Transportation Management System: The Definitive Guide
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Transportation Management System, or simply TMS, has become increasingly popular. Gartner predicts the global transportation management system market to grow 60% from $1.3 billion in 2019 to $2.1 billion in 2024. Read on to learn more about the notion of a TMS and its key functions and benefits, what differentiates it from WMS and ERP, and how to build a custom transportation management system tailored to your business needs.
What is a TMS?
A transportation management system (TMS) is a software program that is designed to streamline the shipping processes and effectively manage the company’s logistics and transportation functions. It is a subset of supply chain management, which focuses on the transport part, i.e., the movement of goods. It is also a part of an enterprise resource planning (ERP) system, which deals with main business processes.
A TMS technology helps companies optimize time, drivers, and other resources while moving goods. In other words it’s a powerful real-time asset tracking solution. Moreover, it can assist in ensuring legal compliance and other administrative tasks.
A TMS collects data, which it uses to analyze, automate and improve various processes. The data is collected and put into the dashboard, where you can find it much more easily and quickly, and make decisions more appropriately and fruitfully.
A TMS uses different licensing arrangements, i.e., on-premises licensing, hosted licensing, on-premises hosted licensing, and hosted TMS free of licensing:
- on-premises licensing presupposes installing and accessing to the system locally, i.e., through the company’s server or device;
- hosted licensing involves renting of the software from a vendor or a provider, rather than owning the one fully;
- on-premises hosted licensing involves a blending of the both mentioned above in different ways;
- hosted TMS free of licensing reminds a hosted one, which does not require any licenses.
Depending on the provider, users can choose the most convenient licensing type for its implementation in their business. To get more information on this topic, we’d suggest reading our guide about on-premises vs cloud computing. Nowadays, though, blended licensing has become increasingly preferred.
What are the key functions & benefits of a TMS?
A TMS provides dozens of functions, each of which adds to streamlining operations and improving efficiency. Apart from core functionalities that will be described below, it deals with administrative functions that process documentation, such as billing, payment, invoicing, tracking payments and comparing carrier rates.
Increased supply chain efficiency, improved business process visibility, reduced warehousing costs, improved customer service, better inventory forecasting, and, therefore, reduced number of administrative and billing errors are just a few benefits that a TMS can bring to your business.
- TMS takes part in load planning. According to the given data and parameters, it opts for transport schemes with greater efficacy. Freight is being combined into bigger loads to reduce the number of touchpoints and to reduce costs. The system can define the scheme which offers the lowest transport cost, the shortest lead-time, and the fewest number of possible stops, meanwhile ensuring the quality.
- TMS deals with route optimization. It manages the execution of the transportation plan, including carrier rate acceptance, carrier dispatching, and EDI (electronic data interchange).
- TMS provides reports and business intelligence. Reporting via interactive dashboards visialized shipping patterns and gives understanding of trends. Business intelligence analyzes your shipping practices and proves to be beneficial in decision making.
- TMS measures logistics KPI (key performance indicator). It keeps track of such measurements as transportation, shipping time, order and picking accuracy, delivery time, and other metrics.
- TMS manages transport follow-up. It presupposes any physical and administrative operation connected with transportation, e.g., traceability of transport, editing of reception, custom clearance, invoicing, booking documents, sending transport alerts, etc.
- TMS allows to conduct fleet management. It’s a dynamic planning of daily fleet activity that offers visibility into vehicle routes. It can also help determine which driver is nearest to the pickup and whether they can handle the order efficiently. This way there is no idle time and deadheads will be avoided.
- Real-time tracking and tracing, which is one of TMS features as well, lets you see shipment from the moment and place it is picked up until it is delivered to its destination. This increases orders visibility and customer service satisfaction level goes up.
All these and many other functions make a TMS the most beneficial tool. It simplifies the processes as instead of calling or emailing somebody to book loads, it is as simple as pressing a few buttons on your dashboard, which saves you both time and money.
- In terms of marketing, a TMS makes it possible to collect information about your customers’ engagement. Moreover, running and viewing reports allow a better understanding of the decisions to be made, and shows areas of potential growth and improvement.
- Another additional benefit of utilizing a TMS is generating compliance paperwork for different types of shipping, i.e., both domestic and international ones. Furthermore, it can also assist with the documents necessary for crossing state lines with a certain cargo or with complex bills of lading (BOL).
- Other administrative functions of a TMS include an integrated system for automatic payments. Additionally, the payment request may be accompanied by automatically drawn documentation about the stages of shipping, loading and unloading time, transit time, etc. It can also require a confirmation from the customer in an attempt to reach complete transparency.
What are the differences between TMS, WMS, And ERP?
Having defined the notion of a TMS, it is necessary to differentiate it from other similar notions, i.e., a WMS and ERP.
