What is a Transportation Management System (TMS)?
The term ‘Transportation Management System’ or TMS has become more common in the supply chain industry as companies turn to technology to stay competitive in a changing marketplace. Technology has revolutionized everything from how we watch TV, to how we buy our groceries, and even how we meet each other. It’s unsurprising, therefore, that a key component of the American economy (the movement of goods, materials and other freight) would eventually turn to technology to keep pace. Transportation management systems are the logical next step. Now, companies of all sizes are researching transportation management systems to learn more about how technology can save them money, streamline logistics operations and improve customer satisfaction.
But What Exactly is A Transportation Management System or TMS?
Definition – According to Gartner, an analyst firm providing companies with insight, advice and tools to evaluate technology:
“A TMS (transportation management system) is used to plan freight movements, do freight rating and shopping across all modes, select the appropriate route and carrier, and manage freight bills and payments.”
Simply put, a TMS is a system that companies can use to digitally manage their freight operations instead of calling and emailing internal and external partners. Transportation management systems often sit between a company’s ERP system and a warehouse management system (WMS) and connect the two for increased supply chain efficiency. Orders flowing between these systems create continuity and speed up the time from customer order to final delivery.
At their core, most transportation management systems have rating, booking and tracking functionality. Others have advanced reporting and dashboards, freight pay and audit, and other modular features that can be added as needed. Transportation management systems come in all shapes and sizes, so it can be difficult to know where to start. Here are some of the potential benefits companies can gain by implementing a TMS:
- • Save money and grow your bottom-line
- • Save time and repurpose labor to value-added projects instead of “firefighting”
- • Improve customer satisfaction
- • Get insight into your operations to make strategic changes
- • Simplify collaboration with supply chain stakeholders
- • Grow your business!
Step-by-Step Guide on What You Need to Know About Transportation Management Systems (TMS)
Types of Transportation Management Software – Transportation management systems have been around since the 1980s, but they’ve come a long way from the clunky, monolithic machines of the past. Now there are many varieties which cater to companies from every industry and of any size. Some TMSs focus on small – to – medium-sized businesses (SMB) and only offer very basic functionality including rating and booking. Many TMSs that cater to a smaller market don’t offer customization or advanced features like reporting and analytics or integrations. Instead, they focus on being low total cost to own (TCO).
Other TMSs focus on the high end of the market and cater to enterprise-size companies. These TMSs often only have a few customers and their price-points make it nearly impossible for smaller companies to benefit from them. According to Adrian Gonzalez, President of Adelante SCM, “In the case of shippers, large enterprises (over $1 billion in revenues) were the early adopters of transportation management systems (TMS), due in large part to the high cost of buying and implementing on-premise applications (typically over $1 million).”
Enterprise-class TMSs usually offer advanced functionality like integrations, freight pay and audit, order and route optimization, and many other features. Unfortunately, most of these legacy systems come as a complete (and pricey) set, leaving companies who don’t need certain features with a bill for the technology they won’t use.
The solution to this is to find a TMS that will expand and contract along-side your business so that you always have the features you need and aren’t paying for the ones you don’t. It’s important to realize that not all companies operate in the same way, and a scalable transportation management does just that. Transportation management systems like Kuebix TMS are built to serve companies of all sizes and needs.
Kuebix Free Shipper was the industry’s first truly free TMS and has removed all barriers to entry to SMB customers looking for rating, booking and tracking functionality. Companies looking for financial management, advanced analytics and other premium features can upgrade to Kuebix Business Pro and Kuebix Enterprise and then seamlessly add additional features.
What’s the Difference Between Cloud-based / SaaS, and On-Premise TMS?
Besides being geared toward specific audiences, transportation management systems are housed and accessed in two different ways. The traditional way which many early adopters of transportation technology used was on-premise software.
On-premise software is installed and run directly on local computers. This requires a representative from the TMS provider to physically install the TMS “on-premise” at the user’s headquarters so that the company can gain access to it. This can cause difficulties whenever a problem arises or a new version needs to be updated, not to mention the customer’s inability to take their TMS on the road with them.
