Insights & News

TMS Breakdown: SaaS, Cloud-Based or On-Premise?

Two transportation logistics professionals review technology in a data center

Posted On August 15, 2022

The logistics industry has many options for transportation management systems.

But what works for one company and its supply chain doesn’t necessarily work for another. Large corporations will need different technology integrations than small startups. Manufacturing businesses that rely heavily on imports, for example, will require TMS solutions that play nicely with international shipping, while an ecommerce company that primarily ships domestically might need a tool with order management and fulfillment capabilities.

So you may ask: What’s the best TMS for our business?

Before answering this important question, you must ask what type of TMS software is best. There are three main categories of transportation management tools to choose from.

  • On-premise
  • Cloud-based
  • SaaS

Read on for the benefits and challenges of each type.

A man looks at a laptop next to several severs

On-premise transportation management system

A company that houses a collection of physical servers on its own property uses what’s known as an on-premise, or “on-prem,” TMS.

Many companies using on-premise transportation management systems either built the software from scratch, or purchased or license the base software and customized it to their needs. Hosting the server gives companies more control over what data is kept, how it’s managed and how it’s secured. Businesses using on-premise TMS software usually have fewer cybersecurity concerns as well, as the application is hosted behind their network firewall.

Despite these benefits, hosting transportation management software yourself comes with some serious challenges. To ensure uninterrupted service, an on-premise TMS requires backup power (usually a generator or battery backups) and a redundant internet source in case something goes down. This becomes very important when the company has multiple warehouses in different locations. The owner is also responsible for implementing maintenance patches and upgrades, so an on-premise transportation management system is best supported with a robust in-house IT team.

All of the additional infrastructure, like the backup generator and internet source, plus the space to host the servers and the air conditioning required to keep the server room cool, adds to the total cost of hosting an on-premise transportation management tool.

Cloud-based transportation management system

Cloud-based transportation management systems (sometimes called web-based systems) are those hosted by a cloud management provider at a data center.

With cloud-based TMS solutions, companies lease space on a server or purchase the equipment that’s housed at the data center. Depending on the business agreement, the TMS software might be the customer’s own proprietary software simply hosted on a leased server, or software created by a provider and leased by the customer. Because companies don’t have to manage the physical server and its various needs—space, backup power and internet, cooling, and in-house tech teams—a cloud-based solution can be a lower-cost option than an on-premise transport management system.

SaaS transportation management systems

SaaS, or software as a service, transportation management options are similar to cloud-based solutions in that the physical server is hosted at an offsite data center. The main difference lies in the software; instead of custom or proprietary software, SaaS TMS is created by logistics service providers and licensed to their customers. So, while all SaaS TMS are cloud-based, but not all cloud-based TMS are SaaS.

Third-party logistics companies that offer SaaS TMS host multiple companies’ data within one server, but while customers are on the same system, their data is independent of each other. Security precautions prevent businesses using the technology from being able to see the data and activity of another business hosted on that server. The ability for multiple companies to share one server decreases costs, making SaaS transportation management systems a cost-effective option.


So… what’s the best transportation management software for your business?

Clearly, the various software solutions each offer different business benefits—so how do you determine which transportation management software option is ideal for your business operations?

More regulated industries with tighter restrictions around data privacy, including defense, finance and healthcare, often need on-premise transportation management systems. In addition, on-premise is typically the best option when software speed is the most important factor.

Small and medium-sized businesses, on the other hand, benefit most from a cloud transportation management system or SaaS option because of the price and convenience.

Whichever option you choose, due diligence during the selection process can ensure your company makes the best decision for your unique supply chain needs and optimal operational efficiency. Keep reading to learn how.

A data center

Evaluating potential transportation management systems for your business

Once you’ve narrowed down the type of transportation management system your company will use, you’ll still have plenty of providers and systems to choose from. These six key factors are important to consider before making a final decision.

