What is a transportation management system? (Plus benefits)

By Indeed Editorial Team

Published 26 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

A transportation management system, or TMS, is important for the seamless transportation of goods. A TMS can help companies maintain visibility of the routine transportation operations that drive their business, provide information about compliance adherence and ensure timely deliveries to their destination. This visibility and organisation streamlines the overall shipping process and makes it possible for businesses to optimise their operations. In this article, we answer the question, 'What is a transportation management system?', learn why it's an important aspect of business operations and answer some common frequently asked questions.

What is a transportation management system?

If you've worked at any point in the supply chain for goods or freight, you may have wondered, 'What is a transportation management system?'. Simply put, a transportation management system is a platform for logistics that utilises technology and software to help businesses map, plan, execute and optimise their physical movement of goods. A TMS also helps businesses adhere to compliance standards and provide proper documentation during the shipping process.

This system falls under a larger supply chain management (SCM) system and ultimately works towards improving shipping efficiency, reducing costs, gaining real-time supply chain visibility and ensuring customer satisfaction. Here are some common facts about TMS:

  • TMS helps employees in three main areas: When items require shipping, the TMS helps employees find and compare shipping rates and carriers, book the shipment and subsequently track its progress and movements until it reaches its destination.

  • Many industries use TMS: Manufacturers, distributors, e-commerce businesses, shippers and carriers, wholesalers, retailers and third-party logistics providers rely on TMS software to fulfil their shipping requirements across the UK.

  • TMS makes up one aspect of supply chain management: TMS is one of the core technologies used in supply chain management or SCM, which encompasses supply chain execution (SCE) and supply chain planning (SCP).

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How a TMS works

A TMS is a software that collects and stores information about carriers and their operations. It also serves as a transactional and communication system that helps businesses organise and execute shipments. Businesses can use a TMS that's integrated with their existing cloud or on-premises enterprise resource planning (ERP) software. Some TMS solutions have trade documentation capabilities or global trade management (GTM) applications, while as a standard, most are available as modules within ERP and SCM suites.

TMS software integrates with carrier systems, data sources or other sources of carrier information. Usually, orders come through automatically via a business' enterprise resource planning, warehouse management or order management systems. The TMS software then automatically coordinates otherwise complicated manual tasks. These tasks include those that occur at the interface of warehouses and freight shippers, such as the palletisation of goods, labour scheduling, yard management, load building and cross-docking.

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The benefits of transport software

Transportation management software is a modern necessity for companies that are directly responsible for transporting goods and freight of significant volume. Supply chains are complex systems to navigate, especially in terms of complying with regulations. TMS software and computerisation makes this possible. Some of the main benefits of TMS include:

Saving time and cost

Transport management software automates many of the rudimentary and detailed tasks that supply chains encounter. These tasks may include things like securing transportation services by comparing many different rates. Because they remove human error, they can perform tasks without losing quality or efficiency.

Boosting technological capabilities

Transportation management systems can provide shippers with the technology they require to make informed routeing decisions. A TMS can find and categorise information based on quoted prices, transit time and carriers from a centralised location. Because of this, you may require less manual effort and time during the booking process.

Simplifying processes

Transportation management solutions simplify many of the processes involved in the shipping process. For example, a TMS can simplify the carrier selection process by matching the goods with a carrier in the network. The TMS can then save and remember these processes, allowing you to revisit past shipments and match similar loads to appropriate carriers.

Helping track freight

One excellent quality of a TMS is that it can easily track a company's freight or goods while it's in transit. TMS applications can send and receive alerts so you can keep track of any unforeseen delays from location to location. Since a TMS can send real-time updates, you can know about problems, and think of solutions in a more timely manner.

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Improving operations

Software for transportation management can help businesses select the best mode of shipment for their goods based on distance, cost and efficiency. Transportation management can help plan multi-leg carrier routes that are difficult to optimise manually. They can provide the visibility that a business requires to keep track of every stage of the supply chain and improve operations based on the insight this provides. And some TMS can provide important information regarding tariffs, trade, regulations and the delays that businesses may encounter.

Clarifying business insights

A TMS can offer businesses a way to control and manage all aspects of the supply chain, and this improves insight. Common transport management systems can offer in-depth analytics and data-driven insights and reporting capabilities. A TMS can store information about everything, from the percentage of delayed deliveries to shipping invoices. Custom reports based on this information can help companies make important analyses and business decisions.

Transportation management system FAQ

Transportation management is a large and complex portion of overall business operations, and if you're considering utilising their advantages, you may have questions. Here are some frequently asked questions about TMS:

Can a TMS support more than one mode of transportation?

Many systems support more than one mode of transportation, such as multimodal and intermodal transportation. In multimodal transportation, a single carrier uses at least two modes of transportation and is legally liable for meeting the terms of the contract. Intermodal transportation refers to shipments that require more than one carrier and contract.

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What's the difference between a TMS and a WMS?

A warehouse management system, or WMS, is another commonly used digital technology that can help businesses ship and control their inventory, organise their warehouses and distribution centres and manage their order fulfilment process. The main difference between a TMS and a WMS is that a WMS handles and controls freight while it's physically at the shipper's facility. TMS instead handles the movement of goods to and from their facilities.

Both a TMS and WMS may integrate with a company's enterprise resource planning, or ERP, initiative. An ERP is a software system that allows shippers to manage all of their usual daily business operations from a single platform. A company's ERP is the larger initiative.

What is a TMS' role in supply chain management?

Supply chain management primarily focuses on purchasing, manufacturing, and transporting goods to and from key locations in the supply chain. A transportation management system can help with transportation logistics within the supply chain management of an organisation. Fundamentally, a TMS is a subset of a company's supply chain management concerning finding transportation solutions through automation.

Who uses TMS systems?

Businesses use transportation management systems to ship and receive goods on a regular basis. This may include manufacturers, wholesalers, distributors and retailers looking for ways to deliver goods quickly, efficiently and cost-effectively. Companies that can benefit from a TMS system include retail, automotive, and manufacturing industries, pharmaceutical and healthcare industries, food services, logistics providers and aerospace and defence organisations.

How much does a TMS cost to implement?

There are many factors that may alter the price your business may pay for a TMS. Transportation management system pricing can vary based on the vendors, delivery model or extra modules you decide to add. There are two main ways that providers may price a TMS, which can include the price based on a company's overall freight spend or the price based on transaction count.

How do businesses manage a transport management system?

Since a TMS is the centre of a business' use to control and manage all shipments throughout all stages of the supply chain, operation or logistics managers usually monitor them. These managers have the relevant experience necessary to control and understand the transportation management system's main dashboards. They also have the insight to make intelligent decisions about carriers, compliance and logistics.

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