How Your Business Can Benefit From Implementing the Right TMS
The transportation management systems (TMS) market is growing rapidly. In 2022, it reached a size of US 10.45 billion, and an annual growth rate of 14.8% is expected from 2023 to 2030.
The demand for TMS is explained by the great value the system brings to organizations.
Businesses that use transportation management systems enjoy the benefits of digital transformation, reducing costs and boosting productivity. Implementing TMS also includes other bonuses, such as improved workflow and more transparent daily operations.
But how to choose the right TMS for your business? This article will provide the answers you seek.
What features should you look for in TMS?
The primary goal of TMS is to refine business activities related to sending and receiving goods. Given this, TMS focuses on optimizing routes and delivery time by offering such features as:
Shipments planning. TMS allows you to manage shipments in electronic format. You can create a package, specify its weight and dimensions, specify the time of sending, and select the recipient. You will be able to track the parcel in real-time and receive notifications when it moves from one point to another.
Loads planning. With TMS, you can effectively distribute the loads of carriers and transports. For example, you can send part of the cargo by car and the remainder by plane, order a separate vehicle, or distribute your parcel among multiple shipment providers.
Price comparison. A transportation management system is primarily designed to optimize supply chain costs. Using TMS, you can quickly compare the rates of different shipping providers and choose the best option from the price-quality perspective. If, for example, you are a transportation company, you can compare the costs of different transport means and optimize them depending on your goals.
Real-time tracking. GPS tracking is not a technological novelty. However, transportation management systems offer a more customized tracking experience than generic programs like, for example, Google Maps. For instance, in TMS, you can track several shippers simultaneously on one map, receive alerts when the cargo reaches waypoints, and upload transportation reports.
Carrier performance monitoring. TMS can analyze the performance of different carriers over time. For example, you can assess carriers based on on-time delivery, transit times, overall reliability, and other metrics. Such a feature will help you make informed decisions about which carriers to partner with for various routes and shipments.
Shipment documentation. The send-deliver process is accompanied by numerous documents, such as a bill of lading, commercial invoice, packing list, shipping label, etc. A transportation management system allows all these documents to be stored in one place and provides handy features to edit them.
Analytics and reporting. Transportation management systems allow you to monitor the effectiveness of the transportation process. You can select the specific indicators you want to track and customize reporting options accordingly. Also, you can fill out mandatory industry reports, such as records of shipments or driver's daily log records.
TMS is an integral part of corporate software
Transportation management systems are used for internal purposes within a company. Like other corporate programs, they aim to optimize processes, reduce manual work, and improve KPIs.
Medium and large enterprises typically use TMS to automate supply chain and logistics operations. These operations do not exist autonomously but are a part of the multi-functional business process.
Given this, companies integrate TMS with other corporate systems or develop programs where TMS is a part of the system functionality.
Third-party integrations of transportation management systems can vary depending on the nature of the enterprise's activities. The most common integrations of TMS include:
Enterprise resource planning (ERP). Integration with ERP allows the exchange of orders, inventory, and financial information.
Warehouse management systems (WMS). Integration with WMS facilitates order fulfillment and inventory tracking.
Carrier and freight management. This enables TMS users to set up rate quotations, select carriers, and track shipments.
Electronic data interchange (EDI). EDI integration simplifies the exchange of documents with trading partners and improves collaboration.
Customer relationship management (CRM). Integrating TMS with CRM helps manage customer-related transportation requirements and track customer-specific data.
Financial systems. Integration with financial systems enables automated billing, payment processing, and cost allocation for transportation services.
Telematics and GPS solutions. These allow for the live tracking of vehicles and the monitoring of fleet performance.
The importance of transportation management systems: who needs them and why
TMS is a program for automating freight transportation and delivery of goods. Companies that have decided to implement TMS want to increase the transparency of supply chain operations and avoid the challenges of managing operations manually.
The typical users of transportation management systems are:
Freight forwarders and carriers
Manufacturers and distributors
Retailers and e-commerce companies
Wholesalers and suppliers
Healthcare and pharmaceuticals
Food and beverage industry
Government agencies
Here are the challenges that companies overcome by incorporating transportation management systems in their workflows:
Limited visibility. Without TMS, you don't have the full picture of a supply chain in one place and cannot manage all routes simultaneously.
