As the transportation industry is becoming more sophisticated, logistics service providers are starting to realize the importance of modernizing their entire supply chain operations. It’s only by keeping up with the latest technology trends that they will be able to thrive and gain a competitive advantage. Some of the biggest questions facing today’s logistics teams revolve around how transportation technology can help them solve the many challenges associated with eCommerce.
For logistics and supply chains to be effective and successful, they need to have several things working in their favor. They need a well-trained workforce, optimized transport processes, a favorable market, and innovative technology. Finding the right software can be a huge catalyst that drives significant operational improvements and streamlines entire workflows.
One such piece of technology is a transportation management software (TMS). With a TMS platform, companies can better position themselves to achieve their key strategic and business goals such as:
- Greater Control Over Logistics Operations
- Reduced Freight Cost
- Find Freight Capacity More Quickly
- Improve Overall Performance
- Provide Better Customer Service
- Gain More Supply Chain Visibility
- Stay On Top of Regulatory Issues
Whether you are looking to implement a TMS software for the first time or are looking to upgrade your old system, this guide to transportation management systems (TMS) will help you make a more informed decision about which software may work best for you.
What Are Transportation Management Systems?
Put simply, a TMS solution is a subset of a company’s larger supply chain management software. It handles all transportation-related operations and sits between enterprise resource planning (ERP) and warehouse management systems (WMS). Transportation management systems deal with both outbound and inbound freight and will offer users suggestions on how to best plan their routes.
In other words, TMS provides third party logistics carriers and shippers with the possibility of moving freight more effectively and reliably, all the while reducing costs and time required. This software supports all transportation modes, including national and international air, ocean, over-the-road, and intermodal freight. It also covers full truckload, LTL freight, expedited shipping, and more.
Below we will be taking a closer look at what TMS technology can do and what benefits companies can expect from their implementation.
What Are The Major TMS Features and Benefits?
In today’s digital business environment, there are too many moving parts involved in shipping for companies to be adequately supported by spreadsheets, phone calls, and emails. Over the past decade, TMS solutions have evolved beyond being mere freight management platforms and have gone on to become fully connected fleet management systems that are easily accessible to companies of all shapes and sizes.
Out of all supply chain technologies currently available, transportation management solutions will provide freight brokers and other logistics companies with the most benefits. One of the most powerful reasons companies often consider implementing a TMS is to lower freight spend.
These cost savings can be achieved based on a series of core features such as process enforcement, optimization, reporting, and analytics. When compared to more traditional forms of managed transportation, TMS software solutions will enable better customer service, improve operations, and will help with more informed business decisions. Below are some of the main benefits that transportation management solutions have to offer.
Keeping all of your shipments and their different modes of transport organized can prove to be a challenge. Details can be forgotten and slip through the cracks, leading to miscommunication and potentially costly delays or other challenging circumstances. Logistics teams using a TMS software can keep all of this data organized, helping them avoid mistakes. It will also help teams better consolidate their orders, optimize their route scheduling, and improve their planning.
With top TMS software, you can also optimize your dock configuration, helping to minimize congestion. It also provides you with improved visibility on all shipping vessels while your route information and scorecards will be automatically updated.
Being able to forecast your inventory can be incredibly beneficial for warehouse management. A TMS will allow you more time to plan your inventory since it will show you where your outbound and inbound freight is at all times. This will keep the entire supply chain process more streamlined and organized, preventing you from over-stockpiling or having to build a safety stock, just in case.
TMS software will track shipments from tender to delivery. While traditionally TMS platforms used to manage outbound freight, it’s also a great tool for managing inbound freight as well. It’s not uncommon for inbound freight to go overlooked and undervalued. But when it’s incorporated into the overarching logistics strategy, it will provide a full view of the supply chain, giving the company more opportunities to save on freight cost. This increased visibility will not only help with dock management but also with customer service by providing clients with full transparency.
Carrier Rate Management
Another useful functionality for TMS systems is that they allow you to store all contract carrier pricing information. With this feature, you can also optimize your shipments based on costs and get better visibility into your carrier payment processing. Not only will you be able to customize your payment options but you will also be able to approve or reject shippers’ accessorials without having to wait for their invoice.
Carriers and freight forwarders can also use a TMS platform to bid on shipments. This makes the entire process much simpler and less time-consuming. It’s also possible to use the system to automate the freight distribution process. This method takes into account several variables including total cost, award ranks, and lane percent allocation while simplifying the entire communication process with all carrier partners.
Reporting and Analytics
For companies to provide optimal service, they need a lot of intelligence in order to make informed decisions. Gathering this information and analyzing it by hand can be quite labor-intensive and is prone to mistakes and human error. When automated, however, this process will provide third-party logistics providers and other TMS users better and more accurate insights at only a fraction of the cost.
With more intelligence, companies will also help increase their supply chain visibility, showing which carriers have more customer complaints. 3PLs can use this data to rank their carriers, improve their customer service, and further optimize their logistics processes.
