The management of transport and logistics, and the systems underpinning it, has been revolutionised over the last 20 years. No longer are shippers (cargo owners) and logistics departments relying on small teams of human resources, spreadsheets, WhatsApp groups, endless email threads and phone lines to move cargo from source to destination.
Today, as local and global markets have become increasingly sophisticated and globalised, shippers require a robust, always-on-and-accessible Transport Management System (TMS) to manage the complexity inherent in today’s logistics value chains.
In a world where supply chains are continuously evolving and faced with increased complexity, there is now a global shift towards companies taking control of their supply chain by developing a well thought out strategy that unlocks the latent value in the supply chain. These strategies typically involve optimisation of the shippers’ and suppliers’ assets and rely on elevated levels of coordination between these parties, as well data-driven decision-making. Purpose-built technology provides this and ensures that the strategy is sustained as intended.
What is a Transport Management System?
A transport management system or TMS, as defined by Gartner, is a system used to plan freight movements, perform freight rating and shopping across all modes, select the appropriate route and carrier, and manage all freight costs and payments.
Critically, a TMS facilitates interactions between an organisation’s order management or warehouse management system and the logistics activities thereafter to ensure on time delivery to the correct destination at the lowest achievable cost. A TMS is the focal point that pulls together the different moving parts of a value chain and its role players into a highly functioning logistics ecosystem while generating valuable actionable data.
Its key functionality includes managing orders, optimising loads & planning, selection of best carriers, management of rates, automation of shipping for all modes of transport; tracking delivery progress (track and trace), sending notifications of transport status, settling payments automatically, managing claims and providing management reporting for key business decisions. A TMS provides
separation of duties and auditability of each of these functions through detailed user profiles and electronic audit trails.
What are the benefits of a Transport Management System?
The benefits of a tms system are found in its ability to:
These benefits all positively affect a company’s profitability by unlocking savings on supply chain costs. This is because increased predictability and access to information - supply chain visibility - allows a provider to make faster and higher quality decisions that has a net impact on cost reduction and operational efficiency.
When deployed, a TMS delivers business value in the form of reduced costs, but it also gives companies improved accountability, better supply chain visibility, and greater flexibility to match service levels to requirements.
The analytics that logistics managers glean from a TMS also helps them pick up on trends, identify problem areas, and stay agile when addressing issues like how to meet future cost and service-related goals. A highly configurable TMS allows a shipper to rapidly adjust the strategic plan to changes within the supply chain, such as unanticipated (or unplanned for) peaks in customer demand, disruptions in supply of raw materials or sudden re-configuration of warehouse networks due to strikes.
Operations also benefit from the efficiencies that come from being able to automate and execute tasks, and then report back on those activities. A TMS directs the users’ attention to where it is needed. This allows planners, controllers and managers to spend more of their time making decisions and adding value by anticipating and resolving issues, while spending less on simple administrative tasks.
Users should not be phoning suppliers and checking spreadsheets and emails to make sure everything is going well; they should be alerted automatically by a system when things have (or might) go wrong so they can take action. The action should be guided by technology, where applicable.
Similarly, when events do not turn out as planned, these role-players should not be spending hours sifting through emails and contacting operators to figure out what happened or why a certain decision was taken; they should have access to a real-time system of record that presents the full and single version of the truth in terms of what actual events took place.
These efficiencies may seem small individually, but stacked upon one another, a TMS can unlock savings of between 5-15% per annum, a margin that we have consistently experienced with our partners and clients. When a company is dealing in magnitudes of hundreds of millions of Rands, Dollars or Euros, that represents a significant bottom line saving that can be repurposed elsewhere within the organisation.
Making the business case for a TMS investment
One of the biggest ROIs for companies that invest in a Transport Management System is the consistency and adherence to business strategies that they achieve in return. There was a time when a TMS was cost prohibitive for small to mid-sized companies, but with a Software-as-a-Service (SaaS) model you can leave the hosting, IT implementation and configuration, and maintenance to the experts. This advantage alone has opened up the opportunity for a TMS to a much broader market and allowed companies of all sizes to achieve their ROI goals related to their transportation management investments. A SaaS TMS is also easily scalable, so the solution can expand with the operation with almost no growing pains.
The benefit of investing in a TMS platform is that it ensures an automated, auditable systematic allocation of loads to transporters in accordance with the client’s logistics strategy and contracted rates with its transport service providers. Thereby, this ensures that the lowest cost transporter with capacity is always allocated the load, which translates into reduced logistics costs at the defined service level. The ease with which a broad base of transport service providers can be managed with a TMS means that logistics managers need not be constrained by the number or size of carriers when formulating their strategy. For example, a relatively small transporter in the industry with an attractive rate on a particular lane can be quickly onboarded and effectively managed using the robust, automated and auditable workflow the platform enables. The use of this transporter can be discontinued just as quickly if needed.
As the TMS is an end-to-end solution which incorporates rates management and payment to transporters, it has the added benefit of simplified administration processes and auditable, accurate transport payment process which ensures that the correct rates are paid to the transporters at all times. A TMS facilitates reverse billing, which means the shipper, not the carrier, maintains and is responsible for the accuracy of the rates. The increased invoice accuracy alone that this process adds yields significant savings.
Reverse billing also gives the shipper the ability to analyse rates effectively and continually optimise its transport strategy. It also provides the Finance department accurate accrual reporting and insights.
Implementing a TMS platform in your organisation gives senior management and shareholders peace of mind that the lowest cost plan is always deployed each day based on the resources available, whilst the logistics team has access to more information and data than ever before possible. Equipped with this intelligence, the logistics team can focus on continuous improvement and look for further opportunities to optimise the logistics network and drive costs out of the business.
Contributed by: Richard King, Sales & Marketing Manager at Transnova email@example.com