Transportation Management System – Definition, Outline, Components

The transportation management system is commonly referred to as TMS and defined as a tool to assist the supply chain professionals in managing their freight and carriers. It is used by business entities that have to ship and receive goods regularly for instance

• Companies offering logistic services like logistics service providers, fourth-party and third-party logistics company
• Ecommerce companies
• Distributors
• Manufacturers
• Retail business
• Construction business

Meaning of transportation management system

The transportation management system is designed to streamline the shipping process by enabling a shipper to automate the process and receive insights that will actually minimize future spending on shipment and even save valuable time.

Every company that moves freight regularly uses the transportation management system to improve processes. The technology used by the system help in the coordination and planning of Create and optimize shipments, shipping tracking, delivering customized solutions and freight, managing the yard, communicating with all the supply chain stakeholders and tracking processes to save money and time.

Outline of the transportation management system

The outline of the transportation management system is as follows-

• Make sure that the transportation management system vendor knows and understands about the current operations of a company even before he starts to design the future system.
• Standardize exceptions with SOPs to avoid the need for custom coding within the transportation management system
• Go live after fully implemented
• Do not short-cut master data clean-up
• Do not short-cut testing efforts

Components of the transportation management system

The major components for logistic c companies and shippers who use transportation management system are as follows-

• Carrier management
• Route and load optimization
• Procurement management
• Visibility, reporting, and analytics
• Freight execution platform
• Business intelligence
• Invoicing functionality
• Freight settlement for audit and pay
• Logistics and supply chain data repository
• Supply chain communication platform

All the components are incorporated with a transportation management system platform. What the system does for the following stakeholders are listed below

Distribution

• The visibility provided to the inbound materials that are required to fill orders

Manufacturing

• The clarity provided to the incoming materials that are needed for manufacturing schedule

Procurement/purchasing

• Performance reporting and vendor management

Freight

• Plan, optimize and execute outbound and inbound product moves
• Analyze performance and cost of freight provider partners

Sales

• Tracking customer orders
• Reporting on performances

Finance

• Freight audit
• Pay
• Invoice
• Calculating accruals
• Analysing cost performance

Customer service

• Address and track customer orders

Vendors

• Reposting, managing and scheduling inbound shipment to the customers

Customers

• Direct access to shipment and order information

Transportation management system licensing options

The three transportation management system licensing options are

1. On-premises

This is one of the traditional models of the transportation management system. Here a business entity purchases the on-premises license and installs the transportation management system software on their servers.

One of the benefits of the on-premises transportation management system model is that it offers absolute control which is a necessity if a company wants to integrate the software with existing systems that are internally hosted

2. Hosted

The Hosted is a software as a service or SaaS and cloud-based model. In it, someone else will host the transportation management system software on its server and will be responsible for delivering services remotely and managing all the related issues

3. Hybrid

The Hybrid is a blend of Hosted and On-premises licensing. It offers greater flexibility and cost savings.

Advantages of the transportation management system

The advantages of the transportation management system are as follows-

1. Business insights

A transportation management system provides reporting capabilities and in-depth insights into the shipping process. Information is stored in one location, and it becomes easy to create custom reports and analyze the difference between final invoices and rates.

2. Simplify processes

The transportation management system assists in simplifying the process of carrier selection by evaluating the merchandise and matching it with a suitable carrier that is in the network. As the entire process is at one platform, it becomes easy to look at past shipments and match similar ones to the apt carrier.

3. Technological capabilities

One of the advantages of the transportation management system is that the shipper will have the necessary technology at hand to make the required routing decisions that are based on carrier mix, transit time and quotes. The centralized location will assist in minimizing the time, effort and stress that is spent on the booking process.

4. Track freight

A transportation management system helps to notice the delays in the transit and know when and why they are occurring. It tracks freight and receives alerts for unforeseen delays and transit exceptions.

5. Bottom-line results

One of the benefits of the transportation management system is that it ensures shipment booking by incorporating the best service-type and rate.

