Demystifying Transportation Management Systems for Businesses

In our increasingly globalized world, the significance of logistics management has grown substantially across various sectors. Effective logistics management optimizes production and distribution processes, enhancing efficiency and competitiveness for businesses. At the heart of these logistics operations is the transportation system, a critical component that links different activities within the supply chain.

Transportation costs account for a significant portion of overall logistics expenses and have a profound impact on the performance of logistics systems. Transportation costs represent approximately 40 to 50 percent of total logistics costs and 4 to 10 percent of the product selling price for many companies, making it a major concern for logistics management to choose a transportation management system that is also cost efficient. Efficient transportation is vital at every stage of the supply chain, from moving goods from manufacturing sites to distribution centres, to delivering products to end customers. As such, understanding the relationship between transportation and logistics is essential for businesses striving to streamline their operations and reduce costs.

Historically, governments have heavily regulated transportation through direct ownership or stringent laws. However, there has been a shift towards privatization and deregulation, providing businesses with more opportunities to secure improved transportation services and reduce costs. Today’s competitive market offers a variety of transportation modes, including rail, road, pipeline, water, and air, each playing a pivotal role in the logistics chain.

Logistics encompasses the entire process of moving materials and products from suppliers, through production, and finally to the consumer. This includes inbound logistics (materials received from suppliers), materials management (movement within the company), and outbound logistics (distribution to customers). Supply chain management expands on this by integrating logistics with the broader communication network and operational strategy of the business.

Modern logistics also involves the integration of logistics and e-business. Companies like Snapdeal, Flipkart, and Nykaa often collaborate with logistics industries to streamline processes and reduce costs. This integration allows for more efficient resource management, reduces inventory and warehousing expenses, and enhances the speed of delivery to customers. Despite advancements in e-logistics and digital platforms, the physical delivery of goods still relies heavily on effective transportation systems.

As businesses evolve and embrace new technologies, the need for efficient transportation management becomes even more critical. Transportation management encompasses the day-to-day functions of the transportation process and requires considerable knowledge of pricing, services, and regulations. The future of logistics lies in the seamless integration of transportation systems with business operations, ensuring that products move swiftly and efficiently from manufacturers to end consumers.

A Transportation Management System (TMS) is a logistics platform that leverages technology to plan, execute, and optimize the movement of goods. It ensures compliance and proper documentation, providing visibility into transportation operations and facilitating trade compliance. TMS solutions streamline shipping processes across land, air, and sea, optimizing costs, improving efficiency, and enhancing customer satisfaction. According to Deloitte, by 2024, global freight volume is expected to surge from 54.69 billion tons in 2015 to 92.1 billion tons, highlighting the increasing importance of TMS in managing complex logistics.

Transportation Management Systems are utilized across a wide range of industries, including manufacturing, distribution, ecommerce, retail, and logistics services. Oracle states that these systems are primarily used by businesses that spend $100 million or more annually on freights.

But Small and Medium-sized Enterprises (SMEs) face several challenges when it comes to logistics management. One of the primary barriers is the high cost of implementing advanced logistics solutions. These costs include not only the initial investment in technology but also ongoing expenses such as maintenance, training, and updates.

However, cloud-based solutions have made TMS technology affordable for small and medium businesses spending $5 million to $10 million annually.

Additionally, SMEs often lack the internal expertise needed to manage and optimize complex logistics operations effectively. The rapid pace of technological advancements and the need for integration with existing systems pose significant challenges for SMEs, who may not have the resources to keep up with these changes.

In such scenarios, TMS solutions offer scalability, lower upfront costs, and easier implementation, making it possible for SMEs to benefit from advanced logistics management systems.

A TMS manages the entire transportation lifecycle of an order or shipment, which includes:

• Sourcing and Procurement: Gartner states that TMS supports bid management and optimization to source transportation capacity from third-party companies.
• Order Management: TMS consolidates orders and selects modes, routes, and carriers.
• Execution: It facilitates communication with carriers to execute shipment plans.
• Tracking and Tracing: TMS monitors shipment movements from pickup to final delivery.
• Settlement: It matches expected transportation charges against actual charges to manage discrepancies.
• Analytics: TMS utilizes embedded analytics to measure key performance indicators such as on-time performance, emissions calculations, and costs.

