What is a TMS or Transport Management System?

A TMS, or Transport Management System, is software used by large companies to reduce logistics and transportation costs. In essence, they allow you to keep better control of your entire shipping and distribution operation.

As your business grows, your transportation operations will become more costly and complex. If you want to keep your costs in check and ensure that your shipments are being handled correctly, you need to integrate a TMS system.

In this guide, we'll take a closer look at what a TMS is and why you should use it.

TMS highlights

TMS functionality varies by industry or business model.

Some TMSs allow you to integrate modules to increase their capabilities.

Synchronize the most important transportation logistics activities

Enable companies to operate on an international scale

Provide carriers with visibility of both their daily operations and the network as a whole

The most advanced systems feature automated portals to automate reverse logistics and returns management

Enable online stores to offer a much more satisfying ordering experience to their customers.

What is a TMS or Transport Management System?

A transport management system (TMS) is a holistic software that helps companies centralize all transport logistics. It can be used to manage shipments of all sizes and modes of transportation, such as road, rail, sea and air. It also has tools to plan routes, schedule deliveries, track orders, print documents and automate logistics processes.

Types of TMS according to their support

Self-developed: the most customized and flexible, but also the most expensive and require an in-house development and maintenance team.

On-premise installation: usually easier to implement and maintain than in-house TMSs, but can also be more expensive than cloud TMSs.

Cloud service: these are the most affordable and scalable option. These systems are easy to implement and maintain, and are automatically upgraded with new features and enhancements.

TMS systems play a critical role in a multitude of industries. For example, it is crucial for managing the logistics of an eCommerce.

Advantages of using TMS for shipping logistics

Cost reduction

A TMS improves logistics management by reducing costs by optimizing routes and automating processes. It also makes it easier to negotiate rates with carriers to obtain more favorable deals.

Improved efficiency

Automating tasks, such as route planning and document management, enables a more efficient workflow. The ability to schedule deliveries and optimally assign tasks reduces lead times and storage costs.

Increased visibility

Provides up-to-date information on the location and status of shipments, improving decision making and the ability to proactively manage exceptions. Detailed reports and analytics enable a deeper understanding of logistics performance and identification of areas for improvement.

Improved customer experience

On-time delivery and proactive communication about shipment status increase customer satisfaction. Transparency and trust are strengthened by providing real-time order information, which improves the perception of the company.

Encourages scalability

The ability to adapt to changing business needs is critical. TMSs are scalable and can grow with the business or adapt to changes in demand. In addition, integration with other systems, such as ERP and WMS, ensures more consistent and effective management as the business expands.

How exactly does a TMS work?

The operation of a TMS can vary depending on your specific needs, but in general terms, a TMS operates as follows:

1. Data capture

The TMS collects information related to your transportation operations, such as orders, inventory, freight locations, destinations, schedules, delivery restrictions, freight rates and more. This information can be entered manually or integrated with other systems, such as inventory management systems (WMS) or order management systems (OMS).

2. Route planning and load allocation

With the data captured, the TMS helps you plan optimal routes for your shipments and assign loads to specific vehicles. It uses optimization algorithms to minimize costs and delivery times, taking into account factors such as distance, traffic, load restrictions, carrier preferences and service agreements.

3. Carrier management

The TMS allows you to collaborate with carriers and fleet operators. It can facilitate communication with carriers, selection of transportation providers, scheduling pickups and deliveries, and managing service level agreements (SLAs).

4. Tracking and visibility

The TMS provides real-time visibility into your transportation operations. This includes vehicle tracking, event notifications (such as delays or deviations), and the ability to respond to problems in real time.

5. Documentation and compliance

The system can generate and manage important documentation, such as shipping labels, freight orders, invoices and customs documents. It can also help you ensure compliance with local and international regulations and standards.

6. Reporting and analysis

TMSs often offer reporting and analysis tools that allow you to evaluate your supply chain performance, identify areas for improvement and make data-driven decisions.

7. Integration

TMSs integrate with other enterprise systems, such as ERP (Enterprise Resource Planning), WMS, OMS and inventory management systems. This ensures that information flows efficiently between all departments involved in logistics and transportation.

Can a TMS manage returns?

Reverse logistics is one of the most costly and complex activities for any company. Therefore, more and more TMSs include unique solutions, such as automated portals, to ease the workload in this logistics field.

Through such portals, a customer can handle the exchange or returns management himself. The TMS takes care of generating the pickup with the carrier and provides the buyer with the return label, all automatically.

If returns and exchanges are a challenge, we strongly advise you to integrate a TMS with specific functionality for reverse logistics.

What kind of companies need a TMS and why?

Logistics and transportation: Transportation and logistics companies rely heavily on route optimization, load allocation and efficient fleet management.

Manufacturing: coordinate the movement of raw materials and finished goods, and ensure that raw materials arrive in time for production

Distribution and wholesale: Distribution and wholesale companies often handle large volumes of products to be delivered to customers and retailers. A TMS enables them to manage delivery routes, scheduling and shipment tracking more effectively.

E-commerce: With the rise of e-commerce, companies need TMS to manage the transportation of products from warehouses to end customers. A TMS can help meet delivery deadlines and improve the customer experience.

Food and beverage: The food and beverage industry often handles perishable products that require accurate, time-sensitive deliveries. A TMS can help ensure that products arrive fresh and in good condition.

Pharmaceutical: In these industries, accuracy and timeliness are critical due to the sensitive nature of the products. A TMS helps manage the transportation of pharmaceutical and healthcare products safely and efficiently.

Steps to successfully integrate a TMS

1. Develop the project

Establish the basis of the project, define the objectives, tasks and responsibilities. In addition, at this stage you must plan the resources and establish the necessary infrastructure for the project.

2. Identify the necessary functionalities

Perform a detailed analysis of the business processes and needs. Identify the systems to be integrated with the TMS, define the information and data flows, as well as the objectives to be addressed during the implementation phase.

3. Implement the technology

Set up the technology implementation of the solution, which includes enterprise master data loading and integration with the software via API. During this stage, your development department and technical team come into play.

4. Testing and training phase

Perform tests in order to detect possible risks or pending adjustments. This stage also encompasses the preparation and delivery of training, providing the necessary documentation to instruct all employees who will be using your TMS.

5. Start-up and ongoing support

Full implementation of the solution. Ensure a smooth transition to the solution. In addition, the vendor should provide solid support to address any eventualities that may arise during this process and resolve them as soon as possible.