The benefits of a TMS solution include more than savings on freight cost, they allow companies to simplify the flow of goods through their supply chain.
In the following section, we will introduce you to the must-haves of TMS software platforms that drive the highest savings and ROI for a company’s supply chain, but before jumping into the details, below is a quick overview of the typically cost savings components and ROI of a transportation management system:
- Planning & Optimization
- 3%-12% saving opportunity
- Analyzing shipments, rates and constraints
- Execution & Advanced Visibility
- 2%-5% savings opportunity
- Automated Execution Tasks and workflows
- Rate / Capacity / Routing Guide / Carrier Performance Management
- 2%-5% saving opportunity
- Self-billing, freight audit and pay
- 3%-10% saving opportunity
- Secure / Maintainable Durable Rates / Capacities
- Reduce Broker Dependencies
A transportation management system brings with it a great deal of functionality and benefits, so let us take a closer look at everything a TMS can do for a company’s logistics and supply chain tactics and strategy.
Focus on Industry Best Practices
Companies leading the market are implementing TMS software into their businesses quicker than ever, which has caused the TMS software market to grow exponentially. Companies are moving away from Microsoft Access and Excel, along with other less efficient and effective methods for moving their freight.
The days of relying on spreadsheets, phone calls and emails has long past. There are simply too many moving parts in the shipping process and internal and external stakeholders demand and deserve more. To keep up, TMS software platforms have expanded their scope over the past decade. Today TMSs are more than freight management platforms, they are fully connected systems for all product movement that is accessible to everyone involved for all their management needs.
TMS industry best practices require companies to incorporate the software with all the systems involved. This allows them to provide key information to their customers from the point the goods are purchased to the point the customer takes delivery of the final product.
Once in place, the TMS will monitor, report and capture data so you can analyze how to improve your tactics and strategy for better performance in the future. Amazon’s Founder and CEO, Jeff Bezos, calls and compares this process of ever-evolving improvement the fly-wheel effect where the process starts slow, but as more people touch the wheel to push it forward it picks up speed along the way and takes on a life of its own.
Improve Operational Efficiencies
Full transparency of all freight movements for internal and external stakeholders is part of a successful TMS software.
Again, the value a TMS brings is more than managing freight, it also brings the stakeholders together within the supply chain to remove barriers and reduce friction in the process.
While we keep pushing the idea that a TMS is more than freight, we do understand that many of you are looking to figure out a better mousetrap to drive cost savings and efficiencies in your department, which is absolutely what a TMS can do.
The TMS drives efficiencies in planning the most efficient freight routes, then automates the execution processes from shipment tender to final delivery. It uses a waterfall method where the least cost to most cost contracted carrier is offered the freight. When a contract carrier is unavailable for the given load, the carrier management process automatically taps into the thousands of carriers available on the freight load boards and streamlines the onboarding process and managing their spot rates, charges, terms of shipment, certifications, and transit maps to ensure the freight capacity is found for the 100% of day’s shipping requirements.
Once the shipment is tendered out, the TMS takes over in helping the logistics team track and monitor the shipment through various methods and reports exceptions that are falling out of specifications to make an on-time pick-up and delivery. The way in which the TMS assists in this monitoring process is through its electronic integration or customized portal access for carriers to report their process along the way. While some carriers may not always update the shipment progress, their load will fall out of spec and an email or call will be made asking for a response. In this way, the freight operations team is managing the exception so to avoid as many last-minute fires as possible in the shipping progress.
Increase Customer Service
A good TMS software can enable benefits on the customer service side of the business as well. This is especially important in an economy where the retail customer base is becoming more and more demanding.
Track & Trace Shipments
TMS software tracks a shipment from tender to delivery. It does this because the implications of the decisions made throughout the process ultimately affect the transportation process and the satisfaction of the customer, whether internal or external. The tracking element of a TMS software provides consumers with 100% transparency throughout the shipment process.
While TMS has its origins in managing outbound freight, it is also a great tool to manage inbound freight. The management of inbound freight is often overlooked and undervalued, but when incorporated into the supply chain strategy brings the complete picture into focus and further gives the company opportunities to save on its freight and operating costs. When a company has visibility to all the inbound shipments it can better manage the inbound receiving dock activities and better plan and monitor its production processes. This is particularly important in a just-in-time (JIT) environment.
Connections with Industry and Operational Data Platforms
The modern-day TMS connects with the freight industry and logistics market analytic platforms. Freight industry platforms include load boards, insurance validation, operating authority validation, contract validation, rating platform, and enhanced visibility platform. These leading industry services increase the ability of logistics teams in being able to fill a freight load efficiently and safely with nothing more than a push of a button.
On the logistics market analysis side, there are numerous data warehouse consortiums that roll up billions of dollars of freight spend by capturing data by lane from various shippers and logistics companies across the US. The data is collected on an anonymous basis whereby buyers of the information cannot see what the carriers or the customers of the freight spend, but do see the actual spend on essentially every origin/destination point.
This information is not averages of averages, but actual lane-by-lane freight rate data that shippers and logistics companies can use to measure their performance against the market. The advent of these logistics data meccas has forever changed how companies can benchmark their freight spend against the best, worst and average in the lane to create and execute the most competitive RFP for their business.
