Your Comprehensive Guide to Transportation Management Systems

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Thursday, June 17, 2021

Introducing a transportation management system could be one of the most significant steps you take to modernize and improve your logistics operation.

Article 6 Minutes
Your Comprehensive Guide to Transportation Management Systems

Smooth and well-managed logistics is crucial to the success of countless companies, industries and economies across the globe.

If you rely on the efficient movement of physical goods for your core business, there's a strong chance you have something to gain from adopting a transportation management system (TMS).

What's a TMS?

Often positioned within a larger supply chain management system, a TMS is a dedicated logistics platform that can help you manage both the inbound and outbound movement of goods to and from your business.

This technology can have a wide range of applications, encompassing everything from the earliest stages of planning and decision-making to performance measurement and reporting.

A reliable TMS could also help you with vital tasks like making sure every shipment you send or receive is compliant with relevant legislation and accompanied by the proper documentation.

How does a TMS work?

A TMS can function in various ways, depending on the nature of your business and what you need to use the system for. In most cases, the key features and applications of these platforms can be divided into three groups.

Planning

Planning is one of the most important aspects of logistics for many companies. It's at this stage that you take a range of crucial success factors into account and make key decisions that’ll dictate how the rest of the process unfolds.

A good TMS can help with a number of vital elements of your planning, including:

  • Selecting the optimal mode of shipment and the best carrier for your needs, considering factors such as cost and distance
  • Making you aware of tariffs, customs requirements and trade regulations relevant to your shipment
  • Choosing the most efficient route between your point of origin and final destination

Execution

Once the planning phase is complete, your focus will turn to the execution and real-time management of your shipment. It goes without saying that it's crucial to minimize errors and inefficiencies at this stage if you want to maintain a successful logistics operation.

You can use a TMS to carry out several key tasks during the execution phase, such as:

  • Communicating with carriers
  • Documenting and tracking shipments while they're in transit
  • Enabling information exchange between carriers, distributors, warehouses and customers
  • Verifying that the proper import and export documentation has been provided

Visibility and measurement

Having full visibility over your logistics function and tools to measure performance makes it easier to pick up on recurring problems and action the right changes to achieve constant improvement. A TMS can help on this front by giving you access to regular reports, dashboards, analytics and intelligence.

Who can use a TMS?

The wide range of applications of a typical TMS means these platforms can prove useful for lots of different types of businesses.

They’re frequently used by:

  • Manufacturers
  • Distributors
  • eCommerce businesses
  • Retailers
  • Logistics service providers

Traditionally, TMS platforms have been most commonly used by larger corporations that spend tens of millions of dollars a year on logistics. These companies have a lot to gain from ensuring their transportation operations run as smoothly as possible, and a lot to lose if they go wrong.

However, the evolution of technology and the increasing availability of cloud-based TMS solutions is making it more feasible for smaller businesses to reap the benefits of these tools.

Using a TMS: benefits and considerations

Before committing to a decision on whether using a TMS is the right option for your company, it's important to scrutinize the exact benefits you're likely to achieve, as well as potential downsides and other factors you might need to take into account.

Key advantages

One of the clearest benefits most companies will hope to achieve by using a TMS is reduced costs. These solutions can help you analyze your logistics spend to identify your biggest inefficiencies and areas where you can reduce expenses.

They can also add transparency and simplicity to this aspect of your business, providing a single platform where you can track freight movements all over the world.

Other big advantages of using a TMS include:

  • Automation of previously manual processes to improve speed and minimize human error
  • Better compliance with import and export regulations, reducing the risk of delays and penalties
  • The ability to track shipments in real time, giving you access to information that can be passed on to the buyer for a stronger customer experience
"Transport management systems act as a key interface for engineers in the supply chain, giving freight forwarders an efficient and transparent way to monitor their shipments and the digital means to communicate with their partners in the supply chain." - Dr Christian Grotemeier, managing director, BVL.digital
 

Challenges and considerations

Like any new system or business investment, TMS solutions have a number of potential drawbacks and limiting factors you'll want to take into account before proceeding with adoption.

Aside from obvious considerations like cost, you should look into how easily a new TMS will integrate with other tools and technologies that are crucial to your core business, such as your inventory management system. Asking your staff and partners to work with an unfamiliar platform that's incompatible with your existing processes could cause more problems than it solves.

It's also important to think about how much you're willing to rely purely on technology - particularly a new system that you haven't used before - for crucial tasks like providing real-time updates on shipments. This is where it's essential to do in-depth research before committing to a particular TMS and to look into what other companies have to say about the options you're considering.

What does the future hold for TMS solutions?

Looking to the future, there's a high likelihood that cloud-based solutions will prove increasingly popular and influential in the TMS space, much like they have in many other areas of business.

Turning to the cloud for your logistics needs could lead to a number of benefits, including lower total cost of ownership, improved economies of scale, stronger security and automatic updates that provide access to the latest features.

It's also likely that TMS platforms will continue to evolve and become more feature-rich in the coming years, as businesses seek to meet rising customer expectations for fast and reliable shipping and real-time updates.

This could go hand-in-hand with growing adoption of cutting-edge technologies such as:

  • Internet of Things devices and sensors to enable real-time fleet monitoring
  • Digital assistants and chatbots
  • Machine learning functions in TMS solutions, allowing more accurate planning and predictions based on historical data

With plenty of scope for further growth and innovation in this space, it's worth asking how you could stand to benefit from these trends in the years to come.

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