Manual processes. Manual data entry often leads to time-consuming operations and data errors.
Inefficient routing. It is difficult to find the optimal shipping route without a specialized transportation management system.
Difficulty in rate negotiations. You may face challenges in negotiating competitive rates with carriers due to the lack of insights provided by TMS.
Inaccurate billing and payments. Manual processes can lead to billing discrepancies, invoicing errors, and delays in payment processing.
Uninformed decisions. Without data analytics from TMS, you may struggle to make informed decisions about the transportation strategy.
Poor customer service. Inefficient transportation management can result in delayed deliveries and subpar customer service.
Compliance issues. Without TMS, you risk not complying with industry standards, such as Hours of Service (HOS) and Electronic Logging Devices (ELD).
Difficulty in handling exceptions. Managing supply chain disruptions or customer demand changes may be challenging without TMS.
Benefits of transportation management systems
We have already discussed the issues that companies face when not using transportation management systems. Now, let's list five essential benefits you will receive after incorporating TMS.
Improved freight visibility
Transportation management systems allow real-time tracking of vehicles and freight. Here is how it works:
Each vehicle that needs to be tracked is equipped with a GPS-enabled telematics device
The telematics device communicates with TMS through cellular networks to transmit location data to the TMS server
The TMS server receives and stores the location data from all the vehicles in the fleet
TMS administrators access vehicle tracking information through a web-based dashboard or mobile app
TMS administrators track vehicles' progress and respond to any issues that may arise during transit
TMS stores historical location data, allowing administrators to access past routes and generate reports on vehicle performance
Optimal route planning
Transportation management systems are indispensable for planning optimal delivery routes. Here is how optimal route planning works:
TMS uses advanced algorithms to analyze distance, traffic conditions, vehicle capacity, delivery schedules, and customer preferences
TMS consolidates shipments and reduces empty miles by finding backhaul opportunities
TMS selects routes that optimize fuel usage by analyzing speed limits, fuel prices, and fuel consumption rates
Enhanced warehouse operations
Transportation management systems use advanced technologies to optimize the movement of goods within the warehouse. Here is how it goes behind the scenes:
When the order is placed, TMS checks items in stock, fulfills the order, and reduces inventory by the appropriate amount
TMS analyzes data from the warehouse camera and determines the most strategic location for each product
Having a map of goods placement, TMS guides warehouse employees on the most optimal routes
TMS joins inbound and outbound transport and enables cross-docking operations without storage
TMS automates repetitive tasks, such as barcode scanning or label printing
TMS integrates with warehouse equipment, such as conveyor systems, forklifts, and automated guided vehicles, and optimizes their operation
Carrier management
Transportation management systems digitize communication and collaboration with carriers. Here is how:
TMS allows carriers to monitor the status and location of the cargo by connecting with GPS devices
TMS sends notifications when an order is confirmed, shipment status updated, and delivery completed
TMS enables the electronic exchange and storage of shipping documents
TMS aggregates data from various carriers and allows companies to choose the most efficient partners
TMS allows shippers and carriers to collaborate on transportation planning through the shared virtual working space
Data-driven decision making
Transportation management systems generate data that help make decisions regarding logistics operations. Here's how it happens:
TMS utilizes real-time tracking to monitor shipments, track vehicle locations, and assess delivery performance
TMS has in-built analytics functionality to identify patterns and issues in the transportation process
TMS generates reports with valuable performance metrics, helping stakeholders make informed decisions
Real-world examples of companies that have successfully implemented TMS
In modern conditions of market globalization and close cooperation of international partners, TMS is no longer a luxury but a necessity. Companies with an extensive supply chain cannot establish efficient logistics on paper and need a robust digital solution to manage their transportation operations.
According to Coyote Logistics research, 98% of large and 83% of small companies successfully use transport management systems today. Below we present real cases of successful TMS usage and share our own experience in developing logistics software for a large American company.
AGCO
AGCO Corporation is a large agricultural equipment manufacturer headquartered in Duluth, USA. The company has significantly grown over the last two decades and reached US$12.65 billion annual revenue in 2022.