6. Saves time

The transportation management system is an automated process, and it is now possible for shippers to access any required information through a single portal. It is the advanced technology of the system that makes it possible to save time

7. Improved services

As the supply chain is running smoothly, the transportation management system provides the customers access to tracing and tracking of information. The customer is aware of the delivery schedule and in case of changes is notified instantly. This has improved services to a higher degree

8. Business growth

The transportation management system has proved beneficial for the companies that have implemented this system because it has made it possible to meet the needs of the business entities and customers alike. This has resulted in the growth and development of companies

9. Warehouse efficiencies

The use of a transportation management system minimizes the time taken for freight management. It is now possible to reduce entry errors and inefficiencies in the warehouses.

10. Accounting functionality

The transportation management system acts as a shield to the auditing and payment processes from human error. It is now possible to create custom reports and analyze any discrepancies

11. Aligned dock scheduling

Predictable planning and execution lead to the alignment of deliveries with efficient dock scheduling. It reduces waiting time and ensures quality transportation from one point to another destination

Disadvantages of a transportation management system

The disadvantages of the transportation management system are as follows-

• The cost of installing a transportation management system is expensive because you need software licenses, computer hardware, maintenance cost and expert handling and all these need extra money
• Embedding a transportation management system inside the workflow requires trained staff because a person without training can’t understand and run this system.

Reasons you need a transportation management system

The reasons why a business needs a transportation management system are as follows-

1. Improved cash flow

The reason for using an effective transportation management system is that it helps in improving cash flow and minimizing shipping costs. It also helps to analyze the financial aspect of every logistic route and create ideas for reducing costs in particular areas like overtime of driver and fuel consumption.

2. Less paperwork

The transportation management system is an automated process that helps to eliminate paperwork. No more invoice errors and incorrect billing through this system. The system cuts down on administration expenses and this increases overall efficiency levels

3. Supply chain visibility

An essential reason for using the transportation management system is to gain a better view of the supply chain system. It is a severe achievement to have access to real-time data and full operational visibility.

Now the supervisors can resolve issues and act on new opportunities easily

4. Integrated planning and execution

The transportation management system can integrate with the existing systems in a business-like Supplier Relationship Management, Customer Relationship Management, Warehouse Management and Purchasing and Order Management systems that are useful for a business entity.

This leads to better route planning and execution of orders with the least costly carrier

5. Inventory management

The reason why a business implements a transportation management system is that monitoring the shipment and order in real-time becomes easier. It is now possible to get status updates on every purchase.

All these facilities result in an accurate idea about the inventory and assist in boosting the accountability of the supply chain network.

6. Order fulfillment

The transportation management system ensures full visibility of supply chain and real-time tracking, and this increases the accuracy of order fulfillment. Situations can be quickly resolved as there are fewer discrepancies and errors in the shipping

7. Optimizing routing

The transportation management system has helped business in facing the routing challenges. The system encourages the user to implement pool distribution, which is a faster and cheaper delivery process and provides greater control and visibility.

8. Tracking en-route drivers

The reason to use a transportation management system is that it becomes possible to assess the benefit of the various routes taken by the drivers so that a strict schedule can be created.

The real-time tracking offers safety benefits in case of a mishap or an accident. The user can also track the efficiency level of each driver and provide valuable feedback through the transportation management system

9. Improved customer experience

Customers consider A-One services as an integral part of every business entity. They demand customized services every time and it becomes a challenge for the people handling their business.

The transportation management system unites all the orders to find the best available carrier at the lowest price> this results in a better and enhanced customer experience

10. Repeat business and referrals

The transportation management system can improve the overall efficiency and productivity levels of a company and save valuable money and time. It also leads to repeat business; moreover, satisfied customer leads to referrals and more business for the company.

Challenges faced by companies if you do not have an effective transportation management system in place

The challenges faced by transportation management system are as follows-

• When you are working with numerous shipments, it becomes difficult asking for rates from the carriers from different websites. Dialing their numbers and requesting quotes becomes a time-consuming process
• A business entity will use different carriers for freight depending upon their specific needs and requirements. Sometimes separate shipments are in transit abroad various company trucks at the same time. It becomes a challenge to track the freight process because without an effective transportation management system in place a business entity will have to do all the work by itself
• Every shipment is different and needs to be handled with care. You cannot ask a single carrier to process the different varieties of delivery as some might require special services or others might be temperature sensitive. Selecting the best one becomes a challenge
• It becomes different to gather valuable insights about the cheapest carrier without a proper transportation management system in place