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What is a Transportation Management System (TMS)?

What is a Transportation Management System (TMS)?

A transportation management system (TMS) is a supply chain solution that helps businesses and shippers plan, execute and optimize shipping processes. Gartner defines TMS 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 called TMS or Transportation Management Software) to streamline traditionally manual processes within the logistics subset of their supply chain. More advanced systems go beyond the basic functions of a TMS — they also bring automation and visibility into shipments, help organize executional functions (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 understand the impact a transportation management system could have on your supply chain.

Key functions of Transportation Management Systems (TMS)

The core capabilities of a TMS can be broken down into the planning, execution, and delivery of shipments and the optimization of related supply chain processes such as billing, carrier selection, price strategy, and more.

Planning: Transportation management systems help shippers determine the best transportation mode, lowest rates, most reliable carriers, and highest performing lanes. TMS can give shippers insight into shipments and help them manage customer expectations with proactive 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, tender shipments with automated workflows, provide visibility into shipments, settle and reconcile invoices, and more.

Optimizing: A TMS that tracks the performance of shipments — ranging from operational statistics (OTP/OTD) to carrier scorecards — helps shippers optimize future shipments. On top of that, pricing insights 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 on their shipping 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 furniture manufacturers — can benefit from a TMS. Transportation managers that coordinate shipments within a complex supply chain, 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 need a full supply chain management (CSM) 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 transport system management is not the only piece of the complex supply chain. Easy integration is crucial for both standalone cloud-based 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 varying reasons, but the greatest benefits of using a TMS all boil down to streamlining the 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 and optimizing loads, modes, and rates across their shipments. On top of that, transportation management teams spent 75%-85% less time managing 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 transportation 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.

During black swan events like Covid-19, resilient supply chains are not a luxury — they’re imperative. Read Shipwell’s guide to managing your supply chain in a volatile market.

What is the future of transportation management?

While the market changes within minutes and customer expectations continue to rise, the supply chain industry has traditionally been slow to change and adopt new technology, including transportation management software. Shipwell is constantly challenging the industry and is determined to improve shippers’ experience with smarter supply chain management systems.

  • Cloud-based TMS supporting remote workforces. As companies begin to move their teams remotely, the ease of integration and convenience of cloud-based TMS will outperform the more traditional on-premise transportation management systems.
  • Guided actions powered by predictive and prescriptive insights. By combining machine learning technology and data analytics insights, a TMS can help shippers determine stronger pricing strategies, route options, load consolidation, and carrier selection.
  • End-to-end automation. Shippers can focus on exception management with a TMS that automates ingesting orders, load planning, and optimization, carrier and rate selection, transport and delivery, settlement and invoicing, reporting and operational optimization, and other processes.
  • More advanced carrier evaluation and communication tools. Determining which carrier is best suited to complete a shipment is based on more than just price. A TMS should be able to aggregate information about carriers, including automatic compliance checks, price, on-time pickup and delivery, driver satisfaction, and more.

Join the Shipping Evolution®!

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.