Few advances in commercial transportation over the past
two decades have been as powerful to the supply chain as
Transportation Management Systems (TMS).
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M33 TMS White Paper
Transportation Management System Solutions: The Workhorse of Logistics
TMS software automates such functions as carrier selection,
routing and rating, supply chain visibility, and freight audit
and payment, which helps users reduce their shipping and
administrative costs by efficiently, reliably and cost-effectively
moving freight from origin to destination. This technology
supports both planning and execution, as well as a wealth of
business intelligence, to drive stronger strategic and tactical
decision-making.
Having evolved significantly over the past 20 years, such
systems are available as standalone software packages, as
part of a larger Enterprise Resource Planning (ERP) solution,
or as Software-as-a-Service (SaaS) by partnering with a third
party logistics (3PL) provider. Regardless of the technology
delivery method, a TMS tackles the freight movement puzzle
by handling single parcels to bulk commodities and
everything in between.
TMS solutions oversee the movement of all inbound and
outbound freight modes at the domestic and international
levels. TMS fleet management capabilities are usually focused
on the shipper’s own transportation assets while its planning
and execution functions monitor and track movements
involving outsourced service vendors such as 3PLs.
Executive Summary
2
A Solution to rising Transportation Costs
4-5
Common Features of TMS
6-7
Evaluating TMS Solutions
8-9
TMS Benefits
10-11
TMS: On-Premise versus SaaS
12-13
The Leading Solution for Logistics ROI
14-15
UP TO TEN PERCENT FREIGHT COST SAVINGS—OR MORE
TMS solutions provide a freight cost-saving antidote to such turbulent and seemingly systemic commercial freight transportation challenges. Most users primarily rely on a TMS to cut their freight costs, which, according to a recent ARC ADVISORY GROUP study, average six percent annually, with 23% of respondents stating a savings of 10 percent or more by implementing a TMS solution.
Linking a TMS with a WMS can provide end-to-end supply chain visibility that allows for better inventory forecasting and a reduced incidence of data-entry errors. By automating freight payment and auditing services within a TMS, a user can catch inaccurate charges and duplicate payments, as well as streamline the entire process. Combined, these capabilities can yield substantial savings on a freight bill.
There are other benefits as well. For example, a TMS reporting and analytics module can identify if the lowest-cost carrier is actually delivering on time, all the time. If not, the shipper is wasting time, money and resources putting out fires, thus negating any rate savings. With a TMS, less employee time spent on transportation management paperwork means more time spent on other important issues such as inventory control or other core business tasks.
The TMS sector has been growing at a double-digit clip over the last couple of years—and isn’t showing signs of letting up any time soon as a means to improve transportation performance and reduce supply chain expenditures.
A TMS may “sit” between an ERP or legacy order processing system and a warehouse distribution module. A typical scenario would include both inbound (procurement) and outbound (shipping) orders to be evaluated by the TMS planning module, offering the user various suggested routing solutions. These solutions are evaluated by the user and passed along to the transportation provider analysis module to select the best mode and the least-cost shipping provider. Other TMS applications have the TMS being fed order information from either the ERP or Warehouse Management Systems (WMS) for execution. Once the best provider is selected, the TMS generates electronic freight consolidation, load tendering, and track and trace to execute the optimized shipment with the selected carrier. The TMS also supports the freight audit and payment settlement process and links back to the ERP system after orders are turned into optimal shipments. WMS programs are common TMS features, as are analytics and an analysis of the shipping operations. While fuel costs have recently stabilized and reports posit that oil prices will remain at or near 80 dollars a barrel for the foreseeable future, nagging challenges in the transportation supply chain continue to nudge shipping costs upward. The combination of persistent driver shortages, the negative bottom-line impact of federal government regulations such as driver hours of service (HOS) rules, and an ever-tightening truckload capacity crunch are playing, and will continue to play, havoc with transportation costs.
TMS solutions offer a number of valuable
tools—freight sourcing, multimodal planning,
route optimization, freight consolidation—to
maximize efficiency and reduce logistics and
transportation-related costs.
Automated carrier selection
A TMS improves the carrier procurement process by determining the best carrier and mode options for each delivery.
Shipment consolidation
Consolidating shipments is the single fastest way to cut shipping costs. A TMS will assess all scheduled shipments and arrange them into efficient solutions, maximizing their load consolidation with each delivery.
Route optimization
TMS uses maps, road speeds, traffic data, fuel costs and modal limitations to determine the optimized route to save time and reduce fuel costs.
Freight estimate optimization
Whether you’re submitting bids or simply calculating shipping costs, a TMS will calculate the cost of delivery based on cargo weight, mode of shipping, delivery distance and other variables, and provide comprehensive reports and needs analyses to facilitate the most cost-efficient choices.
Payments
These systems include accounting functionality that helps users reconcile invoices with shipments, audit freight bills and reduce payment errors.
TMS solutions offer a number of valuable tools to maximize efficiency and reduce costs associated with product shipping and logistics. Some of these features include strategic freight sourcing tools, multimodal planning functionality, route optimization, freight consolidation and dock scheduling.
COMMON FEATURES
OF TMS
ASPECTS OF TRANSPORTATION AND
LOGISTICS NEEDING IMPROVEMENT
Source: 2014 Transportation Management System Report,Logistics Management and Supply Chain Management Review
41% Rate procurement and contract negotiation
42% Reporting and documentation/Access to data
42% Supply chain flexibility
43% Carrier and partner collaboration
45% Electronic communication (e.g., EDI, XML) with customers and carriers
45% Overall supply chain processes (inbound, outbound shipments)
52% In-transit visibility
55% Shipment planning — rates, routes, models, load consolidation, etc.
