Posted On January 23, 2023

For modern shippers, transportation management systems (or TMS) have gone from “nice to have” to “need one to keep up.” But many companies are still going without, or haven’t yet made it past the entry-level TMS they’ve been using for years—and have since outgrown.

If you’ve been questioning whether the technology you use (or lack thereof) is holding your business back, this article will help.

What is a transportation management system?

While they come in numerous formats, a transportation management system is technology that companies use to coordinate and facilitate their supply chain logistics. Transportation management software can be used for countless tasks, from planning and executing shipments, optimizing and tracking the movement of goods, creating and organizing shipment documentation, monitoring transportation assets and more. A TMS can affect the whole supply chain, from inbound shipments and warehouse efficiency to outbound shipments.

The most commonly used feature, however, is the ability to rate shop, or search for the best prices for a specific shipment, instead of having to manually enter shipment dimensions, origin, destination and other information into numerous carrier websites.

A transportation management system can be on-premise, cloud-based or SaaS. The best type of TMS depends on a company’s unique needs and future plans.

Transportation management systems have exploded in popularity in recent years, as companies realize their potential. While the question used to be whether a company should get a TMS, it’s now more often whether the company has the best TMS for its needs. Too often, business leaders assume their operations teams have chosen the best transportation management system available and are using it to its fullest potential—or worse, wrongfully assume their shipping manager has negotiated the best available rates.

That’s where finding the best transportation management software can have an incredible impact on business.

Transportation management system benefits

A decade or two ago, most companies used spreadsheets (or even pen and paper!) to manage transportation. But today’s supply chain tools have evolved drastically—and the many benefits of a TMS are monumental.

Access to better shipping rates.

The biggest benefit of using a transportation management system is decreased freight spend. This happens for a few reasons.

Most TMS solutions pull in freight rates from numerous carriers, which allows shippers to quickly view options within a single platform, instead of having to spend minutes or even hours searching. Think of it like Priceline or Travelocity but for shipping.

A TMS solution will often incorporate carriers’ unique base rates into its displayed prices, whereas shippers who request pricing directly from carriers often use generic base rates and lanes. This results in carriers giving less aggressive pricing. But having a TMS encourages carriers to offer aggressive pricing, because it increases the chance they’ll be satisfied with the outcomes

But how much freight savings do transportation management systems actually provide? The answer depends on the rates a company was getting before making the switch, but estimates suggest a TMS implementation can save businesses between 3% and 12% on freight spend.

In addition to saving money, the time spent executing shipments also decreases with a TMS, as shippers can typically purchase shipping within the platform. 

Having a central source for supply chain visibility.

Most TMS solutions offer real-time tracking, which provides valuable information both for dock and warehouse teams and sales teams. Instead of having to navigate to carrier websites for updates, team members can get real-time updates within one platform.

For an even higher-level view, TMS software with analytics and reporting capability gives businesses the ability to report on enterprise-level performance, carrier performance and more.

Greater efficiency.

The best supply chain is one that works seamlessly and efficiently—so having a tool that streamlines operations can be transformative.

In addition to saving time on route optimization and finding the best carrier, a TMS automates tasks that had previously required manual data entry. That automation eliminates human errors that lead to wasted spend and time spent fixing the mistakes.

Many TMS integrate with a company’s existing technology for additional efficiency. For example, Flat World’s transportation management system, Pipeline, can integrate with a warehouse management system (WMS), order management software or an enterprise resource planning system (ERP). It can also be connected with customer communication tools for increased customer service, so that shipping updates are automatically sent to customers. This eliminates a large chunk of calls from customers wondering where their shipments are, another way logistics and service teams can save time.

The ability to scale.

Imagine your company has a small shipping team working at full capacity. A new client submits a record-breaking order, and suddenly, twice as many shipments need to go out every week. Without the right technology, keeping up just isn’t possible.

However, the added efficiency from a TMS gives companies the tools to scale without the cost of hiring several new staff members. 

Better carrier performance.

Business expert Peter Drucker is famous for saying “What gets measured, gets managed.”

Remember those performance analytics we mentioned earlier?

Companies can measure and analyze costs with a TMS, but that’s just the beginning. With a TMS that also tracks damage rates, on-time delivery and more, companies can measure which carriers offer the best services, and which have room for improvement. With that information in hand, shippers can make better choices around preferred carriers and have more negotiating power with the carriers that have underperformed.

No matter what you’re shipping or to whom, reliable, on-time transportation is a competitive edge—one that will keep clients coming back for future purchases.

Does your logistics partner negotiate with carriers on your behalf? Even in those situations, having carrier performance data is helpful. Just make sure your partner is aware of the information and prepared to bring it up with carrier representatives.

How to know whether it’s time for your company to use a TMS

Any company that is shipping multiple shipments per day would benefit from a TMS, whether they’re shipping truckload, less-than-truckload or parcel. 

More and more, however, companies need to review not just whether they’re using a TMS, but whether they’re using the right TMS.

A common pitfall is relying on the way something has always been done. Instead, businesses should look for a TMS option that can grow with their needs. Maybe you start out with a TMS simply for the basic rate shopping feature and as your business grows, you can utilize more advanced features.

But how do you determine if your TMS is cutting it? The answer, yet again, is in the data. A prospective TMS provider can run an analysis on your company’s supply chain numbers and look for any potential savings—both quantifiable cost savings and the harder-to-quantify soft savings like greater efficiency and fewer errors.

A company’s data can provide incredible insights about whether the right decisions are being made—and how to improve going forward.

A supply chain and logistics services company, Flat World’s proprietary transportation management system helps teams save money, improve service levels and grow. If you’re not sure whether you’re using the most effective TMS for your needs, our team can do a free audit to look for any opportunities. Contact us to learn more.