this article, we’re going to focus on Transportation Management System software
Key functions of TMS
On a more granular level, a TMS solution is loaded with a wide range of features to boost operational efficiency. They can be divided into several main categories, depending on the tasks each of them performs. Let’s take a closer look at each one:
Transportation Planning Features
The planning functionality is usually among the most important and powerful parts of a transportation management solution. There are several main types of logistical planning:
TMS order management involves keeping track of all shipment details. Information such as what’s being shipped, how much it weighs, where it’s coming from and where it’s going. The system can also plan the best possible route, assign the right driver, and estimate delivery times.
Tendering is where the transportation system automatically asks carriers to bid on handling shipments. The system organizes a list of carriers, so you can pick one that fits your specific needs, or let the TMS make the choice. Depending on the specific transportation solution and how it’s designed, there may be various options, such as picking the lowest-cost carrier, assigning shipments to specific carriers, or using load numbers to allocate shipments.
Shipment Rate Management
This function is all about calculating how much it will cost to transport goods. A TMS uses a rate engine to figure out the transportation costs for different types of shipping, like parcels, less-than-truckload (LTL), full truckload, and intermodal. It takes into account factors like base rates, discounts, and contract agreements to calculate the prices. A good TMS can also create custom pricing rules for more complex situations and send quotes to clients automatically when they request them.
Load planning helps make the most of available space on trucks, trailers, and containers. You can input information about your vehicle’s measurements and save it for future reference, which is called master data. Details about the dimensions of the items come from the shipment order. Some TMS systems even have a 3D load planning feature, allowing you to see and adjust how cargo is distributed and how space is used within the load.
Transportation Execution Features
Once everything is planned out, it’s time to get the load moving.
If you have a fleet of trucks, a TMS provides a centralized platform to view and manage your assets. Different transportation system providers offer different fleet management features, but most will allow you to assign drivers/ equipment, manage dispatch, and handle driver payments. Advanced fleet management solutions can take it up a step and monitor fuel consumption, environmental impact, vehicle maintenance, and more.
Dock scheduling and operations
Scheduling dock appointments can be time-consuming. A TMS can be integrated with a Warehouse Management System (WMS) or Yard Management System. In doing so, you gain an overview of warehouse and transportation constraints, and can create more accurate schedules.
Documentation Management and Settlement
The transportation process involves a lot of high-complexity documentation. Thankfully, there have been notable improvements in the level of automation in this area. Today’s TMS can generate digital bills, create invoices, and conduct freight management audits. Simply put, they can simplify the paper-heavy side of transportation execution, making it more efficient and reducing errors.
Transportation Visibility Features
Once the shipment arrives at its destination, the journey still isn’t over. There are several things you can do – maintain connections with your business partners, and analyze historical transportation data to improve future operations. A transportation management system can help with those tasks.
A TMS typically supports email communication with partners and customers alike. Some vendors also offer more comprehensive self-service portals. They allow for real-time service tracking, and let your partners submit offers, write reviews, and manage invoices. It’s a unified way to maintain transparency and manage relationships.
Tracking, Tracing, and Event Management
Transportation platforms can integrate track-and-trace technology to allow for real-time shipment monitoring. This is invaluable for customers who want visibility over their shipment, as well as for scheduling purposes.
A big advantage of a centralized transportation system is the ability to review large amounts of shipment data simultaneously. For example, you can conduct a performance analysis based on carriers, products and routes to enable informed decision-making and optimize your operation for future deliveries.
Transport management system deployment
Deploying your transportation management system is a critical decision. There are three main deployment options to consider: on-premises deployment, a cloud-based TMS, or a hybrid deployment model. Each comes with its own set of advantages and disadvantages, and understanding them is crucial to making the right choice for your operation.
On-premise TMS pros
With an on-premises transportation system, all components are hosted on your organization’s servers. That gives you complete control over your system, data, and infrastructure. If you have strict strict security or regulation requirements, such an approach lets you implement more tailored measures.
On-premises TMS is usually designed to adapt to your specific needs and requirements. That allows for strategic modifications and alignments to your unique business model.
While an on-prem system comes with a higher initial investment, there are no recurring subscriptions or fees. As a result, the overall long-term cost may end up being lower
On-premise TMS cons
Higher upfront costs
Setting up an on-premises system requires an investment in hardware and software. Maintaining it afterward takes up a lot of IT resources and developer hours. As a whole, the expenses accrued can be substantial.
Since the system is hosted on your own infrastructure, expanding it may require additional hardware and resources. As a result, scaling an on-premises TMS can be more challenging and complex than an on-cloud one.
You’re responsible for all system updates, hardware and software maintenance, and security.
Cloud-based TMS pros
A cloud-based solution is accessible from anywhere where an Internet connection exists. This promotes operational flexibility, enables remote work and can boost collaboration.
Lower upfront cost
A significant cloud-based TMS benefit is the initial cost savings. There’s no need for expensive hardware or infrastructure – you just pay a subscription fee to access the service on an as-needed basis. This is often a preferred option for smaller businesses.
By leveraging the cloud’s resources, you can easily scale your system or adjust it to changing needs without worrying about expanding hardware infrastructure.
The cloud provider maintains the service, saving you from the burden of managing system updates and regular maintenance.
Cloud-based TMS cons
Data security concerns
A major downside of a cloud-based transportation system is that your sensitive data is stored off-site. Of course, good cloud providers have robust security measures in place to prevent any leaks or breaches – however, it’s always a potential risk to consider.
While upfront costs are lower, the ongoing fees can add up over time. It’s something you might need to factor into your long-term financial planning.
A TMS is an important part of modern transportation management, and crucial for businesses looking to maintain an efficient logistics operation. While there are different solutions by different software providers, there’s a core of main functionalities a good TMS can provide. Things like asset management, freight billing, carrier management, are just some benefits of using a TMS.
As the transportation industry continues to expand, it’s important for organizations to make informed choices regarding their software needs. If you’re wondering if you should invest in a TMS, hopefully knowing what a management system allows will help you make an informed choice.