Collection of Data
It is important to note that while a TMS is an incredible tool for freight operations teams, it is also an incredible database of information to optimize the freight spend of an organization.
A TMS allows its users to perform what-if analysis for tactical and strategic decision support, along with being a great tool to for RFP management and execution. As mentioned in the previous section, connecting the TMS to the outside benchmark databases makes the RFP market-leading.
Because of the situational analysis, actual scenarios can be measured with actual results in the TMS itself quickly and easily. While this seems natural, for those shippers not operating a tier 1 TMS find themselves running averages of averages or cannot even get their hands on the actual data and volumes which raises the bar exponentially in optimizing the results that otherwise cannot be managed in an Excel spreadsheet.
Today’s TMS software platforms have vastly improved standard and customized reporting, as well. Reporting can be run on a preset schedule, on an ad hoc basis, be provided through web portals or a combination of these methods.
The reports can be operation, customer service or financial oriented, and companies have the ability to decide what data to report on based on their specific KPIs. If need be, the information can also be sent to vendors and customers in a customized report that includes their logo and particular nomenclature.
Any way one looks at, either push, pull or ad hoc, the reporting that comes through the TMS will raise the logistics and supply chain bar in any organization.
The days of spending $10’s of thousands of dollars and only getting a snippet of information or averages-of-averages are well behind us, although many organizations continue to use the largest consulting and logistics companies that charge upwards of $50,000 plus analytics. There are plenty of companies like InTek Freight & Logistics that can perform the analysis or perform the annual RFP at significantly less cost with the same or better effectiveness.
An effective TMS will bring together best-in-class benchmarking to put a company up against its competitors versus what is typically done with most companies. Benchmarks provide an opportunity for brokers to leverage better carrier rates and compare against others in terms of contract terms. Overall it gives perspective on who does it best and what companies can change for competitive advantage.
Technology Strategy, Design and Integration
The data compiled by TMS software is useful not only for day-to-day operations but also for helping companies evaluate long-term strategic direction. This software has changed the industry as optimization is now faster than ever, allowing companies to capitalize on additional pooling, consolidation and round trip opportunities. In short, all of the data the TMS collects is crucial to produce fly-wheel like effects on the improvement of all logistics and supply chain components.
Financial Planning and Strategy
One of the most important goals of a TMS is the overall reduction in the freight cost. This reduction, which comes through a variety of functions within the TMS. Since this goal typically the most important for more than half of TMS buyers, we will spend additional time unpacking the topic of savings and how it is attained through a TMS.
Freight Audit & Pay
The typical savings a TMS user will gain in the freight audit and payment process is between 2-5%.
Freight and audit pay is complicated because of the total number of transactions and pricing variations are required documentation. A TMS simplifies the process of auditing the rates against those assigned to the load at the tender and acceptance phase of the shipment process, along with validating the paperwork sent in by the carrier.
Some TMS systems, like InTek’s, also simplify the document management process whereby the documents associated with the shipment are collected at the time of audit and uploaded to each shipment once the rates are approved for payment. What makes this possible is the carrier’s invoice and back-up documents are sent into the TMS via an email from the carrier. The TMS identifies each piece of paperwork and scrapes off the required information to audit the bill through optical character recognition (OCR).
An added bonus for those shippers or freight brokers that create an invoice to their customer from the carrier back-up documents and invoice is the option to immediately remove the carrier invoice and slide in the customer invoice and required back-up at the time of the audit. The invoice is immediately sent electronically, which makes for a seamless transaction that requires no additional work by the accounting department.
Reduce Freight Expenses
Freight cost savings typically range from 3% to 12% savings for a TMS user.
The freight savings come through:
- An improved RFP process.
- Waterfall tender process whereby carriers are chosen from the least cost to the most cost.
- More readily available spot rate capacity on either public load boards or internally developed load boards of approved contracted freight carriers.
- Automated rate, route and freight mode optimization.
- Utilization of reporting and analytic tools.
The powerful technology resident within the TMS automates the processes that drive these savings and make it a part of the everyday execution of the freight plans.
Improved Operating Efficiency
On average a company can save between 2% to 5% on operating cost when using a TMS.
The 2% to 5% seems insignificant, but when thinking about the operational savings this is across all functional units, not just the freight department.
Improved Order-to-Cash Cycle
A TMS has a direct impact on improving a company’s order-to-cash process, which allows it to invest in its future and grow.
TMS software cuts out all manual components of the cycle from the moment a product is ordered until it is delivered to the customer making for an efficient use case, while also providing full transparency to the process to quickly identify and correcting any step in the process that has an issue.
Forecasting inventory is crucial to a supply chain’s success. With this goal in mind, TMS software can grant peace of mind that loads are being picked up and delivered on-time, all the while granting suppliers more time to plan how much inventory will be utilized. This keeps the processes more streamlined and prevents companies from overstocking unintentionally or building a safety stock figure into their forecasting and procurement model.
Audit Trail Process
A TMS gives companies the ability to audit their shipping process by putting a time and date stamp on every transaction recorded from the point of order to final payment received from the customer.
Having a physical trail for all processes will positively influence the logistics process. When errors in the process are made a user can go back to its origin, which will support a user training opportunity or correction in the overall process.
The contention of freight bills and accessorial charges are a part of everyday life for shippers but can be resolved quickly through the audit trail left behind in the TMS.