The company's rapid growth had both good and bad sides. On the one hand, AGCO significantly expanded its partner network; on the other hand, it experienced chaos in managing transport operations.
To address the problem, the company created a transportation management system and partnered with a third-party logistics (3PL) provider. This decision resulted in a cost reduction of 18% in Europe and 28% in China and North America. The company also noted improved network performance and reduced inventory levels.
Terex
Terex Corporation is an American global manufacturer of lifting and handling equipment for various industries, such as construction, mining, transportation, etc. The company has been on the market for 90 years and gained US$3.89 billion in 2021.
Terex faced a challenge with its manual yard management system. In particular, it was time-consuming to locate and prepare equipment for delivery.
The company addressed the problem by implementing a digital solution based on RFID (Radio Frequency Identification). This technology uses radio waves to identify and track objects. The RFID tags are attached to items and tracked by RFID scanners.
By incorporating RFID solutions with yard management software (YMS), Terex optimized transportation operations and streamlined logistics. Notably, the company reduced the time to locate units from six minutes to 30 seconds per unit and eliminated the need for manual inventory counts.
Avaya
Avaya is a technological company that provides digital solutions for communication and collaboration. The company is headquartered in Morristown, New Jersey, and had US$2.97 billion in revenue in 2021.
Despite its technological nature, Avaya faced multiple supply chain management issues. The reason was that their supply chain was in disarray due to multiple acquisitions in a short period. This led to long cash-to-cash cycles, excess inventory, and inefficient manual processes.
To solve this, Avaya implemented a TMS solution and transitioned its processes to a cloud-based platform. The platform automated non-value-added tasks and integrated sales analysis, procurement, supplier communication, logistics planning, and other essential operations.
Apart from developing a comprehensive transportation management system, the company hired top talents and focused on tracking key KPIs.
Such smart actions led to an efficient transformation of the supply chain. The company improved inventory turnover and reduced supply chain costs by 50%.
Sunsweet Growers
Sunsweet Growers is a leading agricultural corporation that operates the largest dried fruit plant in the world. The company was established in 1917 and holds strong positions in the industry up to now.
Sunsweet Growers faced a specific challenge in managing supply chain operations. Specifically, they had high production costs caused by inefficient forecasting of demand. At that time, the company didn't have a digital TMS solution, so the forecasting was implemented manually in the spreadsheet.
To solve this, they adopted a supply chain planning suite and implemented a sales and operations planning program. This allowed them to increase forecasting accuracy, anticipate plant resource requirements, and reduce the number of warehouses.
Thus, the shift to technology-driven planning resulted in considerable cost savings.
Land O'Lakes
Land O'Lakes is a large American agricultural cooperative that produces and distributes dairy products and other agricultural goods.
The company faced a problem of empty miles in its supply chain and underused truck capacity. This resulted in high production costs.
To tackle this problem, Land O'Lakes partnered with FourKites Inc. and utilized their Lane Connect application. The latter employs a machine-learning algorithm to match shippers with common routes, reducing the need for empty hauls.
The collaboration appeared to be highly effective. It allowed Land O'Lakes to optimize its asset utilization, cut transportation costs, and improve efficiency. All-in-all, the adoption of TMS technology helped Land O'Lakes reduce shipping costs and optimize delivery operations.
Transportation management systems development: Erbis expertise
Erbis partnered with a large logistics company from San Francisco and developed a robust system for managing transportation operations.
The challenge of the project was that the company already had an outdated application that no longer met current industry trends. Erbis completely redesigned the application, focusing on speed and reliability.
During the course of development, we:
redesigned the project architecture and changed it to microservices
developed REST APIs for transitioning to a new frontend application
designed new web forms that seamlessly integrate with customer portals
provided ongoing assistance to current platforms while introducing fresh functionalities to existing clients
The end product is a logistics solution aggregating data from more than 40 US-based carriers. The software enables companies to manage shipping rates, negotiate contracts, and detect fraudulent activities. You can read more about transportation management software development by Erbis here.
Transportation management systems: off-the-shelf vs. custom-made
When creating software, you have a choice: use a ready-made program or create a custom solution tailored to your needs. Each approach has its pros and cons, and organizations must decide based on their capabilities and goals.
