What is Transport Management System?

shipsy

Updated on April 27th, 2022

For decades logistics operations were managed manually. But with the emergence of transport management system or TMS, logistics-powered businesses gradually started realizing the significance of leveraging technology to optimize overall supply chain and logistics operations. There are multiple reasons why transportation management systems saw significant growth in adoption post-2010. As the cost of logistics operations skyrocketed, impacting bottom lines, businesses gradually began hunting for solutions that could address problems like lack of ground-level visibility of goods movement, poor control over logistics service providers, inefficient SLAs, and inability to gain a unified view of end-to-end supply chain operations and more. 

Transportation Management System Market Overview

The transport management software market is now an extremely lucrative industry. The global TMS market was valued at $5,467 million in 2019 and is projected to reach $11,367 million by 2027, registering a CAGR of 9.6% from 2020 to 2027. Let’s understand how the transport management systems ecosystem looks in some of the key geographies.

The transportation management system industry is a critical sector in North America and is the top contributor to the global TMS revenue. With regards to nations, The US and Canada are joining hands to increase their market share in the TMS sector. Asia-Pacific is another critical region that’s witnessing a rapid increase in the adoption of transport management systems, and the major driver behind this is skyrocketing demand for cross-border logistics in China and emerging economies like India. The growth of the eCommerce industry is also pushing businesses to leverage transport management systems. Here’s a look at some of the key factors that are influencing businesses around the globe to invest in advanced transport management systems.

Top 5 Drivers of Transport Management System Adoption

Increasing customer expectations, the growing need for end-to-end delivery visibility, the need to optimize logistics costs, improving cross-border logistics operations, collaboration, and driving data-driven decision making are some of the critical factors that are attracting investment in the TMS industry.

1. Increasing Customer Expectations

Customers across the world are becoming ambitious. More than 84% of customers will leave a brand if they have two bad experiences. Customers want greater visibility into delivery progress. They need to know where their orders are and what’s the exact ETA. Modern customers want flexibility, too, when it comes to receiving orders. Factors like being able to change delivery location and time based on their convenience are becoming important privileges retailers, D2C brands, and logistics services providers need to give customers. All these factors are making it imperative for businesses across the world to digitize everyday logistics operations by investing in modern transport management systems.

2. Growing Need for End-to-End Supply Chain Visibility

Poor visibility of logistics operations has been weighing down supply chain operations for decades. Businesses are increasingly realizing that lack of transparency is one of the major reasons behind growing operational costs, poor logistics productivity, lack of control over logistics service providers, and inaccurate SLAs. As much as 69% of companies do not have proper visibility over their supply chain operations. Hence, businesses are deploying TMS to gain real-time insights into goods movement and financial transactions.

3. The Need To Optimize Logistics Costs

Balancing cost and customer experience is a critical goal logistics-powered businesses need to achieve fast, especially in the last mile. More than 40% of entire supply chain costs globally can be attributed to the last mile. Therefore it becomes necessary to eliminate unnecessary costs triggered by poor delivery productivity, growing risks, lack of visibility, and inefficient collaboration. A transport management system can be of immense help here.

4. Improving Cross-Border Logistics Operations

The intensity of cross-border logistics activities to fulfill eCommerce delivery demands is growing rapidly. The cross-border eCommerce logistics market share is expected to increase by USD 44.61 billion by 2025. To ensure the scalability of logistics processes and ensure seamless shipping operations, retailers, eCommerce providers, and manufacturers are digitizing global trade operations using advanced transport management systems. 

5. Driving Data-Backed Decision Making

According to research, as much as 98% of logistics firms say data-driven decisions are crucial to supply chain activities. When it comes to scaling logistics operations and understanding customer expectations, guesswork is a major challenge. So, to overcome this, companies across the globe are deploying analytics-powered transportation management systems. Such systems provide intuitive dashboards that logistics stakeholders can leverage to gain critical insights into costs, performance, compliance, productivity, and more.

6. Barriers To TMS Implementation

So, even though the need to embrace a transportation management system is growing by the day, a significant number of businesses are still shying away from investing in one. The reasons can be lack of understanding about the capabilities of a TMS, inability to make a robust use case, poor internal alignment between stakeholders, bad experience with a previous TMS provider, thinking that deploying one needs means ripping and replacing existing IT infrastructure and more.

What kind of businesses need a transportation management system?

Any business, may it be a retailer, manufacturer, eCommerce brands, on-demand delivery providers, direct-to-consumer brands or an exporter/importer, that is powered by logistics needs a transportation management system. The use cases vary depending on the industry and end-customer needs, but a TMS can drastically boost logistics performance and optimize costs irrespective of where it’s being used.

How does a transport management system work?

There is a systematic process every transport management system follows to streamline the procurement and shipment of goods. After the integration with existing SAP/ERP systems, the TMS looks into a new order and segregates them based on given parameters. It then finds out the vehicle and drivers for the delivery. The software also connects with the warehouse management to ensure the timely pickup, AWB generation, printing labels, and conducting other tasks. It generates the most efficient routes for delivery, sends delivery-related alerts to the end customers, and provides the riders with options to manage their trips.

Top 7 Features of Transport Management System

Here are some of the key features that should be there in transport management software.

1. Automated Order Allocation

To categorize the products based on their size, volume, type, and delivery location. Doing this manually requires enormous time and effort.

