There are many benefits of TMS that manufacturers, distribution companies, and anyone who ships freight realize. They go often way beyond just the cost of shipping freight. If you can look at your freight and transportation department as more than just a cost, then you are thinking in the right direction on how to holistically help your business leverage a TMS for the maximum ROI.
A transportation management system (TMS) helps companies move freight from origin to destination efficiently, reliably, and cost-effectively. TMS encompasses solutions for moving freight in all modes and also includes intermodal movements. The TMS processes include freight transported inbound or outbound, domestically or internationally; using transportation assets owned either by the company or an outside service provider. The freight managed by a TMS ranges in size from parcels to bulk commodities.
Perhaps no other supply chain application offers so many ways to save money or drive value. But the main reason companies implement a TMS is to reduce freight spend. A TMS achieves these savings based on process enforcement, analytics, and optimization; with virtually no other supply chain application offering so many different forms of optimization.
There is a particular focus on the degree to which a TMS can reduce freight spend. Several methods can be used to reduce freight spend, with the different “savings buckets” having different levels of savings.
Shippers that implement TMS solutions compared to traditional methods of transportation management perform better in terms of service levels and freight savings. So let’s explore a few areas where there are further benefits of a TMS.
Increased Customer Service
When you have the ability to use a TMS with reporting and analytics you are able to see the effect of your choices within that TMS. For example, let’s say you were shipping LTL, and at the time of processing the shipment, you have a carrier you can choose based on time of transit, cost of shipping, and insurance limits. Let’s say you choose one carrier 10 times because it’s the lowest cost, which you naturally want to choose. 5 other times you pick another carrier because they happened to be the least cost carrier, but not always are they the cheapest. After a month goes by, and you use the reporting capability of the TMS, you see that although you chose the carrier 10 times, they only got the product to the customer on-time 60% of the time, and you are always having to run customer service interference, wasting valuable time and money. With the other carrier, they are on-time 100% of the time! This is valuable information, allowing you to increase your customer’s happiness by making sure the customer has no issue with receiving their product. Now that is increased customer service!
So how does a TMS help in warehouse efficiency? The MORE you use your transportation management system the more you decrease time on freight management and more time working on other projects such as warehouse duties. Furthermore, if your TMS integrated into systems, such as your ERP, you decrease days entry error providing less time spent on data entry or correcting mistakes caused by entry error. In combination with a Warehouse Management System, you get the overall combined Supply Chain visibility you need to make business decisions that drive further cost savings and decrease inefficiencies.
New Delivery Capabilities
A robust TMS offers the ability for you to optimize the way you ship. For example, you may want to put together pool point distribution programs or set up inbound programs between multiple locations within your organization, thus increasing overall efficiency and cost savings. A Transportation Management System can allow you to easily create a master bill of lading and you can have individual logins with your multiple locations which can then be managed by one person.
When a TMS gives you confidence that your customers are receiving their shipments on time, it allows you to plan better for the inventory you have on hand. Having an accurate forecast of your inventory is increasingly important as eCommerce freight shipping continues to increase for the foreseeable future.
Cash Flow Improvements
By employing proper transportation accounting, through freight payment, auditing, and consolidation services, within a TMS solution, a shipper can go from paying $11 per freight invoice, all the way down to only 5 to 10% of the $11, according to Inbound Logistics magazine. Additionally, by employing an outsourced provider of freight accounting services, a company can save 2 percent to 5 percent of its total freight bill by catching inaccurate charges or duplicate payments.
What other benefits would you say derived from a TMS implementation other than the ones stated above? Let us know in the comments below!