Transportation Management System (TMS), What is it?

Post by 
Hossein Fakhr
Published 
October 7, 2020

Transportation management system (TMS) is a  kind of supply chain management software and often is used together with an ERP system and a warehouse management system (WMS).

The goal of the system is to optimize logistics processes, organize delivery, reduce costs and improve real-time supply chain transparency for wholesalers, manufacturers, third-party logistics companies (3PLs), distributors, retailers, and e-commerce companies.

Thus, companies can use TMS to automate and manage their freight operations.

TMS holds 4 key aspects of transportation management:

  • Planning and decision making  
  • Transportation registration 
  • Tracking shipments
  • Freight estimation

What business can benefit from TMS?

Transportation management systems (TMS) are commonly used by companies that ship, move, and receive goods regularly, such as:

  • Distributors
  • Manufacturers
  • Retail businesses
  • Ecommerce companies
  • Third-party and fourth-party logistics (3PL and 4PL) companies
  • Logistics service providers (LSPs)

Companies in almost all industries, from medicine to real estate, use a transport management system. The main users of the system are businesses that spend over $ 100 million annually on freight. However, thanks to cloud-based solutions, TMS has become more accessible for small businesses, enabling them to take advantage of the transportation management system in the organization of supply chains.

How a Transportation Management System (TMS) saves time and money?

The implementation of a TMS (Transportation Management System) plays a central role in supply chains, automating all stages from planning and procurement to logistics and life cycle management. A wide and deep range of functionality provided by a powerful system leads to more efficient forecasting and control of cargo transportation, which ultimately serves to achieve customer satisfaction. This, in turn, leads to increased sales, allowing the business to grow. We live and work in a dynamic global trading environment, which is why it is so important to have a system that will successfully manage the complex processes associated with trade policy and compliance.

The main benefits of TMS for business:

  • Reduced costs for the business and the end customers
  • Automation of supply chain processes for different regions and types of transport
  • Automation of business operations for faster and more precise invoicing and documentation
  • Improving process transparency and security
  • Save time by automating manual operations, resulting in shorter delivery times and fewer delays
  • The ability to track moves freight locally and globally in a single system
  • Enforcement of import and export regulations to minimize fines and delays in shipment
  • High-quality reporting and analytics that allows making more effective business decisions
  • Providing a high service level  by improving customer service and customer satisfaction through real-time updates and reducing shipment delays
  • Ability to scale the business of exceeding customer expectations for fast and timely delivery

Core features of a Transportation Management System (TMS)

The Benefit Flow of Using a Transportation Management System [TMS]
The Benefit Flow of Using a Transportation Management System [TMS]

The functions of a typical TMS can be divided into the following categories:

Freight management

TMS receives stores and updates shipping rates charged by carriers, often over the Internet in real-time. Having current rates in one place makes comparison and decision-making easier than it was before TMS when freight managers had to call or fax carriers and record rates manually. Instead, communication with carriers and the negotiation of rates with them can be largely managed online. This is especially important when the number of carriers in TMS reaches thousands.

Other functions manage the workflow and documents related to the freight management, for example, organizing a tender for cargo, in which detailed information about the cargo is provided, and the carrier must offer a price, which is then formed into a contract. Some TMS also support order management, although this functionality is more often performed in ERP or standalone order management software.

Execution

TMS also allows users to perform basic freight management activities, including reserving shipments with carriers. Displaying the movement of goods along the transport network in real-time allows you to track shipments and quickly share this information with customers and suppliers. There are also tools for communicating with drivers on the road and the ability to measure time and distance using GPS.

Planning

While most of the TMS functions are focused on contract execution, a significant part of the system's capabilities lies in the tools for planning and optimizing the delivery process. It provides data and analytics so users can choose the most cost-effective carriers and routes. Optimization can be granular down to the ordering and loading level: users can, for example, size shipments or reroute orders to make the most of carrier resources for less-than-truckload (LTL) shipments. They can also plan multileg trips to minimize fuel and labor costs while avoiding empty miles between stops.  

TMS typically has reporting and analytics capabilities to analyze carrier performance and other key metrics. It can also export data and reports to a business intelligence platform for analysis or an ERP system.

Administration

Transport and logistics management is inherently a complex task that requires a lot of document exchange, strict compliance with regulatory requirements, and audit capabilities. Accordingly, the TMS should have sufficient administrative functions to support financial reporting and accompanying documentation requirements. Typical features include billing, payment, and verification tools such as matching the carrier's published rates to the invoiced amounts. An automatic payment system is often integrated to minimize manual invoice processing. TMS can also generate a bill of lading - a document that the shipper or carrier issues to specify the items in the shipment and the terms of the contract. Bills of lading are also used by customs and insurance.

The TMS must also handle the settlement, which requires documenting certain stages and freight metrics before payment can be made, such as confirmation of delivery, receipt, and travel time. The calculation data is also the basis for the TMS performance management and optimization processes. TMS users can search these calculations for clues about customer demand and capacity utilization, and create flexible rates based on a variety of data, from download speed to time of day.

Innovative technologies in freight management

  • Fleet monitoring using IoT. Internet of Things (IoT) devices and sensors greatly simplify the task of monitoring the fleet in real-time, providing opportunities for tracking movement, cargo status, and events in transit. With analytics, companies can reduce their fuel and maintenance costs, as well as minimize downtime and improve driver safety.
  • Digital assistants, which can also be implemented as chatbots, allow customers to conveniently and quickly receive responses to a delivery status request, which leads to higher customer satisfaction.
  • Adaptive intelligence and machine learning. By applying machine learning to historical data, the transportation management system can identify trends, more accurately predict transportation times, plan cargo capacity, manage risks (for example, control the transportation of goods that are about to expire and goods that are sensitive to temperature and other special conditions), calculate exact freight spend and more. Enhanced artificial intelligence also enables TMS to provide more accurate and well-reasoned recommendations for, say, alternative shipping routes during busy periods.
  • Blockchain. Blockchains are currently used to create transparent integration between shippers, customers, and telecom operators, providing a high level of data security.
  • Cold chain management. Another blockchain application available in transportation management systems is cold chain management, which is necessary when it is necessary to maintain the required temperature level at various control points throughout the supply chain. This includes monitoring the transport of perishable or temperature-sensitive foods that need to be stored at a certain cool temperature in the truck, but at a slightly different temperature on store shelves. With a cold chain management system, temperatures can be monitored throughout the supply chain, while providing real-time information to stakeholders and regulators.

The sdd-technology company offers comprehensive services for the development of TMS for your business from system architecture to release and support. Contact us and discuss your TMS software.

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A transportation management system (TMS) is a logistics platform that simplifies the freight shipping process. TMS is a kind of supply chain management software and often is used together with an ERP system and a warehouse management system (WMS).