TMS is an acronym that stands for Transportation Management System. There are many Transportation Management Systems available on the market with a variety of capabilities. There are a couple of basic functions that shippers will tend to look for when exploring the purchase and implementation of such a system.
The first desired functionality is shipment optimization (carrier selection). Shipments, or orders, will typically go through the TMS to be routed with the appropriate, least-cost, carrier that can meet the desired service. The TMS can look at the details of a specific shipment to make a carrier selection. For example, let’s say you have five contracted less-than-truckload (LTL) carriers. Carrier A offers the greatest discount to the destination zip code; however, this shipment will end up being a minimum charge and Carrier B has the lowest minimum charge. The system will know to route this to Carrier B. Now, let’s say the same shipment will also need a liftgate and inside delivery service. The system now determines that Carrier C is the least cost carrier once the accessorials (surcharges) have been factored into the equation. The system will optimize and select the least cost carrier based on the individual shipment characteristics (origin, destination, freight class, weight, and accessorials).
A TMS also incorporates transit times. This allows a carrier to be selected that can meet the desired service. A higher price carrier may be needed to make service, but this is now a conscious decision for a reason that can be captured.
The second functionality shippers often look for in a TMS is shipment consolidation. This allows a batch of shipments, or orders, to be analyzed simultaneously and consolidate multiple shipments together that are destined to the same location. The system should consider the requested delivery dates when consolidating shipments. This may take what would have been many parcel shipments and consolidate them into an LTL shipment or may take many LTL shipments and consolidate them into a full truckload shipment. Shipment consolidation drives down shipping costs. Keep in mind that in order to allow the system to find the most opportunities for consolidation and savings, it needs the benefit of time. Orders that are sent or processed same day will have limited, if any, opportunity for consolidation.
Additional, and sometimes overlooked, benefits of consolidation include operational efficiencies. Being able to pick to a pallet instead of, perhaps, 50 individual packages is much more efficient. There is now one tracking number to monitor instead of 50. Not only does this mean operational efficiency for the shipper, but also for the consignee. The consignee can now receive one pallet with their entire order versus numerous boxes that may or may not deliver on the same day.
While a transportation management system typically has a lot of functionality, the ones discussed above are a couple of the primary functions typically required of a TMS. They drive significant cost reductions, thus providing a timely return on investment.