Cloud-based, software-as-a-service (SaaS) TMS are becoming strongly preferred over on-premise software. They are much more agile and easier to install, maintain, and upgrade, leading to a faster return on investment (ROI) and less hassle.Cloud-based platforms create an opportunity for next-level collaboration across supply chains. With software that is housed on the “cloud” (online), users can access it from anywhere, even from mobile devices, and aren’t constrained to “the four walls” of their office building.
Most cloud-based transportation management systems are sold as software-as-a-service (SaaS). This means that users subscribe to the technology on a monthly or annual basis instead of purchasing the technology outright. Not only is this more cost-effective, it also means that users are always on the most recent version of the software.
What is the Core Functionality of a Transportation Management System (TMS)?
As mentioned above, most transportation management systems provide these three core features:
- Rating: Any logistics professional with a TMS can easily find rates for their customers’ orders and book those orders for delivery.
- Booking: Instead of needing to call individual carriers or visit each carrier’s website, the user can simply access the TMS to see all of their negotiated rates laid out side-by-side. Picking the rate with the best price and service level is both faster and easier!
- Tracking: Transportation management systems provide detailed tracking information on shipments all the way from the warehouse to their final destination.
Together, these features unlock potential for improved operational efficiencies and increased visibility throughout the supply chain.
Common Transportation Management System (TMS) Upgrades
Though most TMSs provide the standard rating, booking and tracking, other more advanced TMSs also offer additional features. These can sometimes be added on in a modular fashion so that the user only pays for what they need, or may come as a package deal with the TMS. Here are some of the common capabilities of more advanced transportation management systems:
- • Freight Pay and Audit – This feature helps companies automatically audit each carrier invoice. TMSs like Kuebix indicate which bills are within the predetermined threshold and can be paid and calls-out others which do not fall within the limit. This makes it much faster for financial teams to pay carriers and helps them avoid overpaying on accident.
- • Order Integrations – An integration between the TMS and an ERP or a financial system like NetSuite, Microsoft Dynamics, or QuickBooks can vastly improve the speed and accuracy of booking. Order information flows directly from the ERP system and automatically populates within the TMS so that users never need to re-key information. This eliminates user-error which can lead to endless firefighting and incorrect deliveries.
- • Order and Route Optimization – Some TMSs offer load and route consolidation and optimization through algorithms within their technology. The system can suggest the most efficient and cost-effective method of shipping a group of orders and the user can book the load quickly and easily.
- • Reports and Dashboards – Analytics are a major draw for many companies interested in improving their logistics processes. Actionable reports and dashboards let users understand every detail of their freight spend and make strategic decisions on the basis of data. They can be used to evaluate carrier KPIs, total freight spend by item, and to provide insight to leadership.
How Can a Transportation Management System (TMS) Software Save Me Money on Freight Spend?
Compare Rates: Transportation management systems let users automatically access all their negotiated carrier rates side-by-side for easy viewing and comparing. TMS users save time by no longer switching between individual carrier websites but instead have all their tariff information contained in one, user-friendly screen. Often, logistics professionals don’t have time to check the rate with every carrier, so inevitably end up missing out on quality rates. With a TMS users can choose the most attractive rate out of all their carriers for each shipment, saving them money on every load.
Pay Bills Correctly: Invoice audit is another way many companies use a TMS to save on total freight spend. Often, accidental or incorrect charges can be added to a shipment. Things like lift-gate fees and incorrect detention charges can increase the final amount on an invoice. These miscellaneous accessorial fees are easy to overlook when manually auditing invoices and are often even intentionally ignored because they waste too much time to rectify. These fees add up quickly, however, so having a system to automatically audit every carrier invoice can save huge amounts each year.
Understand Freight Spend: With a TMS that isn’t tied to a certain carrier or 3PL, users can access all of their rates side-by-side in an unbiased way. And with the addition or reports and analytics, users know exactly how well each carrier is performing on each lane. With this knowledge and understanding of the market rate, TMS users are positioned to negotiate for better rates and service levels with their partner carriers. This saves money overall and helps to improve relationships and customer service all at once.
Gain Visibility: Shippers leveraging a TMS like Kuebix also gain benefits from improved visibility to their supply chain operations. All stakeholders can use the common platform to plan their moves, receive alerts to changes as they occur, see every status update made, and make real-time adjustments to keep the supply chain moving smoothly and the customer happy. By sharing a single common system, suppliers can plan inventory levels more effectively to offer better customer service. Carriers can move shipments in and out more efficiently, making their operations more cost effective and the customer can improve the management of their inbound operations and warehouse.
