How Transportation Management System Can Benefit a Supply Chain
Shipping is a challenge for businesses, considering the need to meet customer’s demands for boosting revenue.
In e-commerce shipping and logistics, there’s a well-known “Amazon effect” which states that e-commerce websites must provide customers with what they want, when they want, and at a lower price.
According to Forbes Insights, 44% of the interviewed people said the Amazon effect had greatly influenced their logistics, supply chain, and transport operations. Hence, shipping software can reduce freight invoice payments by 90-95%, and it’s worth integrating to make the business more cost-effective.
What Is a Transportation Management System?
A transportation management system (TMS) is a part of supply chain management in the context of transport operations. This software arranges, executes, and improves goods shipment.
A TMS performs a number of functions, such as:
- moving freight in all modes (by the sea, train or plane; in bulk or in parcels);
- looking for both company and external service providers to deliver goods;
- arranging inbound and outbound shipments both domestically and internationally.
If an organization uses a TMS, it can arrange freight movements in a robust and effective way. Such logistics solutions assist in managing commodity sourcing, planning, and settlement. Using special software contributes to the company visibility strategy across all transport flows.
It’s worth sharing that a new generation TMS has the following capabilities:
- One can receive the service not only on the installed basis but through the cloud and subscription-based providers (SaaS—software as a service). Cloud and SaaS solutions make transportation management systems more user-friendly, cost-effective, and affordable for small and medium companies. Hence, in 2019, a 15% growth in TMS usage by SMB was reported.
- Freight is visible wherever it is on the land, ocean, or in the air. Most B2B applications have a tracking feature.
- Uber-like options provide the possibility to shop the delivery from the external provider at the best deal on the market, to handle freight easily (for example, spot-market purchase, which is immediate delivery for the bought goods, or last-mile shipment, moving commodities from transportation hub to the end-user housing).
- ROI (return on investment) since TMS installation is no longer taking less time. Due to the expanded integration capabilities of modern TMS applications, the product is more flexible and adaptive to the business workflow (it contains manual data, web services, ERP, and APIs). So, the company invests money in TMS implementation, adapts it easily, and has vast possibilities to tune it to business needs.
These features make the utilization of logistics software profitable and lead to real control over the enterprise’s supply chain.
As the GEFCO website (the European leader in automotive logistics) states, using TMS enterprise is building a “supply chain control tower to obtain real-time visibility from end to end.” Using a special software company can have proper predictive analytics about what is anticipated to get and to send from the warehouse.
To sum up the TMS discussion, remember that it is a type of logistics software, which can be a separate application or a module within the ERP (enterprise resource planning system). TMS can apply a single transportation mode, or it can be multimodal to combine a variety of delivery ways for better performance.
Gartner Group (global research company) calculated that the logistics software market would reach 1.7 billion by 2022. So, by applying a TMS today, you will benefit tomorrow, saving 5-10% on delivery spendings. Let’s see what these benefits are in more detail.
Transportation Management System Benefits
A TMS provides savings by reducing freight delivery cost, improving operational processes, preventing time and money losses with proper analytics, or increasing customer satisfaction due to high-quality service.
Logistics software solutions assist in:
- comparing and choosing the best prices of the carriers available on the market;
- shipments booking;
- tracking the delivery and enhancing SCV (supply chain visibility);
- improving freight shipment efficiency;
- operational costs optimization;
- warehouse efficiency (once the software is integrated into your ERP, you save time on inventory records and commodity entries);
- gaining customer satisfaction (using real-time TMS analytics allows you to track the cases with 100% on-time delivery and choose only those providers for your next deliveries);
- improving cash flow (via combining different routes and types of vehicles, choosing shared container shipping, or the best last-mile deals).
By gaining all the beneficial features mentioned above, you substantially decrease your paper workflow because human errors such as incorrect billing and invoicing are nullified by the system.
Pool distribution is another valuable possibility enabled by TMS integration. You choose the shipments to be picked up or delivered, and at the same time, it’s possible to split the complex orders and process them separately.
The concept of “repeat business” becomes easy-to-execute once automated delivery processes contribute to your customer satisfaction, making them choose you again and again.
To speak up about essential TMS benefits, it’s worth looking through the following statistics:
- After TMS integration, 30% of companies identify an increase in customer satisfaction (AP News Logility Report).
- About 36% of the respondents admit increased possibility to balance supply and demand via predictive warehouse analytics options (from SupplyChain 24/7).
- Around a 90-95% reduction in freight invoice payments is detected (reported by the Cerasis survey).
