We continue our series on the “State of the Transportation Management Systems” today with our post on the 4 key processes enabled by the use by shippers of a transport management system or TMS. In our first post, we covered generally the potential of TMS and the main reasons why shippers turn to TMS.
The popularity of the use of transport management system (TMS) has been growing steadily in the last few years. However, its usage is yet to reach a point where shipping professionals consider it indispensable for their business. In fact, recent studies have shown that only about 35 percent of shippers are using TMS to manage their operations. And many of them are still using old versions and have not decided to upgrade to the latest version.
However, most of the shipping professionals have at least some knowledge of TMS and are aware that they will have to start using it at some point in the future if they want to continue doing business. As the shipping business has gone global, it has grown in complexity. Today’s shippers and carriers are not only expected to have their reach in every corner of the world, they are also required to provide fast, inexpensive and high quality service.
In a world where access to real-time information is vital for every decision-making, the importance of a Transport Management System (TMS) for today’s shipping business cannot be overemphasized. A transport management system helps coordinate all the data points in a transportation network. The collection of vital data, such as rates and route options, allows the TMS to present the data in an easy to understand format so that logistics managers make the best decision possible about transportation.
The latest transport management systems (TMS) available in the market do not stop in capability for data collection and reporting. Logistics managers and 3PLs are now using transport management systems for the entire shipping operation, which involves the following four key processes:
- Planning and decision-making: A transport management system provides vital information in real time to enable shipping professionals to plan and make decisions according to a given set of parameters. These include deciding between a selection of carriers on transportation costs, shorter routes, and fewer stops along the way.
- Execution of transportation plans: A TMS makes it faster and easier to execute transportation plans by automating vital functions such as carrier rate acceptance, dispatching, and EDI.
- Visibility: A TMS makes it easier for a logistics manager to have freight visibility along the way so that everyone involved, including the customer knows exactly where the shipments are at any time. Logistics managers have this visibility from point A, arrival at point B, customs clearance, and invoicing and booking.
- Measurement: Most TMS have a logistics key performance indicator (KPI) reporting function that makes it easy to measure performance.
A Transport Management System brings Needed ROI & Efficiency
The biggest and obviously the most desirable advantages offered by TMS is the savings in costs, resulting in increased ROI. A study by ARC Advisory Group has found that the use of transport management system results in a saving of approximately 6 percent. Users have attributed the savings to lower cost mode selections, better routing, and better procurement negotiations. A TMS makes this possible by obtaining cost information from a variety of providers.
By providing shippers with the ability to choose carriers from the comfort of their office, a TMS can turn the market into a buyer’s market. All that a shipping manager has to do is point and click the mouse button to choose the best option presented to him or her. The transportation best practice of employing a TMS solution cuts time and costs, which is what every shipping manager is looking to achieve.
Another important reason to use TMS is the dramatic increase in efficiency. By automatically tracking multiple products, shipments, and solutions, the TMS organizes all the information into precise and easy-to-read lists, which help managers to make decisions quickly and efficiently. Automation also eliminates human errors, which often result in bad decisions. Companies who are shipping freight are increasingly looking to TMS to increase their competitive edge thanks to the realization of ROI and efficiency.
Using a Transport Management System Levels the Playing Field
Until recently, large enterprises were the main constituents applying the use of TMS. To a large extent, this is still true. The main reason most small to mid level shippers were not so enthusiastic about employing a transport management system was the complexity of the system, high cost of implementation, and maintenance. But, these smaller and mid-level shippers understood the non-use of a TMS put them at a great disadvantage. The savings in cost and increase in efficiency gave the large companies a distinct advantage.
But things are changing. Today a transport management system (TMS) is no longer the clunky and expensive dinosaurs they used to be. The latest developments in technology are making them easier to install, easier to use, faster, more functional, more efficient and less expensive. Any shipper, whether big or small, can greatly benefit from these systems. In fact, many developers are specifically targeting small to mid level shippers because they are the most numerous.
Another significant development that is likely to have far-reaching impact on the future of TMS is the growing popularity of cloud-based computing. Many TMS developers are offering their service in the cloud which makes it unnecessary for companies to maintain large and expensive servers or a team of dedicated staff to maintain those systems. Shippers are then able to access a Cloud-based system from anywhere and are far less costly to maintain, which makes them highly attractive to users.
The drop in the costs of TMS is attracting an increasingly number of companies of all sizes. 3PLs focused on transportation management have been known to provide TMS to shippers free of cost as they can make money off of margins. Due to this easy to deploy technology it means that small merchants associated with 3PLs will increasingly seek to get free access to TMS.
A growing number of shippers are turning to TMS as a means to provide improved customer satisfaction, increase transportation and warehouse efficiency, increase delivery capabilities, reduce inventory, improve cash flows, and increase their ROI.
Thus, the state of the transport management system is superb, and there is a great deal of things to be optimistic about in 2015. The TMS market is still nascent, and there is a lot of room, for growth. As an expert has pointed out, the TMS market is currently at a stage where the personal computer was in the 80s. It has only one way to go, and that is up.
In order to find out where the future of TMS lies, tune in tomorrow as we bring you the last post in our “State of the Transportation Management System” series.