A Transportation Management System (TMS) is a software system designed to manage transportation operations.
TMS are one of the systems managing the supply chain. They belong to a sub-group called Supply chain execution (SCE). TMS, whether it is part of an Enterprise Level ERP System or from an integrated "Best of Breed" Independent Software Vendor(ISV) has become a critical part of any (SCE) Supply Chain Execution and Collaboration System in which real time exchange of information with other SCE modules has become mission critical.
In more recent times, we have seen that these systems are being offered in many different types of licensing arrangements. These different arrangements have given shippers who otherwise would not be able to afford sophisticated software the opportunity to utilize TMS to better manage this vital function. The 3 primary offerings are:
• 1. On-Premise Licensing (traditional purchased license)
• 2. Hosted (remote, Saas, Cloud)
• 3. On-Premise Hosted Licensing (a blend of 1 & 2)
Additionally, we are seeing that some software providers have either been acquired or merged with traditional supply chain management consultancies and are now offering shippers "blended" managed and software services as an outsourced process. Primary Tier 1 TMS providers are still independent, carrier and 3PL neutral, and ERP neutral.
TMS usually "sits" between an ERP or legacy order processing and warehouse/distribution module. A typical scenario would include both inbound (procurement) and outbound (shipping) orders to be evaluated by the TMS Planning Module offering the user various suggested routing solutions. These solutions are evaluated by the user for reasonableness and are passed along to the transportation provider analysis module to select the best mode and least cost provider. Once the best provider is selected, the solution typically generates electronic load tendering and track/trace to execute the optimized shipment with the selected carrier, and later to support freight audit and payment (settlement process). Links back to ERP systems (after orders turned into optimal shipments), and sometimes secondarily to WMS programs also linked to ERP are also common. Most TMS systems help shipper directly work with asset-based carriers and support dis-intermediation (including avoiding use of non-asset based brokers and other intermediaries).
Transportation Management Systems manage three key processes of transportation management:
• 1. Planning and Decision Making
TMS will define the most efficient transport schemes according to given parameters, which have a lower or higher importance according to the user policy: transport cost, shorter lead-time, fewer stops possible to insure quality, flows regrouping coefficient…
• 2. Transport follow-up
TMS will allow following any physical or administrative operation regarding transportation: traceability of transport event by event (shipping from A, arrival at B, customs clearance…), editing of reception, custom clearance, invoicing and booking documents, sending of transport alerts (delay, accident, non-forecast stops…)
• 3. Measurement
TMS have or need to have a Logistics KPI reporting function for transport.
Various functions of a TMS:
• Planning and optimizing of terrestrial transport rounds
• Transportation mode and carrier selection
• Management of air and maritime transport
• Real time vehicles tracking
• Service quality control
• Vehicle Load and Route optimization
• Transport costs and scheme simulation
• Shipment batching of orders
• Cost control, KPI (Key performance indicators) reporting and statistics
• Typical KPIs include but not limited to:
1. % of On Time Pick Up or Delivery Performance relative to requested
2. Cost Per Metric - mile; km; Weight; Cube; Pallet