5 Transportation Management System Benefits & The Ever Expanding use of a TMS by Shippers
The transportation management system is undoubtedly one of the buzzwords of the modern logistics industry. Shippers around the globe are realizing why the time has arrived to take advantage of transportation management system benefits. More shippers are utilizing TMS to improve production, reduce inefficiencies, and keep control of management processes under one roof. As a result, the use of the TMS is expanding, and it will be one of the greatest technology trends to benefit the shipping industry in 2016. Let's take a look at why it’s expanding and how it will benefit the shipping industry.
Driving Forces Behind the Expansion
There are multiple forces that are catalyzing shippers to move towards the implementation of a TMS. Transportation management system benefits are derived from the following driving forces:
- The cloud is making the initial investment in a TMS minimal, especially when compared to the typical initial cost of a TMS historically. In the past, shippers where are unable to spend the quantities of resources to develop and implement a TMS on premises. However, the introduction of the cloud has forced many operations to think about the applications of a TMS in a software-as-a-service environment. Essentially, the initial cost is lowered, and the shipper can realize the transportation management system benefits faster.
- Shippers demand in-house solutions. Regardless of what studies say, shippers do not want to actually outsource all properties and operation to third-party providers, often called managed transportation. This is simply human nature in business, but, as explained by Steve Banker of Logistics Viewpoints, today's TMS models are enabling shippers to combine the traditional benefits of a 3PL with the transportation management system benefits through cloud-based solutions. We call this a hybrid managed transportation model. Meaning, while the 3PL provides the TMS technology, at the same time, the 3PL also provides value-adding services. Meanwhile, complex rate computation, according to Peter Moore of Logistics Management magazine, is only truly achievable through the use of a TMS.
- Omni-channel demand and amazon structured delivery schedules are clearly responsible for the overwhelming demand for faster, cheaper cost of shipping by consumers. Unfortunately, mini shippers do not have the capability to provide shipping and handling services at Amazonesque ratios. Yet, more consumers are getting online and finding their purchases around the globe. A TMS is able to appropriately match ordering and fulfillment centers based on where the delivery address is located. In other words, a TMS is able to help shippers become more like the capabilities of amazon and giant retailers.
Transportation Management System Benefits
The expanded use of a transportation management system directly benefits shippers in many ways. According to Bridget McCrea of Supply Chain 24/7, up to 35 percent of today's shippers are actively using a TMS, and 39 percent of shippers have current plans to move towards the adoption of a TMS within the coming year. As a result, 69 percent of all shoppers are expected to be fully utilizing a TMS by the end of 2017, if not the end of 2016. So, shippers who have yet to think about transportation management system benefits need to know exactly what benefits exist.
A Proven Return On Investment
Shippers that have implemented a TMS see 6.5- to 7.5-percent return on investment, accounting for less than 25-percent net profit going back into the software. In other words, after accounting for monthly operating and subscription costs, the most conservative return on investment estimates for the use of a TMS in today's operation stand out at least 5.75-percent increase in profits.
One of the greatest drawbacks to a traditional transportation management system revolves around where data is stored, analyze, and applied. The use of cloud computing powers is enabling today's shippers to have the full transportation management system benefits without the on-site storage costs.
Response to Driver Shortage
The driver shortage is only around 40,000 drivers as of 2015, reports Bridget McCrea of Supply Chain 24/7, in another article. However, the driver shortage is expected to grow to 240,000 by 2020. That's a 600-percent increase over the next four years, and the push towards more products, faster, and at lower rates is only further exacerbating the problem, as today's drivers are pushed to their breaking point to meet this demand. The TMS simplifies route schedules, loading and unloading, and a host of other processes to make the burden on the drivers last cumbersome.
Proactive, Not Reactive Supply Chain Management
Traditional supply chain operates on a reactive basis. This is the typical operation of any business. Today's demands generate the processes of tomorrow, and employees are constantly working to meet today's mantra. However, the TMS will enable companies and employees to look proactively at what could happen and design solutions before issues arise, making the entire supply chain management system more efficient and competitive. This will further drive better customer service, which is one of the best of the transportation management system benefits.
Digital Empowerment in Making Decisions
From executive-level leadership to drivers, making decisions is part of the job in shipping. However, these decisions must have a basis for why they were made and what benefit can be achieved. As a result, the TMS is enabling greater use of data capture systems to ensure all decisions are made with the appropriate information, at the appropriate time, without any unnecessary delays. This leads to a fundamental growth factor in the adoption of TMS solutions across the industry.
For example, at Cerasis we have a report called the "Least Cost Compliance" report. This allows management to see what all locations picked in the way of carriers and if the location picked the "Least cost carrier" or not. In the system, it will prompt the user to give a reason why they did not and what the cost savings difference was. Now, this is not the pursuit of "least cost," but just gives more control and reasoning in why different carriers were chosen.
Do you remember the last time your organization made a split-second decision that adversely affected your bottom line? Now, what could you have done differently, what your processes and decisions have been better managed if you had more information on hand, could your transportation managers or coordinators have done something to minimize costs, or could the pickers of your warehouse have found a way to get today's shipment loaded faster after integrating into a transportation management system allowing for a WMS to "talk" to a TMS?
These questions are simply the defining factors of transportation management system benefits to your company. Unfortunately, more than one out of four shippers continue to conduct business without the application and use of a TMS. 2016 will see the number of shippers using a TMS double, and the benefits will reach beyond the company and impact public perception, your customer base, and your bottom line.
Want a demo of the Cerasis TMS, we call the Cerasis Rater? Fill out a demo request today!