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Transportation Management System: why this software is so popular among shippers

Transportation Management System: why this software is so popular among shippers

Transportation Management System: why this software is so popular among shippers
Andrii Kuranov

Author:

Andrii Kuranov

Content Manager

Category: Business
7 min read

Transportation management can become the bottleneck that will neglect all the competitive advantages in the field of goods delivery. Every day competition in the trade market is getting tougher, large companies are getting bigger, and in order to break away from a competitor, they need money, the more - the better. And since it’s still too early for AI-piloted long-range trucks, you have to look for ways to do everything in kind of - sort of “the old fashioned way”, but with a light odour of the information era.

The growing needs in the freight market make obvious the need for a new modern approach to the management of transport logistics based on information technology. The need for automation is especially acute when the organization in manual or semi-automatic mode becomes a real pain in the back, promising significant loss of labor, time and material costs.

A tool for making progress in this area is the implementation of an automated transportation management system (TMS). As for the proofs let's address the Gartner report, which says, that by 2022, the cost of TMS applications will be $ 1.94 billion, which is 31% of the supply chain execution market (SCE) of $ 6.2 billion. This growth will be driven by the replacement of local software with SaaS applications. So, what are these systems after all?

TMS (Transportation Management System) - are systems that perform the functions of planning, control and evaluation of indicators at each stage of transportation, covering all the unique needs of the organization. They are easily integrated with other systems and include the so-called warehouse module option. Transportation management systems make it possible to solve a wide range of tasks regarding the optimization of transport logistics, route planning at the strategic, tactical and operational levels.

There are a huge number of classifications, but in this case we consider sorting according to functionality. So, TMS can be conditionally divided into five levels:

  • auxiliary;
  • performance oriented;
  • extended;
  • advanced;
  • global platforms.

In this classification, platforms are sorted from smallest to largest. Roughly, while the auxiliary platform is incapable of being used as an independent solution, then the global platform is capable of serving supply chains at the highest levels, up to state one.

Regardless of type, a good, high-quality TMS is designed to provide the company with the following advantages:

  • simplify processes: for example, many TMS can automatically choose a transport company based on the type of cargo, route and past experience of cooperation;
  • track cargo: in addition to traditional GPS tracking, the system helps to optimize the transportation route or rebuild it due to unforeseen circumstances;
  • collect data in one place: if the company controls 20 offices and each of them sends 5 goods per week, this means that it has to generate 100 sets of documents every week. TMS automatically prepares shipping documents and reports, analyzes data and helps identify errors and inconsistencies.

the benefit of using tms

Below, you can see the main players in this market according to Gartner.

Gartner's magic quadrant

As you can see, there is a vacuum in the visionaries field. Who knows, maybe you should take this place?

 

So how to choose the right TMS after all?

Ask yourself, is it enough to simply automate business processes to get the expected result, or is it necessary to take into account other factors affecting the performance of each company? In the end, when you choose an information system, it is worth considering the opinions of end users. At the same time, it is necessary to involve the information systems department in order to understand how the TMS will be integrated into a IT landscape of the company.

The process of choosing an information system can be one- or two-step. Some companies prefer to first choose an information system developer in terms of their business requirements, and then consider his affiliate network for the choice of a contractor. Other companies try, within the same process, to choose both the supplier of the information system and the contractor. There is a standard process for selecting information systems, consisting of eight stages and taking, as a rule, several months. Here are the steps:

  • Gathering of information system requirements, which involves interest of the business customer. Result: you get a set of business requirements.
  • Preliminary market analysis which involves reports of independent analytical agencies and other publicly available information. Result: a list of developers, which includes approximately 5-7 companies.
  • Request information from suppliers. Result: developers contact you.
  • Creation of a final candidates list. Result: a list of 3-4 companies.
  • Direct familiarization with solutions. Result: presentations and demonstrations of solutions.
  • Request for commercial offers. Result: receiving commercial offers with estimates of the budget and terms of project implementation.
  • Negotiations on the terms of the contract with suppliers and partners. Result: information for decision making in full.
  • The final choice. Result: product acquisition and launch of the implementation process.

In addition, choosing a TMS must be guided by a number of critical factors. Easy to remember, as there are only 3 of them.

 

Flexibility

A TMS is not the type of solution that one can simply implement and run. Each company has its own specifics of cargo transportation, so the same system can work for two customers in completely different ways. Therefore, when choosing a TMS, it is important to understand whether the developers are ready to adjust it to the tasks of the company.

It is also worth making sure that the developers will constantly maintain and improve the product. Some are limited to the introduction of TMS and starting improvements, after which they close the project and leave the source code for themselves. The company in this case will no longer be able to change the functionality of the system if the logistics processes change in the future.

In continuation of the above: the functionality that TMS offers at the start is also important when choosing a system. Developers are not always ready to radically revise the TMS mechanism or add a new module, without which all previous clients could do. For example, one of the most important options for a quality TMS is routing. Many systems do not offer it at the start; instead, developers configure the usual tracking of cargo from point A to point B. However, this will not help the driver build a route, rebuild it due to unforeseen circumstances, or calculate fuel consumption. Thus, the most optimal choice would be to develop a TMS platform initially for your requirements, while laying the possibility of customization.

 

Mobility

According to a study by ARC Advisory Group, today there is a clear tendency to increase the popularity of TMS solutions with remote access, especially from the medium-sized business, which no longer needs outdated centralized transportation management systems, but does not yet have the resources to install “heavy” web-distributed TMS. The practice of Software as a Service (SaaS), and this is completely natural, is most popular in transport logistics.

With the advent of cloud computing, most SaaS vendors began publishing their software in the cloud, rather than installing it locally on every PC. The advantage of the cloud is mobility. If you have Internet access, you have access to your TMS.

 

Price

There are several different models for calculating the cost of TMS. There is a subscription model in which the buyer pays monthly or yearly for the software and is licensed by each user. The advantage of the subscription model is that the customer always has access to the latest software, and support is included in the subscription. The disadvantage of the subscription model is that it is still necessary to pay overhead, and when more users are added, the cost increases. In our dynamically changing world, this model is quite tempting.

Another cost model is a one-time purchase. As you can imagine, the advantage of a one-time purchase is that the purchase of software involves a single cost, which is great for accounting. The disadvantage is obsolescence of the software, or if you require add-ons or support, you will have to pay for it separately.

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Today, customers expect the most out of the shopping process and are demanding of every little thing, especially delivery. Market leaders will be companies that will offer customers only the best, excluding misses on order processing, showing increased loyalty to their customers. TMS has occupied a huge market share today, so your company should do the same tomorrow, and using information systems tailored specifically for its work is a perfect tool to achieve this!