5 Areas of Focus in a Long Term Logistics Strategy That a TMS Can Solve
Transportation management systems (TMS) offer tremendous benefits for shipment management, trading partner collaboration, and freight payment. But with so many products on the market, finding the right solution can be daunting.
Shippers choosing a TMS must consider numerous options, from cloud-based applications to traditional on-site installations, targeted to freight moving over the road or by rail, in containers or as parcel shipments. To help you select the best option for your transportation management needs, Inbound Logistics’ TMS Buyer’s Guide offers a best-of-breed shortlist of some leading TMS providers and solutions.
The Current Landscape of the Transportation Management Systems (TMS) Market Place
Logistics and transportation managers are tasked with making the movement of freight between trade partners easier, cheaper, and more efficient. Often these managers turn to Transportation Management Systems (TMS) in the smooth and efficient operations of their supply chains for decades. Having evolved significantly over the last 30 years, such systems are typically available as standalone software packages, as part of a larger Enterprise Resource Planning (ERP) solution, or in Software-as-a-Service (SaaS) formats.
Calling TMS “one of the fastest growing enterprise application markets” in its most recent TMS Global Market Research Study, ARC Advisory group says that a whopping 63 percent of companies would see at least a 5 percent increase (23% stated a 10 percent or more increase) in total freight costs if they had to give up their TMS and revert to more manual transportation planning and execution processes. According to ARC, a TMS achieves these savings based on process enforcement, visibility, analytics, and optimization, “with virtually no other supply chain application offering so many different forms of optimization.”
Regardless of the technology delivery method, TMS tackles the freight movement puzzle by handling single parcels to bulk commodities and everything in between. In most cases, the solutions oversee the movement of all inbound and outbound freight modes (including intermodal), at the domestic and international level. A TMS’ fleet management capabilities are usually focused on the shipper’s own transportation assets while its planning and execution functions monitor and track movements involving both inside and outside service providers (such as third party logistics providers or “3PLs”).
Top 5 Areas of Focus on a Long Term Logistics Strategy
According to survey respondents in the “Transportation Management Systems” Study by the Peerless Research group and Logistics Management, the top five areas that are important when focusing on a long term logistics strategy are:
- Maintaining high levels of customer service (96%)
- Lowering costs (94%)
- Improving efficiencies and productivity in logistics operations (93%)
- Attaining the ability to target logistics initiatives that drive business growth (79%)
- Improving Asset Utilization (74%)
- TMS logistics strategy 5 Areas of Focus in a Long Term Logistics Strategy that a TMS Can Solve
Furthermore, when asked what aspects of their transportation and logistics operations could use improvement, more than one-half cited understanding and controlling costs (55 percent), better shipment planning (55 percent), and greater in-transit visibility (52 percent). Also high on the list of areas in need of development were electronic communications with customers and carriers (45 percent), overall supply chain processes (45 percent), and carrier and partner collaboration (43 percent).
How Can a TMS help in Achieving the Desired Outcomes of Logistics and Transportation Strategies?
An effective TMS can achieve all of these top 5 desires of shippers looking to shape a long term solution for their business to remain sustainable and cost effective in their transportation spend.
Maintaining high levels of customer service In Using Transportation Management Systems
With a TMS you can have tools and features that notify customers of when their shipment is coming, or you yourself can login and see where the shipment is at any time. Furthermore, when you have a TMS that allows you to run various metrics and reports to analyze, you can see which carriers are getting your shipments in on time to your customer and which ones are not causing high levels of claims. When you weed out the bad, based on data, and focus on the good, you can then ensure with greater predictability that you will have a hassle free experience and confidence in getting your freight to your customer. You may also use that same data to better collaborate with carriers and those in the supply chain to sit down and address these facts and proactively improve so you continue to increase the customer service metrics.
Lowering Costs with A TMS and Managed Transportation Services
Remember, lowering costs isn’t simply about the freight rate. It’s about total costs. As more and more manufacturers look at the total costs of business decisions and the total costs of their operations long term, the hard costs you see that are invoiced are not the only costs considered. In logistics and transportation management, when it comes to costs, you must also include the “soft” costs. These are things like the time it takes to process a freight shipment (calling various carriers, getting quotes, manual methods vs. using a TMS, etc.), the errors that come up due to not using automation features that are available in a TMS, or even the time dealing with such things like freight and transportation accounting or freight claims that a logistics service provider could handle as a value-add , such as managed transportation services to the TMS software offering, really do add up over time. Oh, and not to mention, if you aim to grow your business, which I am sure you do, the added costs of more resources and time to process more and more freight. A good TMS reduces time and allows you to scale cutting out many other unforeseen soft costs.
Improving Efficiencies and Productivity in Logistics Operations with a TMS
This improvement area in a long term logistics strategy by implementing a TMS is highly related to the second point of lowering costs, but let’s go with another angle. Have you ever noticed that when you have a very good process or system for doing something in your job, you have to think less about how you are going to get the job done effectively? The system is sound and allows you to rinse, repeat, and scale by not only following a sound process, but getting muscle/mental memory to get better and better as you use the system. Did you also notice that once you had sound processes you were more productive because you were then able to think strategically in such a way that it allows you to disrupt your other inefficiencies? As they say, it is hard to stay strategic or innovative if you are merely surviving in the land of tactics.
Attaining the Ability to Target Logistics initiatives that Drive Business Growth
Again, as with logistics costs dovetailing into improved efficiencies, this 4th area of long term strategy focus is really only possible if you are efficient in process and are cost effective. When you are confident in a repeatable and scalable system that scales and is cost effective to deploy and maintain, you then have the think and brain power to strategically identify other issues in the organization and apply either more tools, technology, or systems to continue to drive the business forward. As a manufacturer, using a TMS can free you up greatly to focus on the marketplace and new products to open up new markets.
Improving Asset Utilization with a TMS
This idea also plays into operational improvements that allow your business to grow. With a transportation management system and especially one integrated to your ERP or Warehouse Management System, you can start connecting the dots to what inventory you have on hand, which ones are in transit and more. When you have integrated systems that easily allow you to calculate asset utilization, it allows you to continue to have a strategic mindset and quickly make decisions on what products or assets you should have on hand or order more of to ship inbound to your warehouse from a vendor.
The key to all five of these points is truly that a transportation management system frees up any shipper who utilizes one to get out of the weeds of process and put the focus back on their business and not the worry of how are you going to stay effective in transportation management. At best, it is a tool that empowers you, but make sure it’s a tool that has the capability to meet your unique needs. If you are unsure of your needs, make sure you schedule a consultation with one of our logistics experts and talk about how you could use a transportation management system to make your life better.
When using a third party logistics company who both offers a transportation management system and integrated managed transportation services, it is possible for shippers to easily achieve the above desired outcomes in their logistics and transportation strategies.