What Is a Transportation Management System?

According to Grand View Research, the estimated market value of transportation management systems equals $11.9b in 2023. The continuing growth will enable the market to reach $31.18b revenue in 2030, at 14.8% CAGR. 

The numbers are impressive. 

Why do logistics companies invest in TMS software? 

Short answer: they increase the bottom line. According to Descartes’ Study, companies implementing a TMS can save between 5% and 15% of freight costs. 

How?

Let’s look more closely. This brief guide lists features, benefits, implementations, and trends of TMS development.

Businesses across all sectors are increasingly adopting fully digital TMS solutions. 

A robust transportation management system provides a real-time overview of inbound and outgoing freight movement. While shippers and carriers are the main user groups, the list is wider. It includes:

TMS users vary based on their occupation. Based on the specific end-use segments, they are:

There are no limits in transportation methods. Every business conveying goods by land, sea, or air benefits from a transportation management system. Advanced systems enable users to combine different transports within one delivery.

A good TMS filters out and automates routine operations—a mainstay of the shipping and handling business.

The transportation management system usually works with data pulled through other supply chain and logistics modules, e.g., WMS, order management, or procurement system. 

The TMS will automatically handle planning and execution for numerous tasks in the overall freight movement workflow. Depending on specific business needs, a TMS can include such fundamental aspects as:

Like any other business software, a TMS cuts down dramatically on the need for continual inquiry emails or phone calls between in-house departments and external contractors.

It eliminates potential bottlenecks or delays, providing:

A well-implemented transportation management system means that orders are shipped faster and more efficiently. The results are lower overheads and improved client relationships at both supply chain ends.

A transportation management system offers broad and deep control over any cargo shipping and delivery industry phase. The main functionality covers the following activities: 

and more.

The software enables customers and managers to find the best option based on user-defined parameters. Users look through the provider’s focus, services and routes, freight type, and dimensions. Options can be prioritized according to various metrics:

• fastest time
• lowest cost
• fewest stops
• most efficient multi-drop routes
• one-click mileage calculators
• and more

TMSs can even help with contingency planning around background issues like truck driver shortages.

Any aspect of the in-transit phase of deliveries belongs here: 

• order batching and load assignment
• optimization of routes and rounds in response to changing circumstances and cost-control measures
• real-time global tracking of all land, sea, rail, or air fleets
• instant communication updates with individual drivers and handlers

A transportation management system includes a wide range of functions, such as:

• full logging procedures to track and trace every stage of an item’s journey from depot to door
• receipt processing and invoice management (carrier and customer)
• return management
• alert systems to respond to minute-by-minute incidents and delays
• integration with third-party accounting
• payroll and human resources management
• rolling vehicle maintenance and repair schedules

Analytics and reports functionality measures, reports, and provides feedback on performance evaluation. It addresses such detailed metrics as:

• on-time percentages
• costs per unit or mile
• monetary and operational productivity rates
• individual performance
• customer ratings
• supplier reliability
• quality control measures
• and more

An important note. TMS software works alongside other digital management programs in the overall supply chain. Seamless integrations and data exchange are crucial.

The best transport management systems ensure that a worker can quickly track every single delivery from start to finish. The software helps with an optimal sequencing of costs, steps, and variables.

The longer-term benefits are:

Important factors in achieving this include:

What is a transportation management system from an implementation point of view? Several types are possible:

As part of a wider suite, TMS sits between other complementary pieces of software (warehouse management system, resource planning, supplier management, etc.). Together, they comprise a full supply chain management (SCM) system, linking all facets of goods’ handling and movement.

On-premise TMS still dominates, having 57% of the market share. It runs on internal servers with indirect data exchange. The complexity and cost of a locally installed package once limited it to only large corporations. Yet, this option becomes affordable even for SBMs when they outsource logistics development.

Cloud apps grow fast, being flexible, lightweight, and cost-effective. They enable businesses to improve performance by letting users reach functionality anywhere. All departments join efforts effectively within diverse areas.

Security is high with the right team. Updates are fast and seamless.

Every TMS software needs constant integration of the newest technologies to advance its capabilities. 

Understanding the trends lets the businesses using logistics management software better adjust to evolving client expectations.

The following trends are shaping the future of transport management systems: 

Easiness is the deal breaker. While the systems grow in complexity and dynamics, they must remain intuitively clear. A TMS must take the guesswork out of the company’s processes. It must simplify operations for employees and require as little adoption time as possible. Instant support and access to documentation is crucial.

Updates and integrations must also be fast and seamless to eliminate idle time. 

Trade regulations close gaps in sustainable development and environmental protection. For instance, the Germany Supply Chain Due Diligence Act requires domestic companies to monitor human rights and compliance with environmental standards across the entire supply chain. Other countries will pass similar regulations soon. 

Transportation management systems require feature updates to support sustainability. For instance, TMSs must enable companies to calculate emissions when electing the best route and rank suppliers based on their compliance. 

AI is one of the biggest trends. Single employees can complete the tasks that will normally take days of work by an entire department with its help.

According to a McKinsey report, AI technology is valued between $17T and $26T. It lets companies control processes, predict needs, and optimize flows. 

For instance, Uber Freight has introduced Insights AI to increase the precision of estimated arrivals, respond to customers’ queries, suggest alternative routes, and more. 

The so-called Amazon effect affects logistics-related businesses. Customers can order any item online in a click and enjoy rapid delivery through the Amazon fleet. 

The effect disrupts customer habits and skyrockets competition from the retail giant, to which logistics companies must respond. 

Businesses must become equally efficient. TMS is an integral part, enabling them to deliver fast and cost-effectively.

Increased visibility is one of the key logistics trends. It has been the second top reason a company plans to invest in a new TMS or replacement. 

Companies are looking to extend real-time transportation visibility through track-and-trace features. 

A TMS helps prevent damages and losses and determine cost leaks. More importantly, the software helps determine package thefts—a growing challenge for transportation companies.

The IT Craft team has helped the US startup build a Web portal for simplified management and tracking of less-than-truck shipments.

The team delivered an MVP from scratch on time and soon started on its transformation to ensure the same high-level performance and feature expansion under skyrocketing user interest. Constant improvement and a high customer experience enabled the system to become an award-winning software in its category, outpacing notable competitors such as Uber Freight.

The client is a NYC business striving to provide its customers with exceptional services. It started with on-demand laundry services and later focused specifically on business clients.

A custom-built CRM plays a key role in accurate order execution. TMS functionality is responsible for optimized driving costs. It transmits optimized routes and schedules for pickups and deliveries to the driver app.

“IT Craft is honest and straightforward. They’re a good partner to work with.”
Charles Sakkal, Founder, eLaundry

So, what is a transportation system? How does it help?

A transportation management system (TMS) covers all aspects of a company’s freight movement. It enables efficient digital processing, logging, ordering, and fine-tuning. 

Just as supply chains must continually innovate to stay in line with the competition, so will the software. Your business needs the best TMS setups with the support of day-to-day freight infrastructures.

Cloud-based transportation management systems are growing in demand. They incorporate more and more cutting-edge technologies such as AI, automated live updates, and query handling for global customers 24 hours a day.