The pros and cons of a TMS

Freight transport has always been a costly and time-consuming leg in the supply chain. Yet with increasing globalization and the growth of e-commerce, reliable and efficient transportation management is becoming increasingly critical to the success of logistics companies. 

One method of ensuring reliable transportation within the supply chain is through the use of a transportation management system (TMS). TMS eases the many processes of transport management such as sourcing and procurement, carrier network management, planning and execution, dock scheduling, freight rate management, auditing, payment, and performance monitoring and evaluation. Yet TMS systems can be costly and, depending on your company’s current business model, particular TMS systems may not always integrate seamlessly into your work flow.

As such, let’s take a look at some of the benefits and challenges associated with the integration of a TMS system into your supply chain management.

Pros

Smart procurement

TMS optimizes the carrier procurement process by defining the most efficient transport schemes in relation to given parameters. Through the prioritization of parameters such as cost, number of stops, percentage of on-time delivery etc., TMS automates the procurement process while revisiting past shipments so as to quickly and competently match similar loads to the appropriate carriers.

Network assessment and consolidation

Careful management of your carrier network provides opportunities in efficiency and cost savings, particularly through the consolidation of shipments. A TMS assesses all scheduled shipments and, as the single fastest way to cut shipment costs, arranges shipments with carriers so that load consolidation is maximized in shipment batches.

Optimized planning and visible execution

A TMS allows for transportation planning and execution to be based on the examination of various route scenarios. As such, transport routes are optimized in accordance with details such as road speeds, traffic data, fuel costs, and modal limitations, thus fostering punctual and cost-efficient freight delivery.

Furthermore, a TMS allows for real-time tracking and tracing of load transports, sending alerts to communicate any unforeseen delays and their causes. This offers visibility for all stakeholders, enabling better overall planning and communication.

Aligned dock scheduling

With more predictable transportation planning and execution comes greater efficiency in dock scheduling. With the use of a TMS, the alignment of deliveries with dock scheduling can be optimized so as to reduce waiting time and thus ensure quality transportation from point A to point B.

Freight rate estimation

Managing freight rates is a key factor for all stakeholders involved in the transportation process. For logistics service providers, a TMS calculates the cost of a delivery based on a number of variables. These reports ultimately facilitate more cost-efficient choices in transport planning and execution.

Accounting functionality

A TMS shields the auditing and payment processes from inevitable human error. As such, reconciling invoices with shipments or auditing freight bills are not only done more efficiently with a TMS, but custom reports can then be created to analyze discrepancies between rates and final invoices, saving time and unnecessary costs.

Insights & reporting

The establishment of a centralized, reliable, up-to-date database of past and future business may be the greatest benefit of a TMS. Monitoring and evaluation through a TMS offers in-depth insight into what’s working, and what can be improved, so as to maximize savings while ensuring customer happiness.

Challenges

Cost

The traditional use of a TMS included the need for back-end server hardware, hiring programmers or IT staff, and paying loads for software licensing. These necessities made it difficult to justify investment, as ROI would take years to show up. Nowadays, cloud-based systems are rendering such costly investments unnecessary. Still, certain businesses benefit more or less from different TMS models, and so companies need to first carefully assess their current models before deciding on the option with the lowest operational cost.

Integration

Embedding a TMS into your work flow will require training your staff to use it properly. While standard, this change can often stretch wide enough to alter a company’s culture, particularly as it reaches into sales and procurement forces Furthermore, deciding on the right TMS solution itself requires forethought, as niche TMS solutions provide more opportunity for customization while general purpose TMS solutions may require more monitoring.

The Verdict

A properly chosen and implemented TMS results in an enormous upside for companies. Easing each the transport leg of the supply chain not only saves time and money, but reduces error in reporting and enables clearer planning. TMS is thus a worthy investment, and the question of which TMS system to implement depends largely on a company’s current structure.