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Denis Grankin Head of Sales Department
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Key functions of Transportation Management System (TMS) in logistics

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functions of TMS in logistics

The Transportation Management System (TMS) is used in many industries to help businesses physically move their goods safely, cost-effectively and quickly from one point to another.

The standard functionality of the TMS is planning and transporting goods. Designed by engineers with relevant experience, it helps to ensure that all documentation needed is provided and the shipment meets all trade requirements.

Often, but not necessarily, TMS is part of a more complex Supply Chain Management (SCM) system. In this article, we will dwell on the main features of TMS and its advantages for business. This can help you make the most informed decision on the web development of your own TMS.

Capabilities of a Transportation Management System

In today's ever-evolving technological world, enterprises are increasingly looking for effective solutions to streamline business processes and increase profits. In logistics, this challenge is of particular importance; it may take too much time and resources before the business can negotiate lower prices or other beneficial cooperation options with a carrier.

How to deal with it? The Transportation Management System can be a lifeline. This software processes a huge amount of data and has analytical tools and other software tools aimed at fleet management and transportation of goods.

TMS provides a high level of transparency and enables businesses to:

  • Optimize transport logistics and daily transport operations;
  • Simplify the document flow;
  • Monitor compliance with trade agreements and requirements;
  • Ensure on-time delivery of goods.

With the help of this system, it is possible to make decisions on freight transportation that will provide savings for a company of any size. Many of those platforms offer users the opportunity to choose the best carrier, compare prices, routes, carrier tariffs, billing rates and much more. The TMS features contribute to full transparency for business throughout the supply chain. The result is improved transportation quality, increased customer satisfaction, sales growth and business growth.

Capabilities of a Transportation Management System

As the trading environment becomes more dynamic and complex, TMS brings clarity and order into business processes and relationships between partners.

TMS Usage Options

The system can be used as a separate software solution integrated with local or cloud-based ERP (Enterprise Resource Planning) or SCM solution. TMS can be combined with GTM (Global Trade Management) application as a module and can be included in ERP suites.

TMS is utilized by individual entrepreneurs who often have to move a lot of freight or even packages, as well as large enterprises. Traditionally, the main TMS users are those involved in such areas as logistics, retail, distribution, manufacturing and e-commerce. No prizes for guessing why: all these enterprises benefit from supply chain transparency which was impossible before TMS.

According to the report, the market for global transportation management systems is experiencing incredible growth. The average annual market growth rate in 2020-2025 is expected to be about 16%. The market is also expected to grow to 202.14 billion USD by 2022 (compared to 78.20 billion USD in 2017).

Main functions of the Transportation Management System

TMS is used not only in goods supply management but also in supply planning and procurement. Let's take a closer look at the main functions of TMS.

main functions of TMS

All of them can be divided into categories for clarity, depending on the tasks each of them is aimed at the following:

  • Planning;
  • Execution;
  • Optimization;
  • Freight management;
  • Administration.

Let’s elaborate on each of them in detail.

TMS standard functionality includes Planning and Execution

Planning

Typically, the most powerful tools of a system are the transportation planning and optimization tools. With them, users have access to the most important carrier data such as rates, delivery times and routes, to choose the most convenient and affordable shipping method. And that's not all.

Advanced planning options allow you to manage even small shipments. Customers can redistribute shipments and change the size of freight to make reasonable use of the carrier's resources. Thanks to the planning function, the customer is directly involved in ensuring optimized freight transport, avoiding low-load truck rides and saving on fuel.

TMS has built-in functionality for carrier reporting and analysis. For convenience, this data can be exported to ERP or business intelligence systems.

Execution

The execution function is mandatory for any TMS. It can work differently within each system. Usually, the execution function is used to help users to manage freight movements.

This includes operations as follows:

  • Communication with carriers;
  • Transportation booking;
  • Documentation processing;
  • Comparison and tracking of goods;
  • Assistance in invoicing and other necessary settlements.

The advanced TMS allows for tracking goods movements in real time. There are built-in mechanisms for communication with drivers; there is a GPS option that allows you to see where the freight is, as well as how long it takes to get it delivered.

More advanced execution functions offer tracking and tracing services. They involve real-time information exchange between all participants within the supply chain. TMS can also be used in international logistics. It provides import and export documentation to ensure that the transportation process meets all trade requirements and agreements.

