What is a Transport Management System (TMS)?
In this guide:
What is a Transport Management System (TMS)
A transport management system (TMS) – also known as transport management software or transport management solutions – is digital software technology that hauliers use to automate day-to-day onerous tasks. It is a logistics software platform that transport operators use to make it easier for them to plan and carry out the transportation of goods, optimise their routes, and prove compliance by having all necessary documentation readily available.
A TMS software solves many of the challenges that haulage operators face and gives them and their customers visibility of day-to-day operations and transparency of progress. By improving processes and productivity in the business, a TMS helps to reduce wasted time, make better use of the business’s resources, enhance invoicing capability, and improve cash flow.
It allows for optimal route planning, tracking, and communicating with drivers in real time, and sharing information with customers to meet their need for visibility. All this adds up to improved overall efficiency, helping to deliver on those areas where customer expectations are rapidly changing due to the digitisation of the buying experience.
Transport management software is often modular, meaning that the business can choose different functions depending on their needs.
Why You Should Invest in a Transport Management Software (TMS)
Hauliers operate in a highly competitive environment, often with low profit margins. They need to work around ever-increasing challenges in a tough economic climate with high fuel prices and tight rules and regulations, while still finding ways to run their businesses profitably. The ones who manage to do this will be those who understand how to employ a whole range of new technological tools, from data analytics to automation and platform solutions. Those who don’t, risk being overtaken and left behind.
The challenges aren’t going away, but with the right digitisation solutions in place, transport operators can make a success of every haul.
Why is it important to have a TMS software?
Being central to the entire supply chain network, transportation management systems affect every part of the supply process. Because of the high level of visibility that a TMS software offers, operators can increase efficiency in both planning and execution, which in turn leads to increased customer satisfaction. Satisfied customers are return customers, which means more business, and growth. Haulage operators need to work around ever-increasing challenges in a tough economic climate with high fuel prices, tight laws, rules, and guidelines while still finding ways to remain profitable. Having a system that helps to simplify complicated day-to-day processes and compliance requirements makes this easier to achieve.
Why do you need a Transport Management System?
Now more than ever, consumers demand more transparency, increased reliability, and faster delivery. Digital technology is no longer nice to have. It is imperative to gain a competitive advantage and achieve business growth in the face of these and other challenges.
A 2022 insight paper on growth acceleration for logistics companies by PwC’s global strategy house, Strategy&, states that investment in technology is one of the three main levers of growth common across the logistics sector. For a logistics business, responding to the challenges of responsible growth is an essential commercial imperative.
The haulage industry has been slow to adopt digitisation. Yet, a PwC report on the future of logistics says that ‘digital fitness’ as a prerequisite for success is more important now than ever before.
Importance of choosing the right TMS Software
TMS systems vary from server- or cloud-hosted, to out of the box or bespoke, with access to add-ons and integration capabilities. Having the right TMS software can optimise your day-to-day operations and transform your business. It can save you time, money, and effort, increase productivity, efficiency, and customer satisfaction, and bring in repeat business.
Further on in this article, we take a more detailed look at the benefits of a transport management solution and how it helps hauliers achieve the aforementioned. The key is to choose and implement the right solutions.
Once a haulier has made the decision to introduce digital technology such as a TMS into their business, there’s the reality of having to navigate through the different offerings and providers in the market. This isn’t always easy, as requirements differ from business to business, depending on size, sector, complexity, and other factors.
However, while individual businesses may have unique requirements, there are certain essential features that should be available. These are the features to ask about to compare like for like, as asking the right questions can make it much easier to choose the right provider.
It’s important that operators keep in mind that they’ll be signing a service contract with the TMS provider they decide to partner with, which will run for a set period. That’s why knowing what to look for and what questions to ask so they choose the right provider from the get-go can help the operator to avoid losing money, not only through having to pay money again for a more suitable system, but also in related costs.
For example, the employees who will be using the systems receive training to use them effectively. If a system turns out to be inadequate for the business’s needs, these employees will need training again on a new system. In addition, the business will almost certainly lose opportunities. An unsuitable system will not deliver the required efficiencies or time and cost savings. These efficiencies and savings are critical to enable a business to compete profitably, especially against other operators who are using better technology that allows them to work more efficiently.
A good TMS ecosystem should provide the tools to help transport operators to:
- Improve cash flow through invoice factoring.
- Manage orders and customer records.
- Plan routes more efficiently.
- Track and monitor vehicles and driver behaviour.
- Generate proof of collection and delivery documents.
- Increase customer satisfaction.
Business growth in tough times is possible. The right TMS solution should drive competitive advantage for haulage operations of any size, aligning with the haulier’s business needs, now and into the future.
