What is a Transportation Management System (TMS)?

9 min read
last change: 20-6-2023

Are you on the hunt for a transportation management system (TMS)? That’s fantastic! But here’s the thing: TMS is a broad term encompassing a wide range of software products. So, if you don’t have a clear understanding of what you’re looking for, you’re searching for a needle in a haystack.

You might end up visiting websites and scheduling demos for products not tailored to your business needs. It wastes your valuable time and energy, which could be better spent on high-impact work or enjoying cute animal videos.

But fear not! By recognizing the vastness and fragmentation of the TMS market, you can approach your search more strategically. With this awareness, you’ll be able to identify offerings that don’t quite fit the bill before wasting time on useless sales calls and leaving your email address all over the internet.

So, if the world of TMS is new to you, stick around. A comprehensive understanding of the TMS landscape upfront will save you time and energy in the long run.

What you’ll learn:

The Definition of Transportation Management System

Let’s get down to the nitty-gritty of what a transport management system, a.k.a. transport management software, a.k.a. transport management solution, actually is. However, be prepared because there’s no straightforward, concrete definition.

At Viya, we define transportation management system as software that automates and streamlines otherwise manual tasks involved with planning and managing the physical transportation of goods.”

This includes the tasks of all the parties involved in the shipping process, roughly speaking, shippers, carriers, and logistics service providers.

I know this definition doesn’t exactly adhere to the “show, don’t tell” principle of good storytelling. But if you consult Supply Chain Management for Dummies, you’ll find that it simply states a TMS “keeps track of shipments and carriers.” This description drove me crazy when I first learned about the concept of transportation management systems; it gave me no grip on the topic. The reality is that defining a TMS is challenging because its features depend on the users it serves. And TMSs help lots of different users with different needs and priorities (more on this later).

To summarize, the term transport management system (TMS) encompasses a category of software products that increase the efficiency of the shipping process.

At the same time, the term transportation management system is used by vendors to market these products individually. It’s often hard to distinguish on what level they’re talking about transportation management systems; the general concept, or a TMS solution targeted to a specific group (small e-commerce businesses or independent carriers, for example).

The Benefits of Transportation Management Systems

Implementing a transportation management system (TMS) can bring a world of benefits to your business. It enhances collaboration and communication among all the parties involved in the shipping process, from shippers and carriers to logistics service providers and receivers. This means seamless information exchange, real-time updates, and automated processes, saving time and reducing administrative costs.

It makes life easier for your logistics, sales, customer service, and finance teams. With a TMS, you can streamline and automate various logistics processes, boosting operational efficiency, reducing labor costs, and minimizing errors. The purpose is to relieve employees from mind-numbing, repetitive tasks. This way, they’ll be happier at work, and you can scale up operations without expanding the logistics team.

Kinds of Transportation Management Systems

When distinguishing different kinds of transportation management systems (TMS), you can break them down by the specific target customers they serve. To keep it simple, we make a rough division of:

  • Shippers

  • Carriers

  • Logistics service providers (LSPs)

By shippers, we mean the parties providing the goods being transported. By carriers, we’re referring to parties hired to execute the actual transportation of the goods. By logistics service providers, we mean parties that are taking care of (part of) the shipping process on behalf of shippers (e.g., third-party logistics providers (3PLs) and freight forwarders).

Not all three parties have to be involved in the shipping process; plenty of shippers take care of their logistics and transportation. In those cases, shippers would also benefit from the functionalities described below for carriers.

TMSs for shippers

For shippers, there are TMS solutions designed to help them choose suitable carriers, book shipments, manage documentation, and keep clients informed about the status of their shipments. These TMS systems streamline the shipping process and handle tasks like invoicing and payment authorization.

TMSs for carriers

Carriers have their own set of TMS solutions. These systems focus on pricing, planning, and optimizing routes to maximize their vehicle’s capacity. If a shipment is less than a full truckload, carriers can use TMS to consolidate loads and make the most efficient use of their resources.

TMSs for LSPs

LSPs often take on the responsibilities of both shippers and carriers. So, their TMS solutions encompass functionalities that are beneficial for both sides. They handle physical transportation, manage carrier relationships, and provide route optimization and load consolidation features.

