Today’s business environment is nothing if not volatile, uncertain, complex, and ambiguous (VUCA). And coupled with the increasingly digitized transportation industry, it’s no surprise that the global transportation management system market is on the rise. Statistically, the TMS market is expected to reach $6.63 billion by 2026. That’s up from $2.45 billion in 2019 at a compound annual growth rate of 13%. What’s more, in 2018, more than 67% of third-party logistics providers and 38% of shippers have invested in a TMS solution.
These systems provide flexibility, scalability, and a standardized process that allow you to manage all of your transportation activities across the entire organization and supply chain. They also empower operators with a real-time birds-eye-view of their transportation activities. This includes everything from the order information for each vehicle, the routing progress, and more.
If your organization is in any way involved in manufacturing, distribution, retail, eCommerce, or third-party logistics, the chances are that you are already familiar with Transportation Management Systems (TMS) and what they can do. Yet, it’s not just those in the aforementioned industries that will benefit from a transportation management software. Pretty much any organization, regardless of industry, that deals with logistics regularly, will benefit from a TMS solution.
To put it simply, transportation management systems are logistics platforms that allow their users to manage and optimize the daily operations of their transportation fleets. It falls under the subset of Supply Chain Management (SCM) and nestles itself neatly between a company’s Enterprise Resource Planning (ERP) system and Warehouse Management System (WMS). Its main function, however, is to plan and execute the physical movement of goods.
Why Use a Transport Management System?The majority of customers today want instant gratification. Whatever it is that the customer wants, they also want it to be readily available in stock, and they want it now. This is what’s known in the industry as the Amazon Effect. It describes the effect that the digital marketplace has had on most other traditional forms of commerce, such as brick-and-mortar retail. In effect, the Amazon Effect has introduced consumers to an almost frictionless shopping experience, with convenient payment options and next-day or even same-day deliveries. Because of it, customers today expect the same experience, regardless of where they place their orders, be it online or offline.
For most multi-channel businesses, the overhead shipping costs exceed the direct and indirect payroll or even the cost of their utilities. Even if a company has only basic transportation needs, its bottom line has still been greatly affected by the Amazon Effect. The final mile delivery costs now comprise 53% of the total cost of shipping. What’s more, package shipments are expected to rise at a rate of between 17% and 21% every year by 2021. In 2020, same-day deliveries have accounted for up to a 50% increase in overall logistics costs.
Therefore, it’s in the best interest of every logistics-oriented company to keep this increasing shipping cost in check while also not sacrificing their service quality. This is where transportation management systems come into play. Below, we will be looking at the benefits of TMS and what these solutions can do for your business.
What Are The Benefits of TMS?There are more benefits of TMS than many manufacturers, distributors, retailers, and anyone else who ships freight may realize. These will go beyond simple cost savings in terms of shipping freight. If you look at moving freight as more than just a necessary cost, you are on your way to making the most of what a TMS can provide in terms of maximizing your overall ROI. To that end, we’ve put together a list of some useful benefits of these logistics solutions.
Better Cash Flow
As we’ve already established, effective transportation management software will help your business reduce its total freight costs. The right system will analyze all the financial aspects of every route, generating suggestions on how to minimize the freight spend. It will look into various areas such as driver overtime, fuel consumption, negotiated rates, and more.
Integrated Planning and Execution
Today’s transport management solutions will integrate seamlessly with your other existing logistics management systems. These systems typically include the following:
- Purchasing and Order Management Systems
- Warehouse Management Systems
- Customer Relationship Management
- Supplier Relationship Management
This integration will allow your organization to execute orders through the most cost-effective carriers. It also takes into account optimal route planning and load optimization. In doing so, the entire planning and execution of orders will be done faster and easier.
Inventory Management
Through their TMS solution, companies can monitor their order and shipment lifecycle in real-time, getting status updates on each of them as they develop. This will offer an accurate forecast of their inventory, improving the accountability of the entire supply chain network. Also, the TMS software will provide you with the confidence that your customers are receiving their shipments on time. And as eCommerce freight shipping is expected to increase in the future, having this high level of control over your inventory management will only stand to improve all other supply chain operations down the line.
Yard Management and Warehouse Efficiency
Transportation management systems also help with warehouse and yard management. The more you use the TMS platform, the more you will be able to decrease inefficiencies in your freight management, and the more time you will have to optimize your yard and warehouse. Since the TMS software is integrated with your Enterprise Resource Planning and Warehouse Management Systems, you will not only be able to minimize the number of entry errors but also get the overall combined supply chain visibility needed to make informed business decisions.
Better Supply Chain Visibility
Since today’s TMS solutions can integrate across the supply chain, they can provide full transparency. Having such a high level of real-time visibility and access to data from all other integrated systems is a huge benefit. It will allow logistics managers to quickly and effectively identify and act on any opportunities to resolve potential issues that may arise. This will keep customer satisfaction high, without having to compromise on performance or efficiency.
Optimized Routing Capabilities
As order cycles have shortened, and shipment sizes have become smaller, optimized routing has become more critical than ever. With the right TMS tool, a company can implement pool distribution. This is a cheaper and faster method of delivery that offers greater levels of visibility and control. Operators can choose the optimum pool point to determine which shipments need to be picked up and/or delivered. More complex orders can be broken down and routed separately, saving time and reducing costs in the process.
En-Route Driver Tracking
The ability to track drivers in real-time allows logistics managers to determine the most optimal routes available and generate more efficient schedules in the future. Plus, the assessment of individual drivers can be done more easily. Operators can track the drivers’ overall efficiency and provide feedback for improvement. Real-time tracking also helps provide safety benefits, particularly in terms of accident prevention.
Accurate Order Fulfillment
Transport management systems also ensure that shipping becomes more accurate. Thanks to the aforementioned real-time tracking and supply chain visibility, the accuracy of your order fulfillment will also increase a great deal. The TMS software will eliminate any shipping errors or discrepancies. And even in the event of minor issues occurring during transit, the situation can be solved immediately so that the customer will not be negatively affected.
Keeping Paperwork at a Minimum
By automating all of your accounts, the TMS will save time and money. It will also eliminate a lot of the paperwork that would, otherwise, be needed to maintain the operation. As such, administration expenses will be reduced while invoicing errors and incorrect billing will be kept at an absolute minimum.
Improving the Overall Customer Experience
Since the majority of today’s customers demand fast delivery times, last-minute order changes, and customized delivery times, it’s become a big challenge for businesses to meet all of these expectations. The right TMS will be able to bridge the gap between order management and warehouse management, helping to consolidate all customer orders and find the best carriers at the lowest possible prices.
The Bottom Line
The right TMS solution will always provide cost savings to its users. It will enhance the company’s overall productivity and efficiency, and through the above-mentioned benefits, it will help ensure repeat business. Those that want customers to choose their services on an ongoing basis will need to use transportation management software to provide consistently high customer experiences. In turn, this will also help increase the likelihood of referrals.