Key Features of a Transport Management System (TMS)
A transport management system can greatly help hauliers to simplify processes, reduce costs, maximise profits, and grow their businesses. But it’s important to understand what TMS software does before deciding which system or which provider to choose.
Top features to look for in a TMS system
When considering a TMS to increase efficiency in a haulage business, it’s important to look for one that offers at least these eight key capabilities:
- Job creation and planning
- Route planning to avoid over-committing your fleet
- Visibility and exception alerts for all consignments
- POD and invoicing, to help you improve cash flow
- Real-time reporting to inform business decisions
- Centralised customer records to drive better service by all your employees.
- Mobile apps for drivers to allow for easier, electronic communication
- Cloud-based customer portal for easy job entry, increased visibility of job progress
Key functions of a TMS system
There is more access to data in transport and logistics than ever before, with huge potential to enhance performance and improve customer service. Logistics providers who integrate their value chain digitally have the enormous advantage of better forecasting, making it possible to adjust capacity and do better route planning.
Data, together with a transport management system that allows them to perform meaningful actions based on the data, is at the heart of future-proofing their business to meet ever-evolving customer demands. It does this by helping the operator to reduce wasted time, use their resources more effectively, enhance invoicing capability, and speed up their order to cash cycle.
Benefits of a Transport Management System (TMS)
Across the spectrum of customers, from individual to industrial, expectations are changing. Customers want their orders to arrive as quickly as possible and with flexibility around where and when they receive their orders. They want transparency of processing and delivery progress, lower or at least uniform shipping fees, and the ability to make last-minute changes. This transformation is happening swiftly and not only puts pressure on a business’s operating model, but also impacts its bottom line. Here is how a TMS can help haulage businesses stay profitable:
Improved operational efficiency
TMS automates manual tasks, streamlining order processing, route planning, and load optimization. This leads to faster and more accurate order fulfillment, reduced delays, and enhanced customer service.
TMS enables companies to optimize routes, consolidate shipments, and reduce empty miles, resulting in lower transportation costs. It also provides insights into carrier performance, allowing companies to negotiate better rates and eliminate unnecessary expenses.
Improved cash flow through invoice factoring
TMS simplifies invoicing and connects with accounting software, allowing for faster invoicing and improved cash flow. This supports the ability to factor invoices and collect cash promptly.
Efficient route planning
TMS considers factors such as distance, traffic conditions, and vehicle capacity to optimize routes. This reduces travel time, minimizes detours, and improves on-time deliveries, fuel efficiency, and overall productivity.
Enhanced visibility of operations
TMS provides real-time tracking and visibility of vehicles and consignments, reducing the need for constant communication between customers and logistics companies. It also enables proactive response to service disruptions and helps monitor driver performance.
Better inventory management
TMS integrates with warehouse management systems, providing real-time visibility into inventory levels. This helps optimize stock levels, reduce carrying costs, and ensure timely order fulfillment.
Improved customer service
TMS offers real-time tracking and communication capabilities, allowing companies to provide accurate updates and resolve issues promptly. This leads to higher customer satisfaction and repeat business.
Improved safety and compliance
TMS automates compliance processes by generating required documents and ensuring adherence to regulations related to vehicle maintenance, driver qualifications, and safety standards. This helps companies avoid penalties and legal liabilities.
Data analytics and reporting
TMS provides valuable data for analysis and reporting, enabling companies to monitor performance, identify trends, and make data-driven decisions. It offers real-time and historical data on vehicles, consignments, and drivers.
How do transport management systems work
A transport management system (TMS) is software that enables users to plan and execute hauls, manage drivers, and track vehicles. It stores, centralises, and organises transport operation data to give hauliers clear insights into the day-to-day operations of their company. It can also handle the entry of customer orders that specify what is to be transported, and some can integrate with warehouse management systems (WMS) and enterprise resource planning (ERP) systems to coordinate tasks such as palletisation, scheduling, and cross-docking.
What’s the Difference Between a TMS and a WMS?
A warehouse management system (WMS) also helps hauliers manage inventory, organise operations, and fulfil orders.
The WMS system helps hauliers’ freight and loads while on site, and the TMS helps them manage and move loads. The two work together to help hauliers take control of all processes from start to finish.
Relationship between TMS, WMS and ERP
A TMS is usually integrated with a business’s WMS and ERP software. This enables hauliers to manage operations from a single, unified platform.
This ensures that customer orders are received and that integration with the inventory management and warehouse management systems are seamless. This closed loop system is the most effective transport management solution.