Ready-made TMS
There are many transportation management systems on the market. They come with standardized features that can suit a wide range of businesses. You must buy a subscription and create an account to use ready-made programs. Using a ready-made TMS is usually cheaper than creating a new one. But this option may not suit you if you have specific business processes and non-standard system requirements.
Pros
quick access to TMS features
vendor support
affordable price
Cons
limited or no customization
dependence on a third-party provider
standardized approach, not tied to your needs
Custom TMS
Large and medium-sized businesses often choose to create a custom system. This is because ready-made TMS cannot cover their requirements and are unreasonably expensive if adapted to the needs of large businesses. Creating a custom TMS brings business-specific digital transformation. However, the downside is the significant investment in development and the time for implementation.
Pros
highly customized solution
unlimited scalability
software product ownership
Cons
waiting time
development costs
the need to find qualified IT staff
How to choose a transportation management system for your business
If you are having difficulty organizing and managing transport operations, TMS can solve your problem. However, choosing the right TMS can be another challenge on the way to digital transformation. What works for one company doesn't always work for another. To make the right choice, carefully evaluate the transport management system characteristics or create a detailed roadmap if you are developing a custom solution.
Below we list three critical points to consider when choosing TMS.
Company size
If you are a small business or startup, look for an easy-to-use system that is not overwhelmed with features. Basic functionality, such as parcel tracking, inventory management, and order fulfillment, may be enough at the beginning. However, consider scalability opportunities if you are planning to grow your business and acquire new markets and customer segments.
If you are an enterprise, look for advanced analytics and reporting. This will give you valuable insights into your logistics operations and help generate reports as per your needs. Another critical option for big organizations is the ability to integrate with third-party software. For example, if you already have WMS or ERP, you want to seamlessly integrate them with your TMS.
Industry
Different industries have varying transportation demands and compliance requirements.
For instance, if you deal with perishable goods, you should prioritize real-time tracking and temperature monitoring.
If you are an online retailer, you should ensure that TMS can integrate with your e-commerce platform and has a route-optimization feature to ensure timely delivery.
If you are a chemical industry representative, you should have emergency response and incident reporting features to ensure the safe delivery of chemical goods.
Budget
The financial aspect is critical when choosing a transport management system. If you have a limited budget, you can look towards ready-made TMS or create a custom TMS with 3-4 basic features. As your business grows, you can expand the functionality and add new features. You can also integrate with other software programs to improve your business process management.
If your company has sufficient resources to create a feature-rich transportation management system, don't hesitate to invest in custom development. By creating a solution fully tailored to your needs, you will get a powerful instrument to get your business to the next level.
Developing a transportation management system with Erbis
At Erbis, we have 11 years of experience in creating digital logistics solutions. We know that quality software revolutionizes workflows and brings impressive business results. Working with clients worldwide, we understand the specifics of different industries and businesses. We provide a clear algorithm for identifying business needs and creating an effective TMS.
So, this is what the process of the transportation management system development at Erbis looks like:
1. Interview with a client. Half of the project's success is based on setting the right goals. That is why we pay special attention to the planning stage, where we communicate with the client and identify the reasons for creating a TMS. Usually, the interview stage consists of several meetings. Decision makers from the client's side and our technical specialists meet to agree on the development pathway.
2. Choosing the cooperation model. For long-term projects, we offer a dedicated team that will work exclusively on your TMS project. For short to mid-term projects, we propose time-and-material or fixed-price models. The final choice is, however, made based on the unique project nature and requirements.
3. Signing a software development contract. We appreciate transparency in collaboration. Therefore, before the development starts, we sign a software development contract describing the rights and obligations of both parties.
4. Transportation management system development. After determining all the conditions of the collaboration, we proceed to the project implementation. We inform you about the development progress, technical solutions, and challenges. You can manage the project yourself or hire our CTO to undertake management functions and guide the technology strategy.
5. Launch and support of finished TMS. After the transportation management system is developed and launched into production, you can stop cooperating with us or proceed with further system maintenance. You can also order a technical support service. In the end, who knows the system better than its creators?:)
Still not sure if the transportation management system will work for you? Contact us, and we'll advise the best possible solution for your business.
