A transportation management system (TMS) is a real-time logistics tool that streamlines a company's ability to manage its inbound and outbound shipping. TMS solutions, often provided as software-as-a-service (SaaS), can often plug into a company's enterprise resource planning (ERP) or supply chain management (SCM) software.
A TMS can exist either as a cloud-based or on-premises solution, although the former is more adaptable to handle today’s mobile workforce.
A TMS helps global businesses keep track of their important shipments, enables automation at scale, and helps various organizations within the supply chain collaborate to keep the global economy running. Moving to TMS software can help companies better view their operations in terms of organizational key performance indicators.
The past few years have highlighted the importance of a globally connected supply chain where many tasks are automated, so every organization understands where goods are at any given time and can communicate their actions to others in the supply chain ecosystem.
An integrated and software-driven supply chain helps to ensure that goods can reach their intended destinations on time with as few issues as possible, providing wholesalers, retailers and e-commerce providers with the goods they need to sell to the ultimate customers of the global supply chain: consumers.
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TMSs often use advanced technologies like machine learning (ML) and artificial intelligence (AI) functions to optimize existing manual processes in their transportation operations, which take up valuable employee time. While some customers will purchase their TMS based on price, others pick the solutions that excel at providing some of the below components:
Warehouse management system (WMS): By understanding the current inbound and outbound schedules for goods, warehouse managers can maximize as much of its space as possible while never exceeding capacity.
Workflows: TMSs help establish, automate and monitor workflows that make the supply chain lifecycle run smoothly and enhance route optimization. Rather than rely on manual work like calls, emails or texts, automated workflows can handle routing, carrier selection, shipment tracking and invoicing without unnecessary human intervention.
Procurement: A TMS helps companies to centralize and understand their procurement approach by comparing vendors and distributors, storing all terms and conditions on a single platform, and more effectively observing the impact of vendor changes on short and long-term deliveries.
Order management: This tracks the creation and completion of orders. If multiple orders are from the same customer, TMSs can eliminate wastage and increase overall efficiency by combining those orders.
Invoicing: A time-consuming facet of shipping is invoicing customers and paying invoices to suppliers. TMS solutions can automate this process so that payment requests and billing are checked for accuracy and that money exchanges hands without human interference. This removes a significant cost drain from all organizations on the supply chain.
APIs: A key component of any TMS is the ability to tap into external software and systems through APIs. Many modern TMSs are available for purchase or license fits can work with many internal software and solutions, like ERPs and SCMs, through APIs.
The entire supply chain is a delicate ecosystem that depends on various organizations sharing information in as close to real-time as possible so the chain remains unbroken. Any organization that depends on fleet management finds value in transportation management software.
Companies that own or produce goods being shipped via different transportation modes. For example, sea, rail, road or air, or a combination of them like intermodal, require both real-time and long-term visibility across the supply chain.
That means they need well-organized information to manage their invoices, monitor the flow of goods, understand the current status of their products on fleets, and track shipments.
The companies operating the fleet vehicles that transport raw materials and supplies should use TMS to track the freight they ship on behalf of shippers.
Logistics service providers sit in between shippers and freight service providers and they arrange for specific freight equipment. They need to know the status of equipment of their customers and the requirements of expected shipments to support them with the right solutions when required.
Warehouse managers and shipping yard laborers should have a real-time dashboard to see where deliveries are; this way, they can accommodate them with the appropriate amount of staff and space within buildings and yards for efficient offloading and storage.
At the far end of the supply chain, these companies need to know when goods will arrive to sell to consumers. TMS provides real-time visibility so they can manage to stock their shelves and communicate with customers.
Transportation management systems include several benefits that can help all types of organizations across the supply chain better collaborate and manage their processes.
Cost savings: By optimizing shipping routes and destinations, companies can reduce costs and drive efficiencies. Businesses devote a significant amount of manual labor to maintain and update a complex network of spreadsheets. TMS software helps to manage this complexity by centralizing this information within one tool.
Subsequently, this reduces long-term labor costs, freeing up employees to work on higher-level problems. Some shippers require less than truckload (LTL) deliveries, where what they’re shipping is combined on one truck with goods from other shippers.
Being able to track their shipments among the rest of the goods is important. By automating the creation and analysis of internal and external data, shipping organizations can generate new insights to help them boost profitability and improve efficiency, such as faster invoicing and offloading of goods.
Increased collaboration: Shipping on the global supply chain requires significant collaboration among the transportation network - between shippers, freight brokers, freight service providers and other entities. By aligning all on one cloud-based software, multiple organizations can have a holistic view of the entire supply chain.
Enhanced forecasting: Shipping on the global supply chain requires accurate projections (link resides outside ibm.com) to plan for shipment loading, pickups and routing.1 This type of visibility into the supply chain allows organizations to plan and optimize for efficiency for themselves and their clients. By tracking shipments on varying timelines, organizations have a better overall vantage of their business.
Increased customer satisfaction: Along every step of the supply chain, there is a hand-off from raw materials providers to manufacturers to shippers to resellers and retailers to customers. Their satisfaction and the satisfaction of their customers depend on on-time deliveries or notifications of delays so they can make alternative plans. Using TMS to track movement and alert all participants if there are delays (or if something will be delivered before the estimated date and time) keeps everyone happy.
Better documentation: By automating the process of shipping goods, a TMS improves documentation in several ways; this includes standardizing all documents for compliance, creating a digital chain of custody, enabling real-time shipping updates and creating an archived record of documents automatically.
Automated tendering: Tendering is the process by which shippers can solicit multiple bids from carriers for any given shipping need they have. TMS can organize all the information that shippers have on potential carriers, can contact them automatically (link resides outside ibm.com) with the key information and terms, and accept offers, saving costs and cutting down on unnecessary manual work.2
Mobility: While many organizations will primarily run their TMS and manage their workflows on desktop computers, having a mobile app is critical for agile businesses that have workers constantly on the go.
Organizations looking to implement automated TMS solutions might encounter some initial difficulties, but in the end, the benefits of a transportation management solution outweigh the challenges.
That said, there are some specific issues that every organization should be aware of as they transition to automated TMS software, so they see through the transformation successfully.
User adoption: For organizations with a unique, manual approach to managing logistics, it might be difficult to wean them off the historical approach for a new system. Often, when companies introduce new systems, employees might fall back on their existing processes if they feel confused by the new system.
Management needs to communicate clearly and justify their decision-making with data to help their teams understand the value of this technology in their work. Providing onboarding education to demonstrate how different modules work will also accelerate this process.
Integration into existing ERPs and SCMs: A new TMS requires integration with existing software and systems. The complexity of this integration depends on what existing software and systems a company has, its IT support, the costs of such integrations, and how it can approach the integration without disrupting existing business processes.
Partner participation: While TMSs can be valuable for one organization within the supply chain to manage their part of the transportation process, the value is exponential for every partner and supplier that taps into it.
Failure to get a company's partners integrated into and using the software will mean it must manage multiple streams of communication and logistics, minimizing the solution's effectiveness.
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Footnotes
1 Creating value in transportation and logistics, McKinsey, 1 November 2015 (link resides outside ibm.com)
2 3 things CPOs should consider for efficient procurement automation, Supply and Demand Chain Executive, 19 April 2023 (link resides outside ibm.com)