The advanced functionality of TMS includes Optimization, Freight Management, and Administration functions

Optimization

The optimization function typically consists of tracking and measuring process performance based on reports, dashboards, transportation analysis tools and business intelligence tools.

TMS helps companies analyze the cost of shipping services, the distance between destinations and overall transaction efficiency, as well as choose the best carrier and the best delivery method. The more powerful TMS, the deeper the visibility for a business of any stage in the supply chain. Information on tariffs and trade, probability of delays and their possible causes can be provided by the GTM (Global Trade Management) function.

Freight management

TMS receives, collects and updates information on carrier rates. Processing of tariff information (reception, comparison, output) can be performed even in real time. It is much more convenient to store all current tariffs on the market in one place and one click than to manually contact each carrier and keep a record of each rate separately. Due to this function, the key issues of the transportation process can be addressed online, such as establishing relations of trust with carriers, rate harmonization, delivery terms, etc.

Other functions included in this category are responsible for workflow and document handling. The following are the examples of what can be negotiated and stored within the system: the transportation agreement; freight tenders; other documentation required by all process participants to maintain awareness of what has been agreed, on what conditions, and on what grounds services are provided.

Administration

This TMS function simplifies and automates the task of managing transport and logistics. It requires large resources to properly process the huge amount of documentation required for B2B operations, compliance and audits.

The administrative function is to ensure compliance with financial reporting and documentation requirements. This includes invoicing, payment execution and tools to compare carrier rates with invoiced amounts.

To minimize manual invoice processing, the TMS may be equipped with such features as:

  • Integrated system for automatic payments.
  • Generated bills of lading. This type of receipt may be provided by the carrier to clarify the goods being transported and the terms of the contract. The bills of lading can also be used for customs and insurance purposes.
  • Automatic processing of settlements. This includes detailed documentation on shipping stages and other parameters before the payment is done. These can be indicators such as delivery confirmation, loading and unloading time, transit time.

All data collected and processed during the settlements is used to further optimize TMS performance and manage its efficiency. This is where users can get information about consumer demand, prices and capacity utilization. Within the platform, it is also possible to negotiate tariffs based on various factors (loading speed, the number of goods, time of day, etc.).

Considering the key functions of TMS available on the market, it becomes clear that the specific set of functions will depend on the system module selected. However, one way or another, all functions - minimal and advanced - are aimed at optimizing the process of freight transportation. The system helps implement it - from planning to selecting a carrier and booking. Besides, you can track the movement of goods and be kept informed of any delays and updates.

In terms of administrative functions, separate TMS modules will help manage contracts, transactions, as well as relations with other companies. The system will keep track of all important indicators and deal with the necessary tasks such as settlements, freight metrics, delivery terms, etc. All data is stored in a database and can be moved to analytical reports which will further simplify the choice of appropriate methods of work.

Advantages of TMS for logistics and other areas

benefits of TMS for logistics

Using transport management software can be beneficial for business in many respects. The most convincing of them are as follows:

  • Reduced warehousing costs. This is made possible by factors such as more rational allocation of space and workforce, efficient fleet management and the automated management of the entire transportation process.
  • Improved customer service by increasing customer satisfaction with quality and speed of delivery.
  • Ability to track and control each step of the shipment in real time.
  • Better predictability in inventory management through increased visibility and detailed reporting within the supply chain.
  • Reduced number of administrative and billing errors by automating the process of audit and freight payment.

Bottom line

The key functions of the Transportation Management System are the planning and execution of the goods movement process. The advantage of the implemented TMS is cost reduction, high delivery speed and transparency of the transport process. With TMS, you now know what you pay for and how you can save money, you are aware of every step your shipment takes and can guarantee your partners a reliable and timely freight delivery. Moreover, before getting started with coding, you can set preferred software development metrics the future product needs to meet. This will make the process of web app development and further system operating more controllable and measurable.

DDI Development has extensive experience in creating and configuring TMS with different scalability levels and different feature sets. Here are the Logistics solutions that we provide to our customers to effectively solve their business tasks: Transport & Logistics platforms, Procurement Management Systems, Transport Management and Planning, Document Management, Inventory Management, Warehouse Management, etc.

This link leads you to more detailed information about solutions for our clients, as well as customers' feedback and some case studies. We will be happy to apply our experience and expertise to solve your task. You can onboard developers depending on tasks that need to be done and solutions that need to be provided as well as outsource the project. Different types of cooperation can be considered. To discuss your request in detail, please contact us by email or phone.

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