Tips on Inbound Logistics and 3PL Providers: Benefits Guide
Managing transportation costs and logistics complexity is a critical challenge for shippers today. In this blog post, we'll explain what a Transportation Management System (TMS) is, address common misconceptions, and show why implementing one is essential to cutting LTL freight costs and improving efficiency. An advanced transportation management system (TMS) can not only increase your efficiency and cut transportation costs but also offer comprehensive solutions to deal with the complexities of global shipping.
Here at Redwood Logistics we did extensive research when choosing a transportation management system to assist our customers, and they have certainly reaped the benefits. Here we will explain just what a TMS is, and why it’s essential to cutting LTL freight costs and employee time.
What is a Transportation Management System?
A transportation management system (TMS) is software that facilitates interactions between the company’s order management system, warehouse/distribution center management system, and carriers. It is the logistics hub in a combined network of shippers, carriers and customers. A typical TMS software includes route planning and optimization, load optimization, execution, freight audit and payment, advanced shipping, order visibility, track and trace, and carrier management.
Misconceptions of TMS
Having a transportation management system in place is essential to having an effective and efficient supply chain. So then why are some shippers not using one? Technology can be overwhelming to a business owner, especially one that has been doing things the same way for years. So here are a few things to consider:
“If it ain’t broke, don’t fix it” – Yes, maybe your systems do work. But, if you’re having to hire extra people, and spend extra time making them work, are you truly being efficient?
“Technology means huge upfront costs and long-term commitment” – False. With new cloud-based applications there are lower cost of acquisition with monthly fees instead of capital costs.
Ignoring or putting off new supply chain technology is essentially choosing not to improve your business operations. Your current systems might not be broken, but you are sitting on a potentially very expensive IT upgrade should it fail before you have a new plan in place.
Reasons to Implement a TMS
Now that you understand why such a small margin of shippers employ a TMS, let’s review all of the reasons why it is so essential to your LTL shipping.
- Reduce cost by better route planning, load optimization, carrier mix and mode selection
- Greater flexibility to makes changes in delivery plans
- Increased customer service with reporting and data analytics
- Increased ability to plan better for on hand inventory
- Cash flow improvements through proper freight accounting
- Improved accountability with visibility and reporting across the transportation chain
- Leverage big data analytics to turn collected data into actionable business intelligence
It’s Time to Implement, Where Do You Start?
As you’ve learned, continuing in your old ways can end up leaving you in the dust among proactive competitors. So, take a long hard look at your processes to start. If possible, get an outside opinion or analyst to take a look. While they’re analyzing your current systems, you can work on some other homework.
First, think about your needs. There is no sense implementing a TMS with all the bells and whistles (and paying for them) when maybe you only need half of those features. Next, do some research on what your competitors are doing. They are your competitors for a reason, so they must be doing something right. See what systems and processes they are using, then do them better.
On top of that, a 3PL will have a TMS already in place that will become available to you and your company. The 3PL will have already vetted the software to know that it runs smoothly and effectively. And, if they are like us here at Redwood Logistics, they will be able to easily integrate their TMS into your other, already implemented, systems.
Final Thoughts
A Transportation Management System can drastically change the way your transportation supply chain performs. It is one of the easiest ways to improve your operations and you should always be on the lookout for better technology.
The simplest way to ensure that you’re keeping pace with technology advancements is to partner with a reputable third-party logistics provider (3PL) or a fourth-party logistics provider (4PL) that can bridge the gap. Contact Redwood Logistics today to help with this!
FAQs
What is a transportation management system in logistics?
A transportation management system is software that connects order management, warehouse or distribution center management, and carriers in one logistics hub. It supports route planning, load optimization, execution, freight audit and payment, advanced shipping, order visibility, track and trace, and carrier management. In practice, a TMS helps shippers coordinate transportation more efficiently and manage complexity across the shipping network.
How does a transportation management system help reduce freight costs?
A transportation management system helps reduce freight costs by improving route planning, load optimization, carrier mix, and mode selection. It can also reduce wasted labor time by automating transportation tasks and making freight decisions more consistent. For shippers moving LTL freight, those efficiencies can translate into lower transportation spend and better overall operating performance.
What are the main benefits of using a TMS for shippers?
The main benefits of a TMS include lower transportation costs, greater flexibility when delivery plans change, better customer service through reporting and analytics, improved inventory planning, stronger freight accounting, and better visibility across the transportation chain. A TMS also helps shippers turn transportation data into actionable business intelligence through analytics.
Why do some shippers avoid implementing a transportation management system?
Some shippers avoid a transportation management system because technology can feel overwhelming, especially if current processes seem to be working. Common misconceptions include believing that an existing setup is “good enough” and assuming software requires huge upfront costs. In reality, cloud-based SaaS tools can lower acquisition costs with monthly fees instead of capital expense.
When should a shipper consider implementing a TMS?
A shipper should consider implementing a TMS when transportation processes are consuming too much time, costs are hard to control, or current systems are becoming a risk to operations. It is also worth evaluating before an aging system fails or forces an expensive last-minute IT upgrade. If competitors are operating more efficiently, that is another sign it may be time to act.
Should a shipper use a TMS directly or through a 3PL?
A shipper can use a TMS directly or access one through a third-party logistics provider. A 3PL may already have a TMS in place, meaning the software has been vetted and can often integrate with other systems more easily. That approach can reduce implementation complexity for companies that do not want to manage the technology on their own.
How do you start evaluating a transportation management system?
Start by reviewing your current transportation processes and identifying where time, cost, or visibility gaps exist. Then define the features you actually need so you do not pay for unnecessary bells and whistles. It also helps to compare how competitors operate and to get an outside analyst or advisor to review your setup before choosing a TMS.
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