September 10, 2020

What is a Transportation Management System (TMS)?

A transportation management system (TMS) is a supply chain solution with specialized software that helps businesses and shippers plan, execute and optimize shipping processes. Gartner defines TMS solutions as:

“Software that deals with the planning and execution of the physical movement of goods across the supply chain. This market focuses on holistic multimodal domestic TMSs for use by shippers (such as manufacturers, retailers, distributors and wholesalers) or non-asset-based, third-party logistics (3PL) organizations.”

Shippers use transportation management systems (often referred to as a TMS or Transportation Management Software) to streamline traditionally manual processes within multiple carriers and  the logistics subset of their supply chain. More advanced freight management systems go beyond the basic functions of a TMS — they also bring automation and visibility into shipments, help organize executional functions within carrier systems (like billing and reconciliation), and compile data insights to use for future shipments.

With global trade and e-commerce growing significantly, now it's more important than ever to have reliable transportation data in order to understand the impact a transportation management system could have on your business operations and supply chain.

Key functions of Transportation Management Systems (TMS)

The core capabilities of a TMS can be broken down into the planning, execution aspects and delivery speeds that ensure the timely and cost-effective delivery of shipments, as well as the optimization of related supply chain processes such as billing, freight class carrier selection, price strategy, and more.

Planning: Transportation management systems help shippers determine the best transportation mode, lowest rates shipping freight, most reliable carriers, and highest performing lanes. TMS systems can give shippers insight into shipments and help them manage customer expectations with proactive shipment process and event management (minimize delays, provide information on market changes, etc.)

Executing: Executional functions of a TMS can widely vary depending on the technology and focus of the transportation management system. A TMS with more advanced capabilities can automatically import orders, consolidate them into loads and into truckload shipments, tender shipments with automated workflows, track shipments, provide visibility into shipments, settle and reconcile invoices, and more.

Optimizing: A TMS that tracks the performance of shipments and shipping methods — ranging from operational statistics (OTP/OTD) to carrier scorecards — helps shippers optimize future shipments. On top of that, pricing insights, carrier management, and data analytics dashboards empower shipping professionals to lower transportation costs and improve their operation by finding poorly performing lanes and carriers and identifying additional solutions for the business.

Who uses a Transportation Management System?

While many businesses would see a positive impact and cost savings on their shipping and transportation process with a TMS, the most common users of a transportation management system are:

  • E-commerce companies
  • Retail businesses
  • Manufacturers
  • Distributors
  • Logistic service providers (3PLs and 4PLs)

Shippers representing businesses across nearly all industries — ranging from food and beverage to logistics service providers to furniture manufacturers — can benefit from a TMS. Transportation managers that coordinate shipments within a complex supply chain full truckload freight — often more than $100 million worth of goods — need a platform that can manage shipments beyond the capabilities of simple transport management systems. Enterprise businesses often move less than truckload and need a full supply chain management (SCM) suite that includes a transportation management system.

Best transportation management system integrations

TMS should be part of a business's overarching supply chain management strategy, but the transport management system is not the only piece of a complex supply chain. Easy integration is crucial for both a standalone transportation complexity solution, cloud-based supply chain planning, and on-premise transportation management systems. A full supply chain management suite could include a global trade management application, a warehouse management system, a TMS, and more.

What are the benefits of a TMS that includes visibility, carrier networks, and automation?

Different businesses will need a transportation management system for their shipping needs for varying reasons, but the greatest benefits of fleet management by using a TMS all boil down to streamlining the freight shipping process. By using a TMS that combines visibility, a carrier network, and intuitive automation, transportation management teams are better able to:

  • Manage all shipment lifecycles in one platform, reducing the inefficiencies and costs of switching between platforms. 
  • Improve team workflows with multiple modes, analytics, and visibility integrated in one place. 
  • Move shipments quickly with access to trusted carriers and load board. Shipment pricing strategies should rely on a combination of contracted and spot rates.
  • Realize time savings with fewer manual processes and increased team efficiency. Market-leading technology automates routing decisions based on quotes, transit time, and carrier mix.
  • Scale business quickly with a faster logistics operation and ability to match higher shipment volumes.
  • Make faster and smarter business decisions powered by data analytics.
  • Improve customer relationships through better understanding of shipment location, speed of service, and increased insights (and top-notch customer service). 

Shippers using Shipwell's TMS experienced savings of 5%-15% on total shipping costs as a result of automating freight and optimizing loads delivery times, modes, and rates across their shipments. On top of that, transportation management teams spent 75%-85% less time managing freight shipment tracking and assigning loads (5 minutes with Shipwell's TMS compared to 20-30 minutes without a transport management system).

What should I look for in a best-in-class TMS?

Outside of the core capabilities of a TMS, the best of transportation planning and management software is:

  • Cloud-based. A TMS that is easily accessible addresses many issues in today's workforce. Remote workforces are here to stay, so it's crucial to have the ability to implement and manage systems quickly and at a low cost. 
  • Easy to implement and use. The technology in a TMS is a competitive advantage only if people are using it. With easy integrations to existing systems and an intuitive user interface, your TMS can become your greatest asset in driving efficiencies and lowering costs.
  • More than a simple routing guide. Transportation management systems that use industry-leading automation, visibility solutions, and enhanced data analytics empower you to streamline workflows and make smarter business decisions with fewer resources.
  • Supported by a strong customer service team. To get the most out of your transportation management software, it's important to have a customer support team that you can rely on to share best practices and regular business reviews.

As we see black swan events like Covid-19, the Suez Canal blackage, Brexit, trade wars, and geopolitical conflict become more common, resilient supply chains are not a luxury — they're imperative. Read Shipwell's guide to managing your supply chain in a volatile market.

Are you ready to learn more about what a new TMS or transportation management refresh could do for your business? Request a demo today to get a personalized quote and expected ROI.

Get started and request your personal Shipwell demo now

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