WMS (Warehouse Management System)
A WMS, or a warehouse management system, is a software application designed to support and optimize warehouse functionality and distribution center management. In other words, its functions include:
- tracking stock;
- picking and shipping inventory;
- efficient inventory management;
- tracking and visibility;
- paper-less inventory documentation;
- robust customer service;
- reporting and analytics.
Tracking the stock inflow helps warehouse managers to get an insight into the stock availability, processing, and replenishment. With the data on hand, managers can effectively gauge the demand and supply of the goods, therefore, having an opportunity to replenish the stock at the right time in the right amount. Apart from that, a WMS ensures minimizing errors of inventory shipping as it tracks whether the right product is picked.
Another beneficial thing that a WMS deals with is efficient space management. Since the amount of products is increasing and there is not always the opportunity to expand the building, a robust WMS can store everything depending on the demand and weight, making a place for other products.
In addition to that, a WMS eliminates the need for paper-based documentation, as the warehouse personnel can have requisite data and information at their fingertips. It also offers robust, accurate, and actionable insights on inventory-related operations and helps track the inflow and outflow.
Thus, a TMS and WMS are similar in improving the customer satisfaction levels and facilitating the processes. However, while a TMS tracks the loads from point A to point B, a WMS focuses on the space optimization in a particular warehouse. That is to say, whilst the main functions of the systems are similar, the objectives and the targets have different directions.
ERP (Enterprise Resource Planning)
The other system mentioned is ERP or enterprise resource planning system. It is also referred to as a category of business management software, which is used by an organization to collect, store, manage, and interpret data from different business activities. It tracks business resources, i.e., cash, raw materials, production capacity, the status of business commitments, orders, payrolls, etc. Since the system shares data across various departments, an ERP system facilitates the information flow and manages connections to stakeholders. Apart from that, it guarantees error-free transactions and production and, thus, enhances the efficiency of a business.
Other common functions of an ERP system also include:
- financial accounting (e.g., payments);
- management accounting (e.g., cost management);
- human resourced (e.g., recruiting, training, pension plans, etc.);
- manufacturing (e.g., work orders, scheduling, quality control, etc.);
- order processing (e.g., order to cash, sales analysis and reporting, etc.);
- supply chain management (e.g., supplier scheduling, picking, and packing, etc.);
- project management (e.g., project and resource planning, time and expense, etc.);
- customer relationship management (e.g., marketing, call center, etc.).
Those are just a few of the most relevant functions of an ERP system, and there are many more. Although the idea of the system is the same as the other systems have, it is clear that they are all different in the stages where they apply. While an ERP system comes in handy at the levels of manufacturing and ordering a product, a WMS deals with storing the goods at the place. At the same time, a TMS focuses on the shipping nuances and both safe and fast delivery of the product.
How to build the right TMS to cover all your business needs?
A perfect TMS varies from business to business. Choosing something that will fit your exact needs is not an easy task. However, before something catches your eye, it is necessary to work out what exactly you are looking for. Thus, it is vital to go through the following points.
First of all, set yourself a goal. Your targets and objectives should steer your final choice. Whether you need to automate all redundant tasks or centralize the information, it is pivotal to clarify them to yourself and the people involved.
Secondly, based on your research and targets, choose the key features of a TMS that you want to implement. Make sure it suits all your requirements, voice your concerns in case something doesn’t work as you expect it to, and substitute redundant functions with the more relevant ones. Thirdly, be honest in estimating the cost. The budget allocated for the project has to be realistic so that you do not receive either less than expected or lower quality than desired. Here is a small guide on the cost of IoT application to help you with basic calculations.
Do not forget to talk with the people on the other side. One of the users of a TMS is your customer. Their hands-on experience may assist you in making the right choices. Sending surveys and making polls, looking through the successful experience of your customers may well influence the best decision.
Once you have all the background information at hand, evaluate the development scope. We suggest our clients, begin with the Discovery phase that can jumpstart the whole process of building your own transportation management system. At this stage, our team assesses the scope, as well as business and technical constraints of the solution, and produces an SRS document with a timeline and feature-based cost estimate for your IoT application development project.
And last but not least important factor in your software development process is validating your idea. You can do research, look through the market and recognize the pitfalls, weaknesses, and restrictions which you will need to confront. Don’t forget that you can always opt for an MVP version of your TMS if you want to validate your idea properly.
We understand that all technical details of a solution can get overwhelming. Consult a reliable technical partner, a software development company with strong expertise and experience that can help you tackle these challenges. Arm yourself with information about your TMS and features that would be most beneficial to your business. Being professionals in the sphere, we will assist you on your development journey, help select the most suitable technologies and deliver the product in time and within the agreed budget.