55% Understanding and controlling costs
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M33 TMS White Paper
Transportation Management System Solutions: The Workhorse of Logistics
Demand for high-quality transportation logistics software systems has grown as organizations realize their cost-saving potential. Important considerations when selecting a TMS program include:
• Is your organization interested in an on-premise or a SaaS deployment?
• Is your organization a small to mid-sized business? If so, does the vendor have an established reputation for serving the needs of businesses of this size?
• Does the system support all modes of shipping within your operation?
• Can the system offer specialized functionality to meet the unique delivery needs of your vertical market(s)?
• How easily does the TMS integrate with other enterprise solutions and areas of your business?
• How is the TMS configured and maintained? What are your resource requirements surrounding this?
• What are the costs involved in system maintenance, updating and new functionality? • What will be the implementation time and expected ROI horizon?
EVALUATING TMS
SOLUTIONS
ORGANIZATION’S STATUS REGARDING
THE USAGE AND ADOPTION OF A TMS
Currently running
Other
No plans to run/evaluate at present time
Presently evaluating for adoption within the next 12 months
Planning to invest/upgrade our current application sometime during the next 12 months
33%
37%
10%
14%
6%
Reduce expedited order costs
A TMS can reduce high-cost expedited shipments due to better planning and system-directed exceptions handling.
Increased load consolidation
Using the TMS to consolidate from parcel to Less-Than-Truckload (LTL), and from LTL to Truckload (TL) can result in significant savings.
Compliant carrier selection
Reduced costs are realized through the automated selection of the lowest-rate carrier, shipping mode and route.
Identify transportation invoice discrepancies
Discrepancies can be identified through automating the audit of the freight invoice against the original contract.
Track carrier performance
Capturing carrier performance information helps negotiate better rates.
Real-time visibility
Know the location of any given pallet at any given moment in real-time so potential issues can be detected and resolved before they become problems.
Lower administrative costs
With the automation of the tendering, shipment creation and consolidation processes, a TMS allows staff deployment to tend to other tasks.
More accurate and faster quotes
TMS can support increased sales by enabling quicker quote response times.
Utilize assets more effectively
Increasingly, TMS solutions are taking on asset-based fleet management functions to better leverage drivers and equipment.
Source: 2014 Transportation Management System Report, Logistics Management and Supply Chain Management Review,
TMS BENEFITS
Of those running a TMS application, reviews are mixed on the system they employ. While
46% are highly satisfied with their TMS,
40% are just somewhat satisfied.
14% are unhappy with their current platform.
14%
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M33 TMS White Paper
Transportation Management System Solutions: The Workhorse of Logistics
THE 3PL ADVANTAGE
TMS enterprise software represents a significant upfront investment. With SaaS, the company pays as it goes—like electricity, as you use it. Equipment costs are another consideration. For SaaS, you only need local computers for your employees to access the Internet. With enterprise, you must buy and maintain server hardware, which will need to be replaced periodically. Enterprise software entails on-site installation and a testing period. SaaS is already up and running, so a customer’s employees are ready to work in a fraction of the time.
Upgrades are another important consideration. When the customer buys enterprise software, they get today’s version—they will pay for tomorrow’s version in upgrades as time passes. SaaS upgrades are usually free and transparent, coming online as they are ready for implementation.
A 3PL TMS solution, or SaaS, also gives your company access to experts who specialize in making the customer’s logistics process more efficient so they can focus on their core business. A 3PL is an expert on TMS utilization and therefore has the ability to uniquely customize it to the shippers’ business and train users accordingly.
Transportation Management Systems come in two main forms. The traditional is enterprise software installed on servers that the company buys and maintains. The more recent TMS solution is Software-as-a-Service (SaaS), which is provided and maintained by a vendor, typically a 3PL, on the vendor’s servers, and made available to the customer over the Internet.
While some companies choose to handle their TMS logistics in-house to maintain control of their data, there are significant benefits to outsourcing this function to a 3PL.
While some companies choose to handle their
TMS logistics in-house to maintain control
of their data, there are significant benefits to
outsourcing this function to a 3PL.
THE LEADING SOLUTION
FOR LOGISTICS ROI
According to recent research conducted for Logistics Management and Supply Chain
Management Review magazines’ Transportation Management Systems Report, when asked
what aspects of their transportation and logistics operations could use improvement, more than one-half of respondents cited understanding and controlling costs (55 percent), better shipment planning (55 percent), and greater in-transit visibility (52 percent). Also high on the list of areas in need of development were electronic communications with customers and carriers (45 percent). A TMS is the leading solution to all of these concerns.
IMPROVED COST CONTROL AND SHIPMENT TIMES
Looking at the more significant benefits or advantages achieved from their TMS application, supply chain and logistics managers surveyed say they’re experiencing better cost control, improved shipment times, better efficiencies, and enhanced functionality and visibility across their supply chain. Without a TMS in place, shippers say their firm would suffer from poor spending decisions, higher cost structures and decreased customer satisfaction.
While it is easier and cheaper than ever to implement a TMS solution, it is not a no-brainer. Still, it is clear that a properly implemented Transportation Management System has enormous upside and little downside.
Understanding and Controlling Costs