1. Logistics Service Providers (LSPs) and 3PLs
   • Third-Party Logistics Providers (3PLs)
   • Freight Forwarders and Brokers
2. Shippers and Manufacturers
   • Retailers
   • Manufacturers
3. E-commerce Companies
4. Distributors and Wholesalers
5. Freight Carriers
   • Trucking Companies
   • Rail, Air, and Sea Carriers
6. Cold Chain Logistics Providers
7. Construction Companies
8. Government and Public Sector Organizations

1. Cost Savings
   • SAP states that a TMS can significantly reduce both administrative and shipping costs through automation and optimization.
   • It automates tasks like trade compliance documentation and freight billing
2. Real-Time Visibility
   • According to SAP, TMS provides real-time track and trace capabilities, improving operational efficiency and customer satisfaction.
3. Efficiency and Automation
   • SAP and Oracle indicate that TMS streamlines procurement, freight billing, and compliance documentation..
   • It reduces the risk of errors and ensures smoother operations.
4. Scalability
   • Oracle and SAP highlight that cloud-based TMS solutions make advanced logistics accessible to smaller businesses.
   • These solutions handle increasing transaction volumes without sacrificing performance.

Emerging technologies are continually enhancing TMS capabilities. According to SAP and Oracle, innovations such as AI, machine learning, IoT, and blockchain are transforming TMS functionality. These technologies enable better predictions, real-time monitoring, and increased transparency, helping businesses stay ahead in a competitive market.

• AI and Machine Learning: These technologies improve the accuracy of transit time predictions and optimize capacity planning.
• IoT Sensors: They enable real-time monitoring of driving conditions, routes, and assets.
• Blockchain: Blockchain enhances transparency and traceability across the supply chain.

Deloitte’s extensive survey on the TMS market provides crucial insights and data:

• Market Growth: By 2024, global freight volume is expected to increase from 54.69 billion tons in 2015 to 92.1 billion tons. This surge is driven by factors such as increased demand, cost pressures, and the need for greater sustainability.
• Vendor Landscape: The survey, conducted in Q3/Q4 2019, included a diverse range of TMS vendors from Europe, America, and Asia, representing both small to medium-sized and large vendors with over 10,000 employees. It highlighted the fragmented yet growing nature of the TMS market.
• Technology Adoption: Approximately 90% of vendors support tablet devices, and 80% support smartphones, reflecting the demand for multi-device solutions. Additionally, 70% of vendors utilize cloud solutions, with 85% offering Software as a Service (SaaS).

1. Digitization of Business Processes:
   • Transition from paper-based to digital processes is critical for improving efficiency and transparency.
2. Machine-to-Machine Communication:
   • IoT technology enables intelligent transportation, logistics, and supply chain management through enhanced connectivity.
3. Automation and Robotics:
   • Automation and AI improve operational processes, such as automated hubs and gateways interacting with TMS.
4. Predictive Analytics:
   • Utilizing internal and external data to forecast demand and improve proactive decision-making.
5. Sustainability Focus:
   • Increasing emphasis on sustainable practices, including reducing CO2 emissions through optimized route planning and load consolidation.

Deloitte’s survey revealed that:

• Operational Modules: More than 75% of vendors offer comprehensive planning phases related to transport orders, warehousing orders, fleet, network, and capacity planning.
• Support Functions: All vendors provide shipment monitoring, and the majority offer fleet management and load planning.
• Finalization Modules: Over three-quarters of vendors include billing and proof of delivery functions.

• Global Presence: 65% of vendors operate in more than four regions, with a significant focus on Europe. The highest TMS functionality coverage is in contract logistics and warehousing, with road transportation being the most commonly supported mode.

While the benefits of a TMS are clear, businesses may face challenges during implementation:

• User Adoption: Employees may resist transitioning from manual processes to automated systems.
• Integration: Integrating a new TMS with existing ERP and SCM systems can be complex.
• Partner Participation: The value of a TMS is maximized when all partners and suppliers are integrated into the system.

A Transportation Management System is crucial for optimizing logistics operations in today’s globalized market. By providing comprehensive visibility, automating key processes, and leveraging cutting-edge technologies, a TMS helps businesses reduce costs, improve efficiency, and meet the rising demand for fast, reliable deliveries. Investing in a modern, cloud-based TMS can transform supply chain management and ensure competitiveness in an ever-evolving industry.

20High, exemplifies the capabilities of a good TMS by offering robust features that cater to the diverse needs of businesses. With its advanced analytics, real-time tracking, and seamless integration with existing supply chain systems, 20High empowers companies to streamline their logistics operations, enhance visibility, and achieve significant cost savings. As the demands of global trade continue to evolve, 20High stands out as a comprehensive solution that ensures efficient and reliable transportation management.