An effective TMS software platform will allow freight brokers and logistics managers to compare different freight companies against each other in terms of overall service, on-time deliveries, contract terms, and other attributes. This benchmarking capability will allow you to leverage better carrier rates as well as determine which carriers are the most proficient. It will also tell you what these companies can change about themselves to gain a competitive advantage.
Better Order-to-Cash Cycle
A TMS will eliminate most, if not all components that go from the moment a product is ordered until it is delivered to the end-user. Put simply, transportation management software will have a direct impact on your order-to-cash cycle, also allowing you to quickly identify which steps in the process may need to be corrected or improved.
The Audit Trail
A TMS will give companies the ability to audit their entire shipping process throughout the order-to-cash cycle. By having a physical trail of all processes, users can go back to locate the origin of any errors that may have occurred along the way. This will tie back to how easily issues with freight bills and accessorial charges can be easily resolved by the audit trail found in the TMS database.
Key KPIs to Track With Your TMS System
Aside from streamlining the day-to-day processes, a TMS platform will also allow companies to track certain metrics that let them know how well these processes are working. Some of these key performance indicators will include the following:
- Shipment Yields – Every shipment’s yield can be broken down and examined for delays and extra costs. A lower yield per mile could indicate issues with fuel consumption.
- Fuel Efficiency – Tracking and optimizing your fuel consumption will allow you to remain in compliance with governmental environment initiatives, help reduce overall freight costs, and build a more sustainable supply chain.
- Delays – Traffic delays, random inspections, or various paperwork issues can all work to reduce the per-mile yield of a shipment and increase transit time.
- Loading and Unloading Times – Though seemingly inconspicuous, these KPIs can add up over time, resulting in dead-time or having to reroute shipments.
- Maintenance – Keeping a constant eye on your maintenance metrics will not only help you to avoid any unforeseen down-times, but also may indicate if your fleet may need replacing.
- Damages – By examining when, where, and why damages or accidents occur, companies can identify the causes and minimize them.
- Productivity – This metric refers to how easily and efficiently a shipment is transported. If this KPI is low, companies can experience additional costs, delays, and more.
TMS Cost of Ownership
When discussing the total costs associated with a transportation management system, we need to include the initial investment, the implementation costs, the ongoing licensing, and the ongoing support costs. It’s important to know that cloud-based TMS solutions have driven down the costs of these four categories. Businesses looking to implement a TMS system that view the total cost of ownership as a major deciding factor, should be looking at cloud-based TMS systems more closely.
When it comes to the initial investment, ongoing licensing and support costs, these vary depending on each TMS vendor and its product. The key, however, is to understand these costs based on what’s included in the price. In most cases, buyers can choose from different components that will best suit their needs and requirements.
The Implementation Costs
Unlike other costs, the costs of implementation are more or less the same regardless of the TMS solution and are based on several factors. These will include the following:
- The total number of internal and external users
- The total number of carriers
- The number of integration points for internal and external systems
- The total number of customer
- How many TMS modules are required
- Any custom modifications that are required
Generally, the higher the numbers are for the aforementioned factors, the higher the implementation costs will be. This is also where some TMS vendors will charge the most for their products.
Free vs. Paid TMS Software
Some vendors or third party logistics providers will offer their TMS solution for free. While there isn’t such thing as a “free” anything, there are some pros and cons when it comes to this option. On the one hand, a free software is typically used as a way of getting people accustomed to the new TMS platform. In other cases, it could be given away in exchange for contact information about their target audience – in this case, your organization.
In both these situations, the overall functionalities of the system may not be as comprehensive or as strong as their “paid” version. That said, this free version of a TMS system can still prove useful in several cases such as a small company that doesn’t need multiple user accounts or in cases where companies do not process too many loads. Likewise, for those who don’t need to access information from other services, or don’t require reporting tools like load boards, credit card processing services, carrier qualifying services, and mileage makers, these versions may be adequate.
In other cases, you may still have access to a free TMS system that also features all the functionalities that you require to grow. In this scenario, we’re talking about managed transportation services.
In-House TMS or Managed Transportation Services
You have the options of buying and implementing an in-house TMS system, installing a free one, or outsourcing your freight activities to a third party logistics provider that already has the TMS technology. Opting for managed transportation services (MTS) will not only give you access to their TMS software package but also to their other logistics and supply chain services.
Simply put, third party logistics providers (3PLs) are organizations that specialize in handling their clients’ shipping functions. This will include everything within a distribution network, going from the retailers or manufacturers, all the way to the end-user. Transportation, warehousing, stock management, shipping audits, customs brokerage, delivery monitoring, etc., are all examples of services provided by a professional 3PL.
Granted, the outsourcing option may not be for everyone. Those that use it can see a tremendous amount of value added to their organization. Using a 3PL will also provide you with their experience, resource network, technology, and more. In addition, the implementation will usually be faster as will realizing the ROI since the 3PL will already know the ins and outs of their system.
Redbird Logistics can help manage some or all of your supply chain and logistics. We provide the latest transportation technology platform and real-time tracking & visibility every step of the way. Contact Redbird today!