Transportation Management

Definition: What is transportation management?

Transportation management describes all processes along the supply chain: from the selection of the right supplier to invoice processing. Logistics companies try to precisely optimise these processes with regard to the price-performance ratio. 

What are important factors in transportation management?

There is a lot of cost optimization potential lying dormant in the area of supply chain management processes. Often, transportation costs account for more than half of the company's costs. Here is an overview of the factors that offer such cost optimisation potential:

• Planning the logistical networks
• Analysis of the flow of goods along the supply chain
• Replenishmen
• Transportation and tariff cost analysis
• Route planning
• Consolidation and bundling
• Optimization of transport handling
• Location planning

In order to exploit these as much as possible, to optimize other processes and to gain many other advantages, there are so-called "Transportation Management Systems".

Transportation Management Systems

In order to maintain the best possible overview in the planning, execution and optimization of the physical transportation of goods, there are so-called Transport Management Systems or "TMS" for short. These logistics platforms digitally support all transportation processes and are often part of the supply chain management system. With them, users can control, automate and optimize the daily operation of their transportation fleets. The abbreviation TMS can also stand for transport management software, but both terms mean the same thing. TMS solutions are designed to increase the transparency of transportation operations, ensure effective use of plant resources, comprehensively evaluate current operating conditions, provide all necessary documents and guarantee on-time delivery of freight and goods. In most cases, a TMS serves both shippers and logistics service providers. The main users of the software include manufacturers, distributors, wholesalers, retailers and e-commerce organisations.

TMS are usually offered as a module within or connected to the ERP system. Some TMS function as a cloud solution. These digital solutions have the advantage that all parties involved can access the data more easily - at any time and from anywhere via internet browser. This also allows for deeper integration of e.g. freight forwarders to the supply chain. In addition, a cloud-based system has less implementation and training effort, low total cost of ownership and benefits from automatic updates. 

What are Transport Management Systems important for?

TMS are an important part of the supply chain because they are involved in the process from planning to procurement to logistics. They enable efficient planning and execution of transports and, in turn, ensure higher customer satisfaction. Particularly in larger companies that operate internationally, increasingly complex processes are created that can no longer be managed without software. It ensures that seamless global trade and logistics management is possible. In the TMS, all requirements can be viewed and checked at a glance. In addition, other company processes, such as the creation of invoices/credit notes, can also be integrated. Since in many companies the pure transport costs account for more than half of the logistics costs, there is a great potential for cost reduction with the right software and a certain know-how.

The goals at a glance

• High transport efficiency
• Cost reduction
• Transparency in the supply chain
• Better customer service

What are the functions of such a solution?

Suppliers or forwarding agents can book so-called "slots" for the arrival of the goods. Tours and routes can also be planned by such systems and functions such as delivery status (track and trace) can also be integrated. Other functions that a transportation management system can realise are:

• Order entry and order management
• Fleet management
• Route planning
• Track and trace
• Linking of information/telecommunication systems (e.g. ERP systems)
• Freight cost accounting and settlement
• Financial accounting
• Reporting
• Service provider selection

The functions vary depending on the idividual requirements of the company. In addition, it is possible that the functions of other systems overlap with those of the Transportation Management System.

Advantages of a Transportation Management System

For any company involved in logistics, a Transportation Management System helps to improve operations, drive business, and provide better service to customers. In doing so, the TMS offers numerous benefits that help the company move freight from origin to destination accurately and cost-effectively. 

The advantages at a glance:

• Lower freight costs: Savings through analysis and optimisation of data.  
• Shipment tracking: Drivers and shipments can be tracked in real time, creating an efficient route plan.
• Better customer service: Shipment punctuality is monitored and customers can track their goods (real-time).
• More efficient goods receipt: Due to bookable slots, there is no congestion at the loading bay.
• Optimised supply chain: Tracking shipments, trucks and inventory increases productivity, which in turn strengthens the supply chain and reduces inefficiencies.
• Better warehouse management: Efficiency and productivity in the warehouse are increased. By linking WMS and TMS, orders can be registered and tracked.