TMS: A Beginner’s Guide to Transportation Management Systems

TMS: A Beginner’s Guide to Transportation Management Systems

By Chris Crutchley on March 4, 2023
Check out our guide on TMS software and its many functions.

The processes of supply chain and logistics are notoriously hard to track. With demand for e-commerce goods higher than ever, not to mention rising customer expectations for lightning-fast shipping, it's only getting harder to manage all the elements of logistics.

Of all the stages of the supply chain, the journey of a shipment from warehouse to end-user presents a particularly imposing challenge to visibility. 

Managing various independent moving parts can be a headache. Many have chosen to ease that headache by integrating technology that can help them keep tabs on the moving parts. 

A TMS, or transportation management system, can help you do exactly that.

Read about CBIP's Adaptable 4PL Logistics Services

What is a TMS and what is it for?

A TMS is a software used to manage logistics, specifically transportation elements. The overarching capability of the TMS is visibility for shippers throughout the logistics operations.

The idea of the TMS is to have all data pertaining to transportation organized neatly in one place for everyone to access. 

Traditionally, a TMS system’s function was to automate certain processes to make the transportation element of shipping easier. Today’s TMS systems go much further, utilizing newer technologies like machine learning and cloud-backed systems to deliver solutions like:

  • End-to-end visibility
  • Real-time data analytics
  • Route optimization

You may have heard of a WMS, or warehouse management system. Similarly, those softwares provide visibility on logistics operations. However, the WMS is focused on the shipment while its on-site at the warehouse, whereas the TMS is tasked with keeping up with shipments on the move.

Typically, WMS and TMS are integrated together using a company’s ERP. This provides you with a comprehensive look at your shipments while they are stored, packaged, and transported.

What are the benefits of using a TMS?

From planning and execution to settlement, TMS platforms manage several key functions throughout transportation, such as:

  • Route optimization
  • KPI reporting
  • Predictive analysis and logistics news forecasting
  • Load execution and carrier rate management
  • Freight and shipping tracking
  • Billing and settlement

How do those benefits actually play out with a TMS? Take a look at the 6 different benefits we listed broken down below.

RELATED: These Are the Top Logistics Software as a Service Businesses You Need to Know About Today

Route optimization

Studies by trucking company C.H. Robinson show that each additional stop a truck makes lowers the likelihood of on-time delivery.

 For example, 80% of trucks picking up single-stop truckloads still delivered on time, while 71% of trucks carrying three-stop truckloads delivered on time. Those statistics translate into real losses for your business, so it’s important to cut down on them as much as possible. 

TMS systems use machine learning and regression to find the most efficient route for that truck to take. Optimizing your routes cuts down on time spent in traffic, ensures the parcel arrives on time, and lowers greenhouse gas emissions, saving you money and improving customer satisfaction in the process.

KPI reporting

As a shipper, neglecting to track relevant KPIs can result in inefficient operations and money lost over time. KPIs can help shippers track performance, cut costs, and improve customer satisfaction

Some important metrics for shippers are:

  • On-time and in-full, ie the percentage of orders filled correctly and on time
  • Number of shipments in a given period of time
  • Average delivery time
  • Truck turnaround time

Your TMS helps you measure these by collecting and compiling data into easily comprehensible charts, then offers performance insights to assist with future planning. 

Predictive analysis and forecasting 

You don’t want to have to manipulate data on your own or use outdated software to try and predict future business needs. Fortunately, today’s TMS software is capable of transforming the raw data into legible, helpful information for your business and logistics network. 

This is done on a central platform in a format that can be easily viewed, shared, and understood by relevant stakeholders in your logistics network and company.

You can use a TMS to:

  • Schedule reports to ensure timely and accurate information
  • View digestible reports to quickly identify anomalies and weak spots in your shipping operation
  • Make critical decisions based on reliable data 

Load execution and carrier rate management

When it comes to finding the right vessel for your load, the last thing you probably want to do is manually measure carrier capacity. 

Luckily, your TMS can take care of that for you, figuring out the size of your load, finding the right carrier for the job, and setting the rate all in one fell swoop.

Freight tracking

As any logistics manager knows, the infamous last mile of fulfillment can be one of the most challenging stages for keeping track of shipments. 

TMS software can save you the headache by gathering and consolidating details on your shipments in real-time. From the warehouse to the end customer’s front door, the TMS will track the parcel through its fulfillment journey every step of the way.

Using a TMS to get such detailed tracking intel not only gives you superior visibility on package location, it also allows you to view and assess the performance of the carriers you use. You can even choose to only work with the carriers that have provided you with the best results based on the data from your TMS.

Billing and settlement

Once your shipment has been safely delivered, you can use your TMS to audit carrier invoices and complete payment transactions. They will keep track of all the details of the work, costs, and payment for you, and help you settle up when the time comes.

Why a TMS is a worthwhile investment

Although TMS requires an upfront investment, it is not uncommon or prohibitively expensive. In fact, TMS systems can lower your freight spend by around 8%. 

Even if you aren’t prepared to invest in a large-scale enterprise TMS software for your company, you can use a free, cloud-based version of the software to experience many of the benefits listed above. 

Due to the rising adoption of cloud technology and industry 4.0, more and more companies are adopting TMS. However recent studies show that only around 35% of businesses are currently using TMS platforms. 

Given all the benefits, it feels counterintuitive that a fairly low percentage of businesses are leveraging TMS to optimize their logistics. Reasons for hesitancy to adopt TMS are varied, including:

  • Fear of transitioning off the old system - Many retailers are relying on an old, outdated system to help manage shipping. Some of these systems work just fine for the simple things but are missing most of the functionality that today’s TMS software can give.
  • Loss of control - Sorting through lists of carriers, finding the right one for your load, and setting the rate can all be done through your TMS system. Some worry that this capability may threaten existing relationships with carriers, but this is not the case. You will still be able to work with the same carriers on a day-to-day basis — the TMS simply provides you options for when you need something different.
  • Hesitant to make large investments - Implementing an in-house, enterprise TMS solution can be costly and take time, but many of the cloud-based TMS services these days are quite affordable. 

Work with CBIP to stay on top of the latest technologies

Want to stay up to date with the latest shipping tech and make sure your company sees the benefits?

At CBIP, we make it a point to select partners who use cutting-edge technology to optimize processes and stay ahead. When you contract with CBIP, you are contracting with a company that sets you up with a network of these tech-enabled partners, anywhere in the world and ready to go.

Ready to find out just how efficient your shipping logistics can get? Contact us today for a free assessment. 

About Author

Chris Crutchley

Chris Crutchley is CBIP’s director of operations and finance. He has over a decade of corporate finance and operational expertise throughout the Asia Pacific.

In logistics, Chris strives to continuously innovate and challenge the industry’s norms in order to offer clients world-class service that emphasizes clear communication.

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