Optimization: For companies with large or complex supply chains, features like order and route optimization can also save significant money. This is because manually building the perfect load is a challenge, and more often than not too time-consuming to bother with. There are countless factors a logistics professional needs to take into consideration such as delivery date, location, class, weight and size. Weighing all of these factors without the help of technology usually results in missed opportunities and wasted resources. Instead of pouring through spreadsheets and manually grouping orders onto a single truck, Load Builders and Optimizers can be leveraged to help logistics teams build and optimize the perfect load every time to save significant money.
Click here to see how one company saved $2.2 million dollars in cost-avoidance within one year by leveraging a TMS!
Will a TMS Save Me Time?
Many people are concerned that a TMS won’t actually save them time because they’ve been doing their job for years and know how to do it like the back of their hand. While “tribal” knowledge and relationships gained over a career aren’t easily replaced, a TMS can speed up even the most seasoned logistics professional. Instead of managing an inbox and voicemail of hundreds of loads, every load and stop on a route is tracked in one place. Spreadsheets are no longer required to transfer order information back and forth and users can spend more of their valuable time working on strategic projects instead of troubleshooting errors.
Many transportation management systems can be implemented within a matter of days or weeks. The cloud-based nature of the platform makes online updates and troubleshooting significantly easier for users. Simplified installation and upkeep leads to significant and long-term time and money savings.
From shippers with only a few loads a week to enterprises with hundreds of complex orders to sort through each day, leveraging technology can save countless hours. ERP integrations to automatically flow order information back and forth between systems not only improves accuracy but also makes the process of rating and booking much faster. Auditing and optimization features remove previously tedious processes and result in a faster speed from order to delivery. A few minutes saved per order adds up quickly no matter what size company is doing the shipping.
Not all transportation management systems (TMS’s) are created equal. Make sure to be aware of these common TMS challenges and if you’re thinking of implementing a TMS within your organization:
- • Not every TMS supports all modes of transportation
What to ask: Ask the TMS provider what modes of transportation they do support and whether support is included in all of their purchase levels. Find out if they support full truckload (FTL), less-than-load (LTL), ground freight, air, intermodal, and ocean.
- • The technology wasn’t built on the cloud
What to ask: Find out whether the technology is/ has always been housed on the cloud. If it hasn’t been, make sure that customer reviews reflect the provider’s ability to support a cloud-based technology. Many legacy transportation management systems have not had smooth transitions to a SaaS cloud-based model.
- • Biased in favor of one carrier or 3PL
What to ask: Ask whether the technology is owned by a carrier or 3PL. If it is, determine whether you will be able to add all of your negotiated carrier rates to be viewed side-by-side in the technology. Many TMSs owned by a carrier or 3PL have preferred rates which could detract from your savings. Remember, a TMS should give you an agnostic way to find the best carrier rates.
- • Bad customer reviews
What to ask: Ask to see some customer references before deciding on a TMS. If the TMS provider cannot show you any customer case studies or videos, that should be a red flag. Check out technology review sites like Capterra and Gartner Peer Insights for unbiased reviews from real customers.
TMS’s Can Be Integrated with Users’ ERP Systems
Most transportation management systems (TMS) have several out of the box ERP integrations but can also customize an integration for any ERP system capable of sending and consuming data. Shippers can seamlessly integrate with some of the most popular ERP systems including NetSuite, Sage 100 and Microsoft Dynamics.
ERP integrations are commonly added to a TMS like Kuebix to increase efficiencies for shippers and drive cost savings. These integrations allow information like product and order details to flow automatically from an ERP or ordering system directly into TMS software and vice versa. This means that users don’t need to waste their time rekeying data between different systems and removes the risk of human error.
So, what is a Transportation Management System?
A TMS is a tool that any size company can use to improve the efficiency of their shipping processes. TMSs like Kuebix TMS help companies capitalize on supply chain opportunities through visibility, control and the use of predictive analytics. Kuebix TMS allows all supply chain stakeholders to collaborate on a single platform. Actionable analytics and detailed tracking information help to improve customer service. And since Kuebix is built on the latest cloud technology, it can be implemented quickly so that any company can begin seeing rapid ROI.
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