What Is Transportation Management Software?
Transportation management solutions (or TMS) help users plan and execute deliveries across the supply chain. Efficient deliveries depend on informed route planning, freight consolidation and enhanced visibility. By providing managers with appropriate tools like route optimization, load building and track and trace, the right TMS system can improve fleet performance and reduce supply chain expenditures. Along with warehousing solutions and fleet management systems, TMS solutions constitute the logistics side of an overall supply chain management system.
Common Features of TMS Systems
Transportation systems offer a number of important tools to maximize efficiency and reduce costs associated with product shipping and logistics. Some of these features include strategic freight sourcing tools, multi-modal planning functionality, route optimization, freight consolidation and dock scheduling.
These features provide the following functionality:
|Automated carrier selection||A TMS improves the carrier procurement process by determining the smartest carrier and mode options for each delivery.|
|Shipment consolidation||Consolidating shipments is the single fastest way to cut shipping costs. A TMS will assess all scheduled shipments and arrange them in efficient bundles, maximizing their load consolidation with each delivery.|
|Route optimization||A TMS uses maps, road speeds, traffic data, fuel costs and modal limitations to determine the most efficient route to save time and gas. In addition to TMS solutions, fleet management software also commonly includes route optimization functionality.|
|Freight estimate optimization||Whether you’re submitting bids or simply calculating shipping costs, a TMS will calculate the cost of delivery based on cargo weight, mode of shipping, delivery distance and other variables, and provide comprehensive reports and needs analyses to facilitate more cost-efficient choices.|
|Payments||These systems include accounting functionality that helps users reconcile invoices with shipments, audit freight bills, reduce payment errors and establish tolerances for match-pay settlements.|
TMS Software: Integrated suites Vs. Best-of-Breed
Often, TMS software will be packaged as a group of modules within an enterprise resource planning and/or supply chain management system. Individual TMS applications can also be offered as standalone services.
The advantages to an integrated suite will be far better integration out-of-the box (e.g., fuel expenses automatically sync with the organization’s accounting modules), but what they have in breadth of features they might lack in depth, and for smaller organizations they can be overkill. Individual best-of-breed applications may require more custom built integrations, but they are typically more fully featured than their counterparts in integrated suites.
One thing to keep in mind is what your needs are. If you need to overhaul your entire system, then you would obviously want to look at a broad, integrated suite. If, however, you are only trying to improve one aspect of your operation or fill a functional gap, a best-of-breed application might be your best bet.
TMS Software Pricing
Transportation management systems are typically priced two ways: perpetual and subscription licensing.
Perpetual. The firm purchases a license to use the software in perpetuity, with the license price typically determined by the size of the organization or the number of vehicles in its fleet. Keep in mind that you often have to pay annual fees for support, maintenance and upgrades—one general rule of thumb is you can expect those annual costs to amount to roughly 20 percent of the perpetual license fee.
Subscription. The firm purchases a subscription (typically billed monthly) that is based on the current size of the organization or the number of vehicles in its fleet. Typically the organization will have to pay more for every additional truck it adds into the system. Fees for support, maintenance and upgrades are generally wrapped into the subscription price, so the organization can usually determine what the total cost of ownership for the system will be during its lifecycle.
TMS Software Deployment
Transportation management systems are typically deployed two ways: cloud-based and hosted on-premise.
Cloud-based. With a cloud-based system, the software is hosted on the vendor or a third party’s servers, and can be accessed through a web browser or via a mobile app if the vendor offers one. The recent trend has definitely been toward deploying cloud-based software, as it is often cheaper to deploy and easier to manage for smaller to midsize fleets.
On-premise. The organization hosts the software on its own computers and servers. The traditional method of software deployment, on-premise deployment has started falling out of fashion in the TMS realm due largely to the increased use of internet-connected hardware devices embedded in trucks or other commercial vehicles. That said, larger distribution firms, or firms with particular security needs might find more value out of an on-premise system.
Market Trends to Understand
Internet of Things. More TMS systems are starting to integrate or otherwise be paired with Internet of Things (IoT) hardware devices that are placed in the vehicle and are used to relay more than just simple GPS tracking. Food distributors, for example, often use internet-connected thermometers to ensure that food shipments are maintained at certain temperatures.
Global Trade Management. Some TMS platforms also feature modules for Global Trade Management, such as international tax and ISO compliance, international shipping schedules and other tools to assist with transoceanic shipping.
Driverless technology. It will be interesting to see which TMS vendors make the greatest strides into developing integrations for autonomous vehicles. It is expected that commercial autonomous vehicles will be on the roads en masse in as little as five years, so expect there to be much disruption in the realm of fleet and transportation management.
Evaluating TMS Systems
Demand for high-quality transportion software systems has gone up as organizations realize their cost-saving potential. But their historical lack of use means there’s no one truly dominant leader in the small and mid-size business markets.
Important considerations when selecting a TMS program include:
- Is your organization interested in an on-premise or SaaS deployment?
- Is your organization a small to mid-sized business? If so, does the vendor have an established reputation for serving the needs of business of this size?
- Does the system support all modes of shipping within your operation?
- Can the system offer specialized functionality to meet the unique delivery needs of your vertical market?
- Does your organization engage in global trade? Not all TMS systems include functionality for international logistics.