All About TMS: What is it and Why is it Important?
TMS stands for Transportation Management System: a system to control and audit the transportation movements in a supply chain, as well as the resource planning of an organization. TMS can help companies save time and resources by integrating many parts of transportation operations into one complete system.
Ted Bowley, Director of Logistics Services at Carter Logistics, provides insights and recommendations on TMS.
What is a TMS?
1. TMS is a system to control and audit the transportation movements and spend of an organization, in order to:
a. Optimize the network in pre-planning,
b. Ensure quality and accuracy in transportation movements and
c. Ensure that the price paid is based on agreed-upon rates negotiated ahead of the transportation movement.
2. TMS utilizes accumulated data reports in order to review performance and progress.
a. Data reports reveal the effectiveness and efficiency of the transportation network, including these metrics:
i. Rating a carrier for on-time performance – Pick-up and Delivery
ii. The accuracy of invoicing
iii. The timing of invoicing
iv. Completeness of invoicing
b. Having all your transportation movements in one system allows all the data to be pulled in real time to run “what if” scenarios. It also allows cost to be driven out of the system, not only in transportation but also in labor in the shipping and receiving department. In addition, it allows invoicing to be audited against the contract within the TMS for the accounts payable department.
c. Data reports help to budget for new programs or projections for upcoming years.
d. Accurate data reports help to manage costs that are out of your control. For example:
i. Fuel Surcharge – the TMS will allow the user to pull these costs out of the system and show the true impact.
ii. Accessorial Charges – the TMS will keep a record of the details and the root cause of incidents. You can hold individuals accountable to a degree to avoid unnecessary charges as such.
e. These reports help track “where you were, where you are, and where you are going.” In other words, the user can achieve more accurate pricing in real life scenarios that can be backed up with data.
3. Tracking and Visibility – The TMS will allow users to see their freight movements in real time. It will also allow them to manage, by exception, avoiding time wasted investigating items that are within the norm as well as abnormal occurrences such as late, expedites, and no shipments.
Why is it important for a logistics company to have a TMS?
- Movements can be tendered out to a carrier (Pre-planning).
- Movements can be tracked electronically with multiple processes instead of having to call the carriers each time for an update.
- Exception management helps to track labor and the most critical items.
- Freight payment and audit – in managing the carrier contracts in the system, the TMS will allow you to receive invoices in multiple ways, allowing you to process the audited and approved invoices in an electronic process to your financial software.
- Each user’s dashboard can be configured to the user’s role and responsibility.
For example, a logistics company can benefit from using a TMS by managing shipments going across borders in multiple currencies and by being able to scale business with less labor. In addition, the TMS can help to automate manual processes in operations, accounts payable, accounts receivable, and KPI reporting, as well as using cost savings analysis and “what if” scenarios.
Even with a TMS platform in hand, it is important to make sure everyone involved is on board, informed of what they need and how they will achieve it. In some rare occasions, TMS platforms can be very poorly implemented. Here are some tips and suggestions to consider in the implementation of TMS by Director Ted Bowley of Carter Logistics.
1. Ensure that your organizational goals are aligned with the TMS and how it is engaged with the operations.
a. If the goal is to have the TMS tied in with your ERP or WMS, ensure that the data coming into the TMS is accurate and that there aren’t processes to bypass the system.
b. Make sure proper training and manuals are created on how your operation will interact with the TMS. Consider tailoring the TMS to each of your customers while also allowing your operations to work within the same process behind the scenes.
c. Make sure the TMS is able to adapt to your organization’s ever-changing world so that your team can consistently learn and grow.
2. Ensure the people you are working with have the experience and the know-how of both the TMS and how your organization’s supply chain operates. Knowledge is power. In difficult situations, you would want to have a team that knows how to identify problems and provide solutions.
In addition, don’t just work with the salespeople, but also build a relationship with the behind-the-scenes team that will be there to support when unique situations or problems occur.
3. Finally, you have the choice to work directly with a TMS or to work with a 3PL, such as Carter Logistics, that has many years of experience in working with multiple TMS platforms and can provide customer support.