According to the ARC Advisory Group, Transportation Management Systems (TMS) can be defined as software solutions that assist in acquisition of transportation services and in implementation of transportation related plans, enhance short-term planning of transportation activities, optimize the use of company’s resources and assets. These systems do not only manage the physical flow of goods, but also assist in measuring performance, enhancing collaboration and managing information and money flows that relate to transportation activities across all transportation modes.
Q1. Why are organizations showing more interest in TMS (Transportation Management Systems) today compared to the past?
The increasing interest in the TMS solutions has been driven by a number of factors. Firstly, the transportation costs are currently increasing due to the continuous growth of fuel prices and surcharges. Secondly, the process of globalization demands a higher level of supply chain complexity. Moreover, current businesses practices require smaller batch sizes, shorter cycle times and higher delivery frequency. TMS is capable to address all or almost all of the demands posed by the modern environment, while helping companies to realize substantial cost savings across all their activities and transportation modes. TMS has become attractive for the companies also because it is becoming more and more affordable and customized to the specific needs of the customers. It is no longer required to purchase separate TMS for distinct activities within a company, since TMS software developers are adopting a more holistic view on TMS and develop solutions that incorporate both business and organizational aspects of transportation and logistics management. Today, most TMS are developed as unified platforms, which help users across the value chain to perform their role-specific tasks. Thus, even small and medium enterprises that do not have capabilities for handling their own TMS can now benefit by having their solutions integrated into those of their partners.
Q2. Describe the major types of tasks a TMS can offer in helping to achieve transportation excellence.
Since transportation is present at virtually every step of the supply chain, it is often a strategic activity that enhances company efficiency, reduces costs, and helps to maximize customer value. Transportation excellence through TMS can be achieved in a number of directions. Firstly, it reduces transportation cost by automating the processes and improving visibility. This factor helps companies to receive real-time data from the system and to use it for rapid response and continuous improvement mechanisms. Secondly, TMS helps to optimize shipments by automatically selecting the most cost-efficient transportation method and by optimizing capacities. Shipment optimization does not only reduce the costs, but also allows addressing the problem of bottlenecks and to improve delivery reliability, thus reducing inventory levels and maximizing capacity utilization. The possibility to decrease costs by synchronizing the moves within the system offer additional opportunities for cost-savings. Lastly, modern TMS offer services in managing supply chain networks by maximizing transparency, integrating all the operations as well as introducing carrier management and event management capabilities.
Q3. How does a modern TMS system enhance customer service while at the same time generate cost savings for transportation?
The ultimate goal of modern TMS does not chain over time. Companies try to enhance customer service, while reducing transportation cost and time. The use of TMS minimizes the conflict between these two objectives, thus it decreases costs without reducing the quality of customer service.
The cost saving abilities of TMS are mostly related to process automation, shipment optimization, synchronization of moves and by improving organizational capabilities, such as carrier management, event management and performance management. However, these activities do not only significantly reduce supply chain costs, they also improve customer value. Thus, increasing information transparency and better capacity planning increase system reliability, thus enhancing customer service. Real-time data can be used for performance management and continuous improvement activities improve system flexibility and enable companies to adjust to the changing demands of their customers. Higher frequency and shorter cycle-times also enhance reliability and help to reduce inventory levels of their customers. Lastly, the holistic approach of TMS help clients to get access to a wide spectrum of services, and eliminates the need to engage in multiple contractual relationships with several logistics service providers, thus reducing transaction cost and contributing to stronger relationships with supply chain partners.
Q4. Why have some critics suggested that many organizations that have adopted TMS systems have not fully utilized the full capabilities of these sophisticated systems?
There are several reasons for limited utilization of TMS systems in many organizations. Firstly, the greatest effect of TMS can be only achieved if it is implemented not only within one company but across the whole network. However, due to the low market penetration of these systems, it is hard to realize the full benefits of TMS solutions. Secondly, traditional TMS systems target only specific areas in the operations of service providers. That is why companies implemented several systems, sometimes developed by different vendors, without using the full spectrum of opportunities provided by each system. Moreover, the use of on-demand service instead of in-house software enhances the use of the existing TMS capabilities and facilitates networking capabilities along the supply chain. The software vendors that provide management services offer higher expertise in deriving value from the existing TMS systems, therefore TMS utilization has become more effective even for the companies that already have such systems. Lastly, TMS application has become strategic. Therefore, the full use of TMS is now essential for remaining competitive in the market.
References
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