Types of Transport Management Systems
Transport management systems come in different forms, with varying degrees of functionality. Some can be slightly configured or fully customised. There are systems that can be integrated with mobile apps, tracking and other third-party systems, while others offer only limited integration capabilities. Here are four types of transport management systems:
SaaS / Cloud Based
A cloud system stores information remotely, retrieving it on demand using the internet. Some of the benefits of cloud systems are:
- They are subscription-based and flexible, cost-efficient, and quick to set up with no extra hardware required.
- The provider takes care of everyday maintenance and data security so you can focus on running your business.
- Automatic updating, with best-practice features more readily available, and fixes happening in the background. This takes the hassle of installing updates and making sure your systems are up to date off your hands.
Prior to fast and reliable internet connections being available to most businesses, if not all, TMS solutions would typically be installed on a server somewhere on your premises. Although this meant the software and your data was always available to you, you had to be on the premises physically to use it and the maintenance of the system was much more difficult, sometimes involving costly visits by IT staff to upgrade it or fix any issues you encountered.
Out of the box
TMS solutions can be purchased with pre-set functionality that is ready to use immediately. They will often be less expensive, and easier to install and set up, but they may not have enough features to meet all your needs. These solutions tend to better suit smaller, simpler businesses.
Building systems and software specifically for your business will more closely provide what you want them to do. However, there are two things to consider:
- There will be a significant increase in the cost and time commitment to build the system.
- Providers may not be able to update the software with ‘niche’ functionality that applies to only a few customers.
Who Uses a Transport Management System (TMS)?
Transportation management systems are primarily used by businesses that need to transport and receive goods on a regular basis. Businesses in nearly every industry use transportation management software. This includes:
- E-commerce businesses
- Companies that provide logistics services, such as third-party and fourth-party logistics (3PL and 4PL) companies and logistics service providers (LSPs)
- Retail, automotive, and manufacturing industries
- Pharmaceutical and healthcare industries
- Food service businesses and restaurants
- Aerospace, government, and defence organisations
The availability of cloud-based TMS solutions has made it more affordable for smaller businesses to also take advantage of the benefits of a transportation management system.
Which TMS Software is best?
While no TMS can fit the requirements of every business, your TMS provider should keep all of requirements in mind and be flexible and adaptable in their approach to installation. When necessary, they should identify any potential issues that arise and align the system to your needs to help you achieve the efficiencies and cost savings you’re looking for.
It is important to have a good understanding of any software you purchase to make sure you get the most out of it. When choosing a TMS provider, decide what is important to your business and your users, and find out how the provider can support you in your day-to-day operations. When you have made your decision, find out what to expect during implementation, when you go live with the system, and in the months and years afterwards.
How to Choose the Right TMS Software
There are different TMS (transport management systems) on the market today, all offering different features and benefits.
They may look similar but they can work in different ways. To help you find the TMS software that’s right for you, it’s worth considering the following points to help you in your search for a new system and partner:
Priorities. What are your biggest challenges and issues facing your business? Understanding and documenting your problems will help you determine what you’d like a TMS to do that and what will make the biggest difference to you and your business. Ask your staff, partners, and customers for their opinions too, as a TMS can add value to you and to your customers and the way they work with you.
Timescales. How soon do you need a system to be up and running? How much time can you and your staff devote to the development and implementation of the system and training?
Resources. Who will be responsible for managing the project and making key decisions? Which members of your team do you need to involve and do they have time to devote to the project to support you? Do you know anyone outside of the business who can work with you to help support you through the process?
Functionality. Will the transport management system give you the flexibility to work the way you want to work? For example, traffic planning: will you have the flexibility to plan deliveries by resources (drivers, vehicles, sub-contractors) or by load?
Niche market. Do you work in a niche market such as waste? Does the TMS include functionality specific to your sector and will it support your processes such as waste transfer notes? Do you work in a pallet network and what level of integration does the TMS offer?
Licenses. Cloud-based applications can be available per user or per vehicle. Some vendor licenses are per user and some are concurrent and so it’s good to know how many users you’ll need and how quickly additional users can be added if your needs change.
New feature releases. Does your chosen provider have a roadmap in place for ongoing developments in their TMS ecosystem or are they standing still? Look at how they’re progressing and ask what level of investment they make to future-proof their system.
Access. Do your users need remote access to the software from anywhere? If so, a cloud solution may better meet your needs.
System maintenance and updates. If you host the software, do you have in-house expertise to resolve issues if they occur? If not, a cloud-hosted solution may be best for you.
Support. What support services does your TMS provider offer for both users and technical support? Does the provider produce their own software and offer local support for users?
