Integrating ERP and TMS: Why Your Business Needs Both Systems

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Too often, ERP software is seen as the final answer to any and every distress a business may face. Built to centralize processes, increase productivity and provide end-to-end visibility of your company, why would you ever consider another solution? But more often than not, businesses focused heavily on the supply chain aren’t getting all the promised benefits of this software. While ERP systems provide excellent tools to manage accounting, human resources, customer relationships and more, they considerably lack the tools needed to properly manage transportation. In order to resolve this issue, many businesses are integrating ERP and TMS software.

Three Reasons Why ERP Isn’t Enough

1. ERP doesn’t provide enough supply chain management capability

Although anecdotes about ERP’s inability to adequately serve the supply chain have circulated for years, there’s now data to back it up. According to a 2016 report from Ohio State University, 86 percent of respondents believed their ERP systems did not provide adequate supply chain management. While this data point alone doesn’t discuss TMS, it shows a majority of businesses should plan on implementing some type of system to support supply chain management capability in addition to ERP.

2. TMS is most important for increased capability

When asked what features were needed to increase SCM capability, 92 percent of respondents named transportation management as either critical or important. This feature was named more often than all other features including supply chain visibility, warehouse management and eCommerce. This shows not only is transportation management incredibly important to the supply chain but that it’s also very clearly the missing piece from today’s ERP systems.

3. TMS software provides the fastest returns on investment

In the same study, TMS software was also found to be the quickest when it came to providing benefits equal to the costs of the system and its implementation. While respondents reported different lengths of time until they “broke even”, the median point for TMS was found to be less than one year. All other systems studied had a median point of 18 months to two years, making TMS a more financially-sound choice when it comes to bolstering SCM capability.

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Benefits of Integrating ERP and TMS

Increased Automation

Transportation management systems provide a higher degree of automation in the supply chain than ERP can do alone. One of the first ways TMS accomplishes this is with automatic carrier selection. This tool provides an interface to work with shippers using up-to-the-minute data for complete visibility and accuracy. During bid analysis, many TMS tools will produce forecasts to let users know how this carrier will impact them financially. This allows users to quickly determine the best carrier.

Further, TMS software manages automatic order processing. With the use of EDI and other similar technologies, TMS doesn’t require your team to enter order information by hand. The information is simply processed with no human intervention, reducing the chance for human error as well.

Enhanced Customer Experience

Although ERP systems traditionally contain customer relationship management tools, TMS enhances the customer experience in a different way. First, TMS software offers scheduled pickup, which allows users to specify certain locations and times for delivery. Users can set up appointments through the system, reducing errors in communication and dissatisfaction.

TMS software can also manage shipment disputes. This tool addresses conflicting schedules, potential damage and other disputes related to goods. Many systems offer a collaboration portal from which users can update freight charges to accurately reflect any mistakes made during shipment.

Better Visibility

ERP systems provide a great level of visibility of operations company-wide, but don’t offer as detailed information concerning the transportation chain. One feature offered by TMS not typically provided by ERP is fleet management. This capability allows managers to oversee their workforce in regards to schedules, in-transit communication and dispatch. Driver assignment can be partially automated in some solutions, with factors like availability and skill level affecting which drivers the system suggests. Fleet management also allows managers to see the location of their drivers, ensuring each shipment is on track.

In addition to tracking drivers, TMS enables users to track individual shipments as well. This information feeds into a TMS solution’s transportation intelligence which then produces reports regarding your supply chain. These reports are created by analyzing all your transportation data.

Transportation intelligence provides a greater understanding of your operations than the intelligence provided by a standard ERP. TMS software keeps track of metrics better attuned to the industry, such as fuel trends, number of late shipments, transit times and more.

Better Transportation Planning

With access to improved analysis and reports, integrating ERP and TMS also provides better planning. TMS software allows users to consolidate shipments taking factors like capacity and route optimization into account. This helps reduce the overall cost of shipping and improve profits. Additionally, TMS software handles multimodal shipments. This allows businesses to plan which mode of transportation is most cost-effective at any point during transportation.

Putting Them Together

Because neither system can do the other’s job alone, it’s necessary to integrate the two in order to maximize the capabilities. ERP software unifies all functions across an organization, yet doesn’t provide the granular level of detail needed for transportation. TMS software fills the gaps that ERP leaves but isn’t built to handle company-wide processes. Companies may need to move away from looking for an all-in-one solution and instead focus on finding compatible systems to work together and provide peak capability.

For more information on choosing a supply chain management solution, check out SelectHub’s SCM Software Buyer’s Guide. Use it to better understand what SCM solutions can do, create goals for implementation, and get examples of questions to ask vendors. Whether you’re looking for an ERP, TMS, or something else, understanding your options is the first step in receiving the total supply chain capability your business needs.

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