2. Finding Vehicle and Assigning Drivers

From finding the right vehicle to utilizing its capacity completely, the TMS should be capable of doing this automatically. It should also be able to choose the driver considering their performance, driving hours, experience, and other parameters.

3. Automated Route Optimization

The software should also have the feature to plan and optimize delivery routes. It should also include dynamic route planning features so that riders can get new routes in case there is some problem in the route or any customer cancels or modifies the order delivery.

4. Rider Management

The TMS should provide means to manage all riders. It should also provide a dedicated panel or application to the riders so that they can manage every trip and check out particular delivery preferences of the customers.

5. Digitized Proof of Delivery

The TMS should include features to collect and upload the proof of delivery through the app.

6. Options for The End-Customer

Customer satisfaction is the prime goal of every business. Providing delivery-related options to the customers can help in achieving the same. Therefore, the TMS should offer features like rescheduling delivery, real-time tracking, sharing delivery feedback, and checking delivery ETA for the end customers.

7. Reports and Analytics

The TMS should provide means to generate various reports to manage drivers’ performance, check delivery status, and more to improve the processes.

Besides the aforementioned ones, there are many other features that might be there in transportation management system software. In fact, some of the transport software providers can also add exclusive features as per your business needs. You can ask the company for that.

Building A Case for Transport Management System

Barriers to a TMS implementation can be clearly eliminated by identifying the ROI of a TMS, clearly presenting its use cases, displaying its ease of deployment, citing multiple successful case studies, and more. Let’s have a closer look at some of these factors.

The ROI of An Advanced TMS Solution

Return on investment of a TMS includes both quantifiable and non-quantifiable benefits. Its benefits can range from a percentage decrease in costs to an overall increase in logistics productivity, greater levels of visibility to a percentage increase in customer satisfaction.

Gartner highlighted that the average savings that can be achieved by a business using TMS could range from 5-15% of yearly freight spending. It drastically increases the visibility of supply chain operations by ensuring real-time insights into all that’s happening at the ground level. It enhances customer service by enabling end customers to gain visibility over delivery progress. It helps delivery stakeholders plan better, more efficient and faster routes and significantly improves on-time delivery volumes.

Powered by data science and analytics, a TMS helps supply chain and logistics stakeholders improve decision making and identify pockets in an entire supply chain network that can be optimized. According to Inbound Logistics Magazine, one can go from paying USD 11 per freight invoice to paying just 5-10% of the USD 11 by using a transportation management system.

Key TMS Use Cases To Highlight

There are literally hundreds of use cases that can be easily identified to gauge the importance of investing in a transportation management system. But here, let’s talk about those that directly impact cost and customer experience.

Ensuring End-to-End Logistics Visibility

A transportation management system provides businesses with real-time and granular visibility of ground-level logistics operations. This drastically improves logistics planning, mitigates transportation risks, helps benchmark KPIs accurately, gives greater insights into delays, improves exception handling, and empowers businesses to be proactive. Gaining end-to-end visibility of logistics operations businesses can significantly improve customer service and delivery experience and boost the overall productivity of modern-day delivery operations.

Helping Manage Customer Demands

Modern consumers are driven by instant gratification. They want to know where their orders are, who will deliver them and when exactly they will be delivered. An advanced transportation management system helps businesses provide their customers with high levels of delivery transparency and ETA accuracy. It allows customers to set delivery preferences, talk to delivery executives and even change delivery location and time according to their convenience.

Ensuring Cost Optimized Logistics Operations

A transportation management system helps businesses optimize costs by ensuring high levels of delivery visibility and efficiency. Through real-time tracking and tracing, a transport management system can mitigate risks like theft and pilferage. It significantly eliminates chances of unnecessary diversions, vehicle idling, and running empty miles. All these together can help save businesses thousands of dollars in operating costs. Through smart routing capabilities, a TMS can reduce fuel consumption and trip volumes by unearthing the efficient and productive way to travel from point A to B to C and so on.

Seamless Integration with Existing Systems 

Advanced transportation management systems can seamlessly integrate with existing warehouse management systems (WMS), order management systems (OMS), enterprise resource planning platforms, and 3PL systems. It eliminates the need to ‘rip and replace’ current IT infrastructure, hence ensuring close to zero business downtime and a faster go-to-market.

Integrating Transportation Management Systems with Smart Logistics Management Platform

When businesses integrate their existing TMS with an AI-powered smart logistics management platform, the results can lead to exceptional levels of logistics excellence. Such integration can empower businesses to automate core logistics operations, build proactive supply chains, manage multiple logistics providers using a single dashboard, simplify global trade or cross-border logistics operations, boost customer experience and achieve much more. Here is a quick list of benefits that can be reaped through this integration.

  • Improving customer service, experience, and loyalty
  • Seamlessly scaling last-mile operations across geographies
  • Reduced dependencies on manual intervention
  • Ensuring sustainable logistics operations
  • Reducing unplanned expenses while exporting/importing goods
  • Ensuring on-time in-full deliveries
  • Driving data-driven decision making and enhancing KPI benchmarking
  • Shrinking CO2 footprint by reducing fuel consumption
  • Automatically creating highly efficient routes
  • Understanding customer behavior and personalizing delivery experience
  • Having a single platform to manage multiple 3PLs and own fleet operations
  • Improve returns management operations
  • Optimizing resource and capacity utilization and more

To read about seamlessly bridging your transportation and warehouse operations, click here.

These are only some of the key benefits of integrating an existing transport management system with a smart logistics management platform. We will keep writing about more in our upcoming posts.

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