Once you are ready either to utilize ready-made cloud solutions or outsource the development of a tailored TMS application, it’s best to know its basic features.
Transportation Management System Features
Modern TMS features are a part of the supply chain management process. DHL reports this technology is available in the planning delivery process—even for small and middle-size companies with $15 to $20 million annual freight cost.
As we have already discussed, a TMS can be integrated into either your ERP or WMS; it can be single- or multimodal and can obtain pool destination capabilities. However, there’s a number of “must-have” features either in the cloud or pre-installed solution, including:
- Carrier contacts management
- Optimization options (load improvements to understand the best way to pack commodities—in bulk, parcels, stacks, or packages; route optimization; carrier selections; analytics for freight management)
- Real-time tracking (e.g., Abivin Route, with carrier information and GPS updates)
- Contract management possibilities (a modern TMS should contain agreements with customizable features descriptions, such as locations, zones, and effective dates)
- Integration with ERP, WMS or OMS
- Reports and business intelligence options (logistics KPI counter and data for understanding the trends)
- Security (for example, important statistics must be available for authorized users only; system access by invitation; Windows access to outsiders should be blocked, etc.)
In addition to all these basic features, businesses appreciate international logistics functions, such as multi-language interface, the capability to manage commercial invoices, SEDs (shipper’s export destination), NAFTA paperwork, VAT, and cross-border taxes calculations, which makes it easier to manage international trade delivery operations.
Forbes presented an analysis of how TMS features can augment your supply chain performance. Logistics software is also not as sophisticated as it may seem. It can be a “bolted-on” application, ready to be in-built into your website even if you have no special expertise in running it.
To make all TMS options increase the revenue for your business, it’s recommended to navigate the improvements. A 3D (diagnose, develop, deploy) method is usually applied as well as setting clear desired KPIs to reach.
Once the desired characteristics are included in one product, they ease the delivery process, save money, balance supply and demand, and optimize operational company workflow, as the following cases show.
TMS Case Studies
Argo consulting placed a case on their website describing how they support the client in choosing a TMS provider. Wire and cable manufacturers have non-standard and non-centralized delivery processes, which is why their freight expenses were so high. The company was willing to collaborate more with carriers, choose better deals faster, and tune ERP/WMS systems.
Argo advised on order entry and processing and recommended TMS vendors to have real-time visible reports to monitor weekly KPI. The opportunity of managing LTL (less than load) carriers was the main challenge to overcome, and once successful, it resulted in $1.75 million annual savings.
Businesses must oversee the management of order entries, paper workflow to process them, bidding with the carriers, choosing the best deals, applying last-mile outbound delivery, and LTL options to make shipments faster. A TMS tool can perform all of these functions for your business but at a lower price.
Innovecs collaborated with the global provider of web-based TMS solutions to build a web-based marketplace for connecting verified shippers and their partners in one place to optimize full truckload transactions.
While collaborating, it was planned to design a cloud platform as a meeting point both for brokers and the carriers to ease transportations.
Innovecs provided a team of qualified engineers (developers and QAs) with a smooth development process based on the Agile methodology and presented MVP (minimum viable product) in 3 months after signing the contract.
The project resulted in an error-free working platform that contained an:
- inbuilt messenger;
- customizable queries in accordance with personal needs;
- analytic tools; and
- the possibility to choose among the best shipping rates.
As you see, both cases were focused on centralizing and standardizing the delivery process, easing the connection between end-users, and getting up-to-date analytics, which are the basic features of any TMS solution.
“The best delivery modes for the lowest price” is a brief definition of a transportation management system. A TMS saves you money via minimizing paperwork, giving the possibility to track the freight effectively, increasing customer satisfaction with on-time deliveries, and optimizing routes and performing inbound and outbound pool deliveries.
In an interview with Innovecs CEO, Alex Lutskiy, for Business.ua, it was specified that it’s high time to sell not resources, but expertise, considering the main IT trends, such as “economy transformation into the digital world” in the field of logistics, healthcare, entertainment, etc. Hence, such tools as TMS or ERP will be more and more popular to enhance businesses in the next 5-7 years.
Market leaders are presenting new and more powerful solutions, such as Saloodo by DHL (digital freight marketplace platform), Uber Freight or UShip tools, and a TMS allows the business owner to access such marketplaces.
Innovecs is following the trends constantly. In 2019, an Innovecs representative attended HDW19 and shared his vision across logistics software development. We look forward to following logistics trends this year while also performing customized innovative solutions. Innovecs can help your business with global deliveries and creating functional tracking systems.