Transportation Management Systems

What Is Transportation Management Software?

 

Transportation management systems (TMS) are designed to help businesses plan, execute, and measure deliveries across the supply chain. By providing managers with tools including carrier procurement optimization, load building, and track and trace, the right TMS software can improve fleet performance and reduce supply chain expenditures.

TMS software typically sits between a business' accounting system and warehouse management system, but can be a powerful tool to reduce costs and optimize shipping even as a standalone solution.

Here's what we'll cover:

• Benefits of Transportation Management Software
• What type of buyer are you?
• Common transportation management system features
• TMS software pricing and hosting options
• Integrated suites vs. best-of-breed
• What questions should I ask when evaluating TMS products?
• Market trends to understand Related software

Benefits of Transportation Management Software

The general benefits of TMS software are increased operational efficiency, reduced freight costs, and improved profitability.

Here are some examples of how businesses can benefit from TMS systems:

• Measure performance of specific carriers, routes, and delivery times, which allows you to make adjustments based on data, not anecdotes.
• Accurately track shipments and routes to reduce late delivery and better communicate unexpected delays.
• Manage payments in the TMS so you can see trends such as late vendor payments or inaccurate invoices, allowing you to better manage vendor relationships.

What type of buyer are you?

TMS software is used by businesses in any industry where shipments and deliveries are at the core of operations. Most buyers are generally third-party logistics (3PL) companies, but other TMS software buyers include the following industries: food and beverage, automotive, electrical, and consumer packaged goods (and more).

In regard to business size, and independent from industry, you'll fall into one of the following categories:

• Small business buyer. These are companies with two to 100 employees that make less than $50 million a year and have no IT department.
• Midsize business buyer. These are companies that have two to 100 employees and make less than $50 million a year, but do have an IT department.
• Enterprise business buyer. These are large companies that have more than 100 employees, make over $50 million a year, and have a dedicated IT department.

Common transportation management system features

Comparing carriers for the best rates, fewest number of stops, and shortest possible lead time is time consuming when handled manually. Tracking and measuring performance is nearly impossible when relying on spreadsheets alone. Transportation management systems offer a number of important features to maximize efficiency and reduce costs to alleviate pain points.

Carrier Management	Find, compare, and select the most time/cost-effective freight carrier so you can improve procurement processes.
Reporting	Collect and review relevant data points so you can monitor shipping status and measure against established KPIs.
Shipment Tracking	Create tracking info and receive updates on shipment status.
Billing & Invoicing	Create and manage financial transactions (bills and invoices) so you can reconcile invoices with shipments, audit freight bills, and reduce payment errors.
Customer Management	Capture and analyze information about your customers and record your interactions with them.
Order Management	Organize, track, monitor, and execute customer orders for goods, investments, or any other purchases.

TMS software pricing and hosting options

Transportation management systems are typically priced two ways: perpetual and subscription licensing. One thing to keep in mind is if you are currently using manual methods to track shipments, you may need to purchase hardware in order to take advantage of features such as barcode scanning.

• Perpetual: Customers purchase a license to use the software in perpetuity; the license price is typically determined by business size or the number of vehicles in a fleet. Keep in mind that you often have to pay annual fees for support, maintenance, and upgrades; as a general rule of thumb, you can expect those annual costs to amount to roughly 20% of the perpetual license fee.
• Subscription: Customers purchase a subscription (typically billed monthly) based on their size or the number of vehicles in their fleet. Typically, the customer then pays more for every additional truck it adds to the system. Fees for support, maintenance, and upgrades are generally wrapped into the subscription price, making it easier to determine the total cost of ownership for the system during its lifecycle.

Transportation management systems are typically deployed two ways: cloud-based or on-premise.

• Cloud-based: With a cloud-based system, the software is hosted on a vendor or third party's servers, and can be accessed via a web browser or mobile app.
• On-premise: With this deployment method, customers host the software on their own servers.

Integrated suites vs. best-of-breed

Often, TMS software is a standalone system or a key module in a best-of-breed supply chain management system.

The advantages to an integrated suite are streamlined out-of-the-box integration (e.g., fuel expenses automatically sync with the organization's accounting modules), but what these suites offer in breadth of features they might lack in depth. For smaller organizations, they can be far more than is needed. Individual best-of-breed applications may require more custom-built integrations, but they are typically more fully featured than their counterparts.

The important thing to keep in mind is what your needs are. If you need to overhaul your entire system, consider a broad, integrated suite. If, however, you are only trying to improve one aspect of your operation or fill a functional gap, a best-of-breed application might be your best fit.

What questions should I ask when evaluating TMS products?

Can I see it in action?

Always ask the vendor for two demos. The first is typically performed by your sales agent and will walk you through the user interface and core features. The second demo should include your IT resource and the vendor's technical resource.

Do you integrate with X tools I already use?

Insert the names of any software solutions or tools you already use that you want your TMS to integrate with when asking this question. Some vendors may be able to build custom integrations if they don't already offer it.

Is anything I'm asking for custom code?

Ask for a list of features included in the out-of-the-box solution and a list of features that are add-ons to ensure you're only paying for the features you need.

What is your customer support model?

Each vendor offers unique customer service and service level agreements. Do you want a representative available 24/7? Online chat capability? Make sure their model matches your needs before purchasing any system.

What are the set-up costs for the software?

Most vendors price their software based on a SaaS subscription model, but there can be up-front costs that come with implementation.

Market trends to understand

Internet of things. More transportation management systems are starting to integrate or otherwise be paired with internet of things (IoT) devices, and are used to relay more than just simple GPS tracking. Food distributors, for example, often use internet-connected thermometers to ensure food shipments are maintained at certain temperatures.

Global trade management. Some transportation management systems feature modules for global trade management, such as international tax and ISO compliance, international shipping schedules, and other tools to assist international shipping.

Related software

TMS is one part of a series of software designed to optimize supply chain visibility. Complementary solutions include:

Warehouse inventory software (WMS), which gives managers the tools they need to analyze stock and make plans for inventory movement or replenishment.

Order fulfillment software. Many WMS and TMS solutions contain order fulfillment functionality, but buyers without the need to automate warehousing or transportation tasks should evaluate order fulfillment applications.

Inventory management software enables businesses to keep track of their inventory along the supply chain. Features include product categorization, sales, and purchase order tracking, electronic scanning, and automatic ordering.

Fleet management solutions help users optimize delivery routes, dispatch deliveries, and reduce risk factors associated with fleet management.