As the world experienced the onslaught of the COVID-19 pandemic, those in the logistics and supply chain management industry quickly realized that technology adoption was a must in order to mitigate disruption and better prepare for freight market impacts throughout 2021. Because of this, transportation management systems (TMS) are becoming more widely adopted as this form of technology becomes more cost-effective and easier to implement internally. However, many shippers still manage their logistics operations the old-fashioned way by calling/e-mailing their carrier base or leveraging spreadsheets. In this post, we’ll cover the basics of what a TMS is and why you should use one to keep tabs on your supply chain performance.
What Exactly Is a TMS?
The goal of a TMS is to help companies move freight from origin to destination in the most reliable and cost-efficient way possible. An effective platform provides visibility into both day-to-day operations and an overarching view of a shippers’ network within one central location. A TMS handles key functions throughout the full lifecycle of a load, including:
Sales orders can be consolidated to make the largest possible shipment. Once orders are consolidated, the route can be optimized to achieve the lowest available cost. Being able to manage your routing guide within one platform also alleviates confusion on when carrier rates expire, ultimately saving valuable time.
Executing a load is no simple task…from requesting rates to booking and tendering loads to BOL generation, having one platform to manage everything that encompasses a shipment is ideal. There’s no need to bounce between different carrier websites to rate shop, and shipments can be tracked within the system. Being able to track shipments is a key advantage of a TMS because it allows for you to provide updates to your end customer, keeping them abreast of where their goods are at all times.
Let’s be real, who really wants to spend time auditing carrier invoices one by one? When it comes to financials, a TMS sufficiently streamlines the payment process by providing easy access to invoices, making it easy to pay carriers.
Within a TMS, customized reports can be generated that align with your business requirements. Reports can then be utilized to analyze freight spend and to measure carriers against previously agreed-upon KPI’s/SLA’s. This way, you can track which of your partners are performing at high service levels.
Why Should You Use One?
Challenges like tight capacity, rising freight prices, and the driver shortage have shippers looking for ways to improve their supply chains, and a TMS solution has truly become a necessity for most shippers, no matter how large or small the transportation spend. In fact, a recent study by Software Advice found that nearly 24% of shippers are still using manual methods. Here are three strategic reasons why you should invest in a TMS:
1.) Lower Freight Costs
It’s virtually guaranteed that a TMS helps to lower overall freight costs for shippers. Being able to rate shop within a single screen means you can always select the most cost-effective option. However, keep in mind that the lowest price doesn’t always mean the best service. It’s key to review the reports that a TMS populates so you can evaluate the best fit carrier for your shipment based on a combination of price and service levels.
2.) Automation of Manual Processes & Paperwork
BOLs, PODs, and other paperwork can be printed directly from a TMS to ensure that drivers have accurate information at all times. This alleviates unnecessary phone calls and e-mails to get drivers back on track if something is misprinted. All order and route information is also stored in one place, saving a significant amount of time by not having to go back and forth between spreadsheets, note pages, or however shipments are manually being managed.
3.) Improved Communication
The transportation industry continues to rely on real-time data more than we’ve ever seen before. A TMS allows you to track all your shipments in one place, keeping your customers abreast of any shipments running behind or where a possible service failure may occur. This enables you to provide better communication to your customers while consistently meeting their expectations (which hopefully leads to more business for you in the long term)!
Choosing the Right Platform
The number of TMS options on the market is plentiful, so the key is to select one that best aligns with your network. Hosting an RFP to compare your options is an ideal first step, as many of your carrier partners most likely have a proprietary TMS platform of their own. The three most common TMS options include:
1.) Cloud-Based System
A cloud-based system encompasses all of the functionality listed above: load planning, load execution, payment, and reporting…and can be accessed from anywhere. With this type of TMS, the shippers’ internal team would handle the day-to-day operations of the TMS and their transportation network (differing from the managed solution referenced below).
2.) Managed Solution
Many shippers choose to outsource their transportation management for a single mode, location, or their entire transportation network so they are able focus on bigger picture items. With this model, the TMS provider would take care of carrier management, KPI/SLA analysis, and all day-to-day operations, and the shipper only has to check in when any issues arise.
3.) Freight Marketplace
Some shippers may not need a full-scale solution but just want to compare rates from an extensive network of carriers…this is where a freight marketplace comes into play. This solution requires little setup with a simple payment structure as compared to a cloud-based system or managed solution that could take a few months to fully implement.
Staying Ahead of the Curve with a TMS
Here at Spot, we have internally developed our own proprietary TMS, Red TMS. As technology continues to play a more prevalent role in the supply chain industry, selecting the right platform to best manage your business is key in order to:
- Reduce your transportation spend
- Improve communication and service levels to your end customers
- Automate lengthy processes
- Have a firm grip on your transportation network
See how one of our customers, a national distributor of chemical and raw materials, turned to Red TMS to assist in improving their logistics-related workflows and schedule a demo today at redtms.com/demo.