A Transportation Management System (TMS) is specialized software designed for the efficient planning, execution, and optimization of goods transportation. TMS users engage in three primary activities within the system: they compare carrier rates and services to facilitate shipping, book shipments, and track their progress until delivery.
The overarching objectives of employing a TMS are to enhance shipping efficiency, reduce costs, provide real-time visibility across the supply chain, and ensure customer satisfaction.
TMS software is primarily used by shippers and carriers, with significant adoption among manufacturers, distributors, e-commerce enterprises, wholesalers, retailers, and third-party logistics providers (3PLs). These systems are integral to supply chain management, encompassing supply chain execution (SCE) and supply chain planning (SCP). TMS solutions are available both as standalone software and as modules integrated into Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) suites.
While some TMS offerings focus on specific transportation modes, most support multimodal and intermodal transportation. Multimodal transportation involves a single carrier using various modes like trucks, rail, air, or sea. In contrast, intermodal transportation involves multiple carriers and contracts, offering more control over carriers, pricing, and transportation modes but increasing the responsibility for management.
Over the past decade, TMS solutions have gained prominence in enabling global trade and logistics. A 2020 report from Gartner projected substantial growth in the global TMS market, reaching $1.94 billion by 2022 and constituting nearly one-third of the SCE market.
How Transportation Management Systems Operate
Fundamentally, a TMS functions as a repository of carrier information and serves as a transactional and communication platform for planning, executing, and tracking shipments. Integration with carrier systems and data sources is crucial, and the system must also accommodate the entry of customer orders specifying the goods to be shipped. Typically, orders are automatically imported from ERP or order management systems integrated with the TMS. Integration with a Warehouse Management System (WMS) may further enhance coordination at the warehouse-shipping interface.
The integration of ERP, WMS, and TMS systems is key to streamlining order processing and ensuring timely product delivery. The ERP system handles accounting, invoicing, order management, and inventory management. WMS focuses on managing warehouse tasks like “picking” goods and tracking inventory data from barcode readers and RFID tags. Integration links synchronize inventory data between the ERP and WMS. The ERP system provides essential order information to the TMS for shipment preparation and execution, while the TMS returns shipment details for accounting and order management purposes.
Significance of a TMS
In today’s complex supply chains with various transport modes and regulations, a TMS is indispensable for companies responsible for transporting goods or outsourcing transportation services. Automation of these intricate processes helps secure cost-effective transportation without compromising quality or efficiency. A survey by ARC Advisory Group indicated that two-thirds of respondents saved money on freight, with a third achieving savings of 10% or more.
TMS in the Supply Chain
TMS systems play a central role in supply chains, which involve planning, controlling, and executing the product flow through its lifecycle, from raw materials to production and distribution. Transportation is integral to every major stage, from moving raw materials to manufacturing plants, to distributing final products and handling reverse logistics. A TMS helps optimize these various transportation needs.
TMS Deployment Options
Transportation Management Systems were initially on-premises systems but are increasingly being deployed in the cloud, either hosted or as Software as a Service (SaaS). Cloud deployment offers advantages like improved connectivity and cost savings. According to Gartner, most TMS market growth comes from cloud offerings, and the shift to SaaS is expected to continue.
However, some large manufacturing and distribution firms with strict security requirements still prefer on-premises deployment for day-to-day control.
Functions of TMS
A TMS performs various functions, including:
- Freight Management: This involves acquiring, storing, and updating carrier rates, enabling easy rate comparisons and handling related workflow and paperwork tasks.
- Execution: Users can book shipments, track freight movements in real-time, and communicate with drivers in transit using GPS features.
- Planning: TMS provides tools for planning and optimizing the shipping process, considering factors like price, service level, and transit time for cost-effective route and carrier selection.
- Administration: TMS supports administrative tasks, including billing, payment, settlement processes, and document generation.
Benefits of TMS
Transportation management software offers several advantages, including cost reduction, improved customer satisfaction, enhanced supply chain visibility, better inventory management, and reduced administrative costs.
TMS Software Providers
TMS software providers can be categorized into four product types: ERP suites, SCM suites, niche TMS providers, and TMS services.
The Future of TMS
Omnichannel commerce and emerging technologies like IoT, 5G networks, artificial intelligence, and blockchain are shaping the future of TMS. These technologies are enhancing supply chain visibility, analytics, and efficiency, ensuring TMS’s continued relevance in an increasingly globalized world.
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