TMS: Unlocking Transportation Efficiencies
Transportation management systems are key to managing Supply chain disruptions, shifting capacity, fluctuating fuel costs and demanding e-commerce customer requirements.
Most of us recall store shelves emptied of cleaning and paper products in the early days of the pandemic. While many shortages were steadily corrected, the supply and demand imbalance "brought transportation to the board room, and not for the right reasons," says Shane Duncan, vice president of shipper solutions with freight marketplace Transfix. To address transportation challenges, shippers need to be able to pivot when issues arise.
A transportation management system (TMS) can help by bringing "structure to chaos," Duncan says. For instance, a TMS might deploy dynamic routing guides that adjust with the market, providing flexibility and additional capacity when needed.
What exactly is a TMS? It's a platform that uses technology to help businesses plan, execute, and optimize the movement of goods, says Daniela Hendricks, chief compliance and process officer with logistics provider Gebrüder Weiss. A TMS also can ensure shipments comply with regulations and include required documentation.
Current TMS solutions offer more capabilities than those of even a few years ago. For instance, today's rating engines are expected to include multiple transportation modes, and TMS platforms' increasing need to integrate with a range of other parties, including carriers and brokerages, says Jeff Lokant, director of technology operations with logistics management company Transportation Insight.
Several shifts in the business world have boosted interest in TMS solutions. The pandemic highlighted both the volatility and importance of the transportation function. Many TMS platforms can provide routing optimization, visibility, traceability, and other capabilities that businesses need to compete in a post-pandemic landscape, says Sebastian Valencia, partner with Clarkston Consulting.
The shift to cloud-based TMS solutions is accelerating the "democratization of TMS," says Bart De Muynck, vice president and analyst with research firm Gartner. By providing automation and a single source of information with a nominal upfront investment, these solutions can offer value to even small shippers.
Like smartphones, TMS solutions also are becoming more open, says Fab Brasca, global vice president, global solutions with Blue Yonder. Their value comes not just from the solution itself, but from the "ecosystem" of applications they work with. Say a TMS provides coverage for road, but not ocean shipments. Increasingly, TMS solutions can connect with other providers to offer the capabilities they lack.
A TMS's ability to eliminate paper files, while also storing and sharing shipment information electronically, has also become "a must in any TMS software during this pandemic," Hendricks says.
Newer TMS solutions are built on "microservice architecture" that allows for easier integrations with other solutions through application programming interfaces (APIs). "It's like the old Burger King model: 'Have it your way,'" Lokant says, and select from more choices when integrating with other applications.
Considering A TMS
Given the democratization of TMS solutions, do they make sense for all organizations, big and small? "Size isn't the key determining factor," Valencia says. More relevant are the importance of managing transportation costs and/or meeting customer expectations. If these run high, even many small companies can justify investments in TMS solutions.
Also consider the ability of a TMS to enhance decision-making through improved intelligence, such as figuring out the best way to move 1,000 different products. A TMS also makes sense when manual processes have become bottlenecked and inefficient.
Before evaluating a specific TMS solution, here's some advice:
Review your own operations. Consider your size and organizational structure, industry, the modes of transportation you use, and the degree to which you operate internationally, De Muynck advises. Say you move only domestic over-the-road shipments. A cloud solution geared to small operations may suffice.
Understand the pricing model to avoid surprises. Some TMS solutions charge per module and some per transaction.
Assess the software's user-friendliness. "A TMS should be intuitive and allow the user to get rates and create shipments fairly easily," says Kate Leatherbury, director of domestic transportation solutions with Gebrüder Weiss. To boost operational efficiency, the TMS should facilitate connectivity with other operating systems, as well as business partners.
Evaluate the TMS's ability to accurately represent network constraints. For instance, North America is home to many mammoth distribution centers, so it's easy to take dock capacity for granted, Brasca notes. Distribution facilities tend to be smaller in some other parts of the world. A solution has to recognize the constraints to accurately plan capacity. It also should be able to distinguish between, for example, the time required to load trucks with pallets versus boxes.
Room for Improvement
Even as TMS solutions continue to advance and offer value to a broader range of organizations, there's still room for improvement. It's hard to find a single application that can cover all services with the depth most organizations need, in all regions of the world, Valencia says. Shippers often patch together multiple solutions to get all the capabilities they need.
Acquisitions are helping some companies incorporate more capabilities within a single platform. One example is MercuryGate's recent acquisition of Cheetah Software. In its announcement, MercuryGate indicated the acquisition extends its platform to include last-mile, parcel, and LTL capabilities, among others.
TMS solutions of the future will increasingly incorporate technologies such as artificial intelligence (AI). "AI is not just a buzzword," Lokant notes.
For the moment, however, the industry resides in "AI 1.0," and many companies need more mature underlying data sets before AI solutions can "enrich a mainstream value proposition," he says.
In another shift, a broader approach to problem-solving is gradually replacing the supply chain's traditionally siloed focus, Brasca says. For this to continue, TMS solutions need to be more interoperable. "The TMS needs to be aware of other parts of the supply chain," he says.
The TMS industry also is moving to a "TMS-as-a-Service" model, rather than the perpetual license model that has been the norm.
Even as TMS solutions continue to improve, many businesses can benefit from investing in one sooner than they typically have. "Businesses stand to gain a significant competitive advantage if they consider investing in a TMS solution much earlier in their digital journey," Valencia says.