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What Is a Transportation Management System?

A transportation management system (TMS) is a logistics platform that uses technology to help businesses plan, execute, and optimize the physical movement of goods, both incoming and outgoing, and making sure the shipment is compliant, proper documentation is available. This kind of system is often part of a larger supply chain management (SCM) system.

Sometimes known as a transportation management solution or transportation management software, a TMS provides visibility into day-to-day transportation operations, trade compliance information and documentation, and ensuring the timely delivery of freight and goods. Transportation management systems also streamline the shipping process and make it easier for businesses to manage and optimize their transportation operations, whether they are by land, air, or sea.

Transportation Management and the Supply Chain

In addition to transportation management, other components of a typical SCM system include procurement, product lifecycle management, supply chain planning, order management, manufacturing, inventory, and warehouse management.

Why It’s Important to Have a Transportation Management System

Transportation management systems play a central role in supply chains, affecting every part of the process—from planning and procurement to logistics and lifecycle management. The broad and deep visibility afforded by a powerful system leads to more efficient transportation planning and execution, which results in higher customer satisfaction. That, in turn, leads to more sales, helping businesses grow. With such a dynamic global trade environment that we live and transact in, it is important to have a system that will allow you to successfully navigate complicated processes around trade policies and compliance.

Changing Consumer Expectations

In today’s world of same-day shipping and real-time tracking, consumers expect to get what they want, when they want it. Keeping up with this demand is putting unprecedented pressure on traditional businesses, and nowhere is that being felt more keenly than in the supply chain. The physical movement of goods is a critical link in that supply chain, and more and more businesses are relying on transportation management systems to help them manage this function.

Who Uses a TMS?

Transportation management systems are primarily used by businesses that need to ship, move, and receive goods on a regular basis, including:

  • Manufacturers
  • Distributors
  • Ecommerce companies
  • Retail businesses
  • Companies that provide logistics services, such as third-party and fourth-party logistics (3PL and 4PL) companies and logistics service providers (LSPs)

Businesses in nearly every industry, from construction to life sciences, use a transportation management system. The primary users are businesses that spend $100 million or more annually on freight, but the availability of cloud-based TMS solutions has made it more affordable for smaller businesses to take advantage of the benefits of incorporating a transportation management system into their supply chain.

TMS Offerings

Businesses can buy a standalone transportation management system that can be integrated with their existing cloud or on-premises enterprise resource planning (ERP) software and SCM solutions. Some TMS solutions have trade documentation capabilities, or you can complement your TMS with a global trade management (GTM) application. Other, typically less feature-rich TMSs, are available as modules within ERP and SCM suites.

Plan, Execute, and Optimize for Timely Delivery of Goods

A TMS can help any business plan, execute, and optimize the physical movement of goods.

Planning. A TMS helps the business select the optimal mode of shipment and the best carrier, based on cost, efficiency, and distance, including optimizing multi-leg carrier routes. A strong TMS can provide visibility into every stage of the supply chain, and together with global trade management functionality, it can also provide information on trade and tariffs, and if there are any potential delays that may happen because of customs and other trade regulations.

Execution. The execution features of transportation management systems vary widely but can include matching loads and communicating with carriers, documenting and tracking shipments, and assisting with freight billing and settlement. Some advanced TMS solutions also provide track and trace services—enabling real-time information exchange among carriers, distributors, warehouses, and customers. Such advanced systems may also have the functionality to handle complex international logistics, including providing proper import and export documentation making sure shipments are trade compliant.

Optimization. TMS optimization capacities usually include the ability to measure and track performance with reports, dashboards, analytics, and transportation intelligence.

The Benefits of a TMS

A TMS—and modern transportation management in general—provides many benefits to businesses. Some of the top benefits are:

  • Reduced costs for the business and the end customer
  • Simplification of supply chain processes across geographies, modes, and carriers
  • Automation of business operations for faster and more accurate billing and documentation
  • Improvement in visibility and security, especially in transit
  • Time savings—fewer manual steps result in fewer delays and faster delivery times
  • The ability to track freight, both locally and globally, on a single platform
  • Better import and export compliance minimizing penalties and shipment delays
  • New business insights as better reporting leads to faster action and process improvement
  • Improvements in customer service and customer satisfaction with real-time updates and fewer shipment delays
  • The ability to scale the business by meeting and exceeding customer demands for fast, on-time shipments

The Added Value of a TMS in the Cloud

A cloud-based transportation management system delivers many of the same business benefits as other cloud solutions, including improved economies of scale, lower total cost of ownership, no upgrade fees, and a faster return on investment (ROI).

For IT, a cloud-based TMS provides additional benefits in the form of faster deployments, fewer hours needed for training and installation, automatic updates with the latest features, and improved security.

TMSs and the Smaller Business

Smaller businesses—those that spend $5 million to $10 million annually on freight—have traditionally relied on spreadsheets and other manual methods to manage transportation. But now, cloud-based solutions are making it more affordable for these smaller companies to invest in a TMS.

The Future of TMSs

Customer expectations keep rising, not only for on-time deliveries but for two-day and even same-day deliveries, with real-time updates provided throughout the shipment process. Ever-changing global trade regulations are also forcing supply chains to innovate to keep pace, often by investing in a transportation management system.

Transportation management systems must become more robust and feature-rich, providing faster responses to consumers and more detailed information to businesses. Machine learning enable TMSs to be more intelligent, providing better recommendations and more accurate predictions.

Companies can choose to integrate their transportation and global trade management systems with emerging technologies to further improve visibility and offer better customer service. Some of these innovative technologies that are currently available include:

  • IoT fleet monitoring: Internet of things (IoT) devices and sensors make real-time fleet monitoring commonplace, including in-transit visibility of driving conditions, routes, and assets. Companies can lower their fuel and maintenance costs, as well as reduce delays and improve driver safety.
  • Digital assistants: Digital assistants are often called chatbots, and offer immediate, conversational responses to shipment information, leading to higher customer satisfaction.
  • Adaptive intelligence and machine learning: By applying machine learning to historical data and trends, transportation management systems are able to predict transit time more accurately, plan capacity, identify at-risk shipments (such as goods that are about to expire and time- or temperature-sensitive products), and much more. Enhanced artificial intelligence will also enable your TMS to provide more accurate and informed recommendations, such as alternate delivery routes during high traffic periods.
  • Blockchain: Blockchains are now being utilized to build complex integrations among shippers, customers, and carriers. Applications such as intelligent track and trace increase transparency and traceability across your supply chain, but still ensure accurate and secure information.
  • Cold chain management: Another blockchain solution available in transportation management systems is cold chain management, which is useful when different temperatures need to be maintained at various checkpoints along the supply chain. For instance, perishable or temperature sensitive materials and products might need to be kept at a cool temperature in the truck but a slightly higher temperature on store shelves. With cold chain management, the temperature can be monitored across the supply chain, with real-time information provided to the business and the regulators at the country of origin.