1. Data security certifications

Across industries, regions and company sizes, cybersecurity attacks are always possible. Ask a potential transportation management system provider about their cybersecurity certifications and privacy policy, especially for SaaS TMS options in which you might be sharing a server with numerous other companies. If your company’s data—or customer data—needs an additional barrier, you can ask that your software be hosted on a separate server, although this will likely necessitate a price increase.

2. Uptime ratio

Even the best technology will likely have an issue or two arise—but asking a company about its uptime ratio, or the time a software is available to users compared to any outages can give you a sense of how reliable it is. Look for an uptime ratio of at least 99.9%. And the more nines after the decimal, the better—you don’t want an outage to shut down your supply chain processes and transportation operations. A transportation management solution that has a low uptime rate, and isn’t available when you need it, won’t do you much good.

3. Customer support

In the event of an outage, or even just a member of your team needing help to complete a task, you’ll want round-the-clock access to the system’s customer support team. Ask about how various team members involved with your supply chain team—from dock workers to the CFO—can get support, either through email, live chat or a hotline. A TMS provider with support teams that can enable your company to successfully navigate complicated processes can help your company not only have fewer shipment delays, but also provide better customer service to your own clients.

4. Integrations with your other software solutions

It doesn’t matter whether a company uses an on-premise, web-based or SaaS transportation management system; the tool needs to easily integrate with the other platforms in their tech stack. For example, if a TMS won’t easily integrate with your warehouse management system or enterprise resource planning platform, it’s probably not the right fit—or you’ll need to allocate more resources toward making the integration possible. This blog shares more about integrating your TMS within your larger supply chain management systems and processes, but it’s worth noting that asking these questions early on is crucial.

Of course, you’ll also want to ask about overall capabilities and potential customizations your business might need. Some suggested questions include:

  • Does the TMS support workflow automation?
  • Can it predict transit time?
  • For companies that need global trade management, can the TMS generate the proper documentation, and how quick and easy is that process?
  • Will the TMS or logistics provider be able to pull new business insights from the data it collects?

Asking questions like these will help you evaluate whether the tool is a good fit for your organization.

5. End-to-end visibility

Transportation management systems should be able to provide broad and deep visibility into your supply chain throughout a dynamic global trade environment. No matter what category of TMS your company decides to use, make sure the platform will show in-transit visibility across carriers, modes and locations.

6. The fine print

Even after all the above, there are still more questions and factors worth considering. Take the data center location—a company based on the west coast will benefit more if its software is also housed somewhere on the west coast, for example. The farther data has to travel, the longer it will take for it to transfer to your users, resulting in an application that seems slow and unresponsive. You can also ask how many data centers a company uses in case one goes dark.

It’s also important to inquire about the licensing or hosting fees. Some TMS providers don’t include implementation, updates and emergency services into their fees, forcing you to pay additional fees for such basic services. Professional training to teach your team how to use the new tools should also be part of the deal if you don’t want to lead the trainings yourself. You’ll want to be fully aware of what all parties are responsible for before signing any contracts.

And if your heart is set on hosting a server on-premise, but the platform you like most is offered as a web-based or SaaS product, just ask—the TMS provider might be willing to license their software for you to use on your own servers.

7. Additional services

We’ll admit—this one is a cherry on top, and not necessarily a requirement. You might consider asking whether the provider offers other logistics services, in addition to the TMS, to support other areas of your supply chain. A vendor that offers multiple services, including freight forwarding, warehousing and distribution, and parcel optimization can streamline your shipping process and transportation operations for an even bigger impact on both your customer satisfaction and bottom line.

Navigating the top transportation management systems and finding a powerful delivery management software that meets all your needs can be an overwhelming task. Flat World’s team of experts can evaluate your company’s existing processes and perform a shipping audit to find opportunities to improve, as well as give you an in-depth look at the capabilities of our TMS, Pipeline. If you want to learn more, just contact us to get started.