What to Look For In a Transport Management System
Earlier in the article, we mentioned the eight key capabilities to look for when choosing a TMS, namely: job creation and planning; route planning to avoid over-committing your fleet; visibility and exception alerts for all consignments; POD and invoicing, to help you improve cash flow; real-time reporting to inform business decisions; centralised customer records to drive better service by all your employees; mobile apps for drivers to allow for easier, electronic communication; and cloud-based customer portal for easy job entry, increased visibility of job progress.
Depending on what your business goals are, you may need a TMS with extra features to provide additional visibility, such as:
- Integration with warehouse management systems for stock control and tracking of consignments within the supply chain
- Integration with garage workshop management software for an overview of vehicle upkeep, maintenance and repair progress and cost control
- The option to select carriers and rate their performance and efficiency
Your TMS provider should offer solutions that align with both the current and future needs of your business. Make sure your provider has the solutions you need for every mile of your journey ahead.
Consider the following when choosing a provider:
- TMS solutions on cloud or servers
- Out of the box or bespoke
- Access to add-ons Integration capability
- Ongoing service and training
5 more essential tips to keep in mind when choosing A TMS
- Understand your needs. Don’t pay for features you don’t need. Find a transportation management system that enables you to scale and add functionalities as needed.
- Keep integration in mind. Look for a TMS that integrates with complementary tools, your WMS, accounting software, and ERP.
- Compliance is essential. Avoid errors that will cost you money by choosing transport management software that complies with all regulatory requirements, and automates as many of these processes as possible, minimising the chance of human error.
- Get a proven system. Ask your TMS provider for case studies on how they’ve implemented systems at companies like yours. Real-world examples of how specific needs were met can help you choose the right transport management system.
- Analysis. A good TMS helps you get things done. A great TMS will show you how to do them better. A modern TMS can help you plan routes, manage drivers, and avoid potential pitfalls before they happen.
How Much Does a Transport Management System Cost?
The cost of implementing and running a TMS software will be based on your business’s needs and usage each month. With a cloud-based system, you only pay for what you use.
Implementation: The cost of implementation will depend on two factors: The company supplying the TMS, and whether you implement a licensed or cloud-based system.
Licensed TMS buyers would have to load the software on their network servers or on their outsourced hosted networks.
If the TMS is on an outsourced server, using a high-speed fibre connection into your facility ensures that operators work on stand-alone devices. Hosted licensed TMS are only as fast as the servers that host them. Slow response times will result in a lot of user frustration and lost revenue if not set up correctly.
Either way, there is an additional cost to be considered when purchasing a licensed TMS software package.
Transport Management Systems (TMS) Training
Training is critical and should continue not only until every person who will be using your system is fully proficient, but also in the months and years ahead, especially as new staff members join.
It is important that a help desk is available to provide you with ongoing software and IT assistance. Ideally, you should have a dedicated contact person who is always available for advice and support when you need it. To make the most of your investment, your provider should keep you up to date with new features that allow your system to adapt as your business changes and grows.
How Long Does It Take to Implement a TMS?
TMS implementation usually takes 1-2 months for smaller shippers and 3-6 months for larger, more complex networks. On-premise implementations and installations that include a complex migration from legacy applications, can take up to 12 months. It’s vital to understand these realistic timeframes.
If the strategy and selection projects proceed smoothly, then there is a greater chance that a TMS will be implemented faster and within budget.
The Future of Transport Management System (TMS)
Across industries, it is becoming increasingly challenging to meet rising customer expectations and stay compliant with ever-changing regulations. It’s no different for transport operators, and transport management solutions that address these challenges have never been more crucial. To help hauliers future-proof their operations and remain viable amid tough competition, TMSs must keep innovating. Here are some of the ways intelligent technology will enhance transport management systems:
Artificial intelligence (AI) is rapidly becoming a market differentiator. Companies that use AI and TMS systems together are more likely to have a larger share of the market. AI can enable everything from self-driving vehicles and warehouse management, to allowing management to make the best and most informed decisions possible.
When applied to trends and historical data, machine learning can help a TMS predict transit times with a higher degree of accuracy. They can also help users identify possible risks, plan their capacity, work out the most efficient route, and much more.
Internet of Things
Internet of things (IoT) devices have made real-time fleet monitoring commonplace. IoT sensors and devices enable in-transit views, real-time route updates, and asset monitoring. This allows hauliers to lower fuel and maintenance costs, speed-up delivery timeframes, and improve driver safety.
Blockchain technology helps build complex connections between freight brokers, forwarders, hauliers, and customers, making intelligent track and trace, increased transparency, and visibility across the supply chain possible.
Blockchain technology can also be used in cold chain management. When different temperatures need to be maintained at various checkpoints along the supply chain, blockchain solutions can monitor the temperature across the entire supply chain. This means that the haulier and everyone along the supply chain can get real-time information and updates.
Read more: The Future of Road Haulage