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Transportation Management Systems
Transportation Management Systems are software solutions that are implemented to improve the effectiveness, as well as reduce the costs, of transportation within a company’s supply chain. “They address all modes of transportation, including ocean, air, rail, full truckload, less-than-truckload, Parcel, and private fleet. TMS systems manage the physical flow of goods as well as the flow of transportation-related information, documents, and money” (Ross, 316). Operating a supply chain requires transportation management to play a more significant role in the supply chain than just directing modes of transportation and delivering product. “It must execute flawlessly, accurately, and timely processes that span the entire order cycle from bid to delivery” (Ross, 315). A well executed TMS should reduce costs through better route planning, load optimization, carrier mix, and mode selection. It should provide visibility into the transportation chain and allow greater flexibility to make changes in delivery plans (Rouse). The scope and functionality of TMS applications have changed significantly since their beginnings in the late 1980’s evolving from a fragmented collection of applications to a unified platform where users can execute role-specific processes (Ross, 316). These can be executed using configurable user interfaces, work flows, and web services. Web enabled TMS allows the networking of information between many external parties and allows the interconnecting of carriers, suppliers, customers, and logistics service providers across e-marketplaces. TMS systems manage the key processes in transportation management which include planning and decision making, transportation execution, transportation follow-up, and measurement. TMS systems define the most efficient routes according to given parameters which have a higher or lower importance according to user policy: cost, lead time, number of stops, etc. “Transportation execution allows for the execution of the transportation plan such as carrier rate acceptance and carrier dispatching and transport follow-up will allow traceability of transport event by event (shipping time, arrival time, customs clearance, etc), invoicing and booking documents, and sending of transport alerts (delays, accidents, non-forecasted stops, etc)”(Rouse).
Enterprises can now leverage the SaaS model versus the traditional and past hosted models to acquire TMS capabilities. Until recently, Companies not using TMS often said that it was too expensive to purchase and time consuming to implement but now this excuse is no longer valid. “On demand TMS has significantly eliminated the cost and resource constraints and shortened the time-to-value companies traditionally faced in implementing new technology and continuous improvement initiative” (Ross, 317). In a SaaS model the network of shippers, carriers, and other trading partners are already built into one software/hardware setup of the TMS that multiple shippers, carriers, and other trading partners can use.
Implementation of a TMS allows for countless savings opportunities. ARC Advisory Group has shown that companies can “reduce their transportation costs by 5 to 25% or more by using a TMS to streamline and automate their transportation planning and execution processes” (HighJump). Manually controlling transportation costs is difficult to do when you have a lot of criteria to consider when analyzing the movement of goods. Automating transportation processes such as mode and carrier selection and compliance requirements can save time and money. When using a TMS a company can be sure that the numbers are correct as they are coming from an automated system that uses a series of logarithms to compute its