It’s worth mentioning that many TMS providers aim to serve multiple customer groups, given the overlap in their requirements. For example, some TMS solutions for logistics service providers also incorporate features commonly found in carrier-focused TMS systems.

In a nutshell, different kinds of TMSs cater to the diverse needs of shippers, carriers, and logistics service providers. Each TMS focuses on specific functionalities and tasks to optimize the transportation process for its target customers.

When you stop to consider the variety amongst these top-level categories of customers – from a self-employed trucker to an international carrier like DHL and from a regional retailer to a multinational brand with matching logistical complexity – you can imagine the tapestry of TMS solutions that make up the TMS market.

How a TMS, ERP, and WMS Work Together

Most businesses integrate their TMS into their enterprise resource software (ERP) or warehouse management system (WMS). To understand the different functions of these systems, think of a TMS as the conductor of a well-orchestrated shipping process, working hand in hand with ERP and WMS software. When an order is confirmed in your ERP system, it signals the TMS to arrange the shipment while the WMS gets the goods ready for pickup. The TMS arranges the pickup, labeling, and transport documentation as the order is picked and packed in the warehouse. It ensures that all the necessary information flows seamlessly between systems, optimizing efficiency at every step. So, while the ERP manages the overall business operations and the WMS handles the warehouse tasks, the TMS acts as the bridge, coordinating transportation and ensuring a smooth flow from start to finish.

Can a TMS be Used Standalone?

Businesses can use a TMS even if they don’t have an Enterprise Resource Planning (ERP) system or a Warehouse Management System (WMS). While integrating a TMS with ERP and WMS can provide additional benefits and streamline end-to-end operations, it is not a requirement for using a TMS. A standalone TMS can still offer significant value to businesses by focusing specifically on transportation management and optimizing logistics operations.

When to Get a Transportation Management System

Many companies go without a transport management system longer than they should because of a lack of awareness. Here are a few signs that indicate it’s time to make the switch:

  1. Increasing Complexity : As your business grows, so does the complexity of your transportation needs. If you find yourself juggling multiple carriers, managing diverse shipping requirements, and struggling to meet changing customer demands, a TMS can provide the necessary tools to streamline and simplify your operations.

  2. Inefficient Processes : Spreadsheets are prone to errors and require manual data entry, which can be time-consuming and prone to mistakes. If you spend too much time on repetitive tasks like data entry, shipment tracking, and carrier communication, a TMS can automate these processes, saving time and reducing errors.

  3. Lack of Visibility : Do you have real-time visibility into your shipments? Can you track and monitor each delivery’s status at any given time? If not, a TMS can provide you with end-to-end visibility, allowing you to track shipments, receive notifications on delays or exceptions, and provide accurate delivery estimates to your customers.

  4. Cost Control Challenges : Are transportation costs spiraling out of control? Without proper tools and analytics, identifying cost-saving opportunities and optimizing your transportation spending can be challenging. A TMS can provide detailed cost analysis, rate comparison, and optimization capabilities, enabling you to make data-driven decisions and reduce transportation costs.

  5. Customer Service Issues : Are your customers experiencing delays, order inaccuracies, or poor communication regarding their shipments? A TMS can improve customer satisfaction by providing accurate delivery information, proactive notifications, and efficient customer service support.

If any of these signs resonate with your current transportation management challenges, it’s time to seriously consider swapping the spreadsheet for a modern TMS solution.

Your Next Steps to Getting a TMS

Now that you have a clear understanding of what a transportation management system (TMS) is and how it can benefit your business, it’s time to take the next steps toward implementing one.

Start by assessing your organization’s specific transportation needs and challenges. Consider factors such as the volume of shipments, complexity of logistics processes, and desired level of visibility and control.

Next, research and evaluate different TMS providers in the market, considering their features, scalability, and customer support. Engage with industry experts, attend trade shows, and seek recommendations to make an informed decision. We’ve listed our most valued competitors (to be written).

Once you’ve selected a suitable TMS, collaborate closely with the provider to ensure a smooth implementation and integration with your existing systems. Remember, a TMS is not just a software solution; it’s a strategic tool that can revolutionize your transportation operations.

By investing in a TMS, you’ll gain improved efficiency, cost savings, and enhanced customer satisfaction. Don’t wait any longer - take the next steps toward transforming your transportation management today!

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Marleen Hoenink, Content Creator
published on: 20-6-2023
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