98% of large businesses and 83% of small businesses utilize a transportation management system. So why aren’t you? If you still aren’t convinced of the benefits of a transportation management system, you’ve come to the right place. So stay tuned to learn more about what transportation management systems are, what they do, and why they’re important.
What Is a Transportation Management System?
A transportation management system is a software tool that shippers use to optimize the entire logistics process from start to finish. This system helps manage the various moving parts involved in a company’s logistics operations. It utilizes intelligent automation to provide useful insights to shippers that they can use to improve the efficiency and effectiveness of their operations.
Specifically, a transportation management system helps in three important areas: planning, execution, and settlement.
1. Planning
A transportation management system can help with transportation planning. It can be difficult to predict or forecast transportation needs manually; however, it’s important to be able to predict changes in supply or demand that will necessitate transportation adjustments. A transportation management tool can effectively plan and forecast network needs by gathering and analyzing numerous data points.
From there, a transportation management system can also help you optimize routes so that you can be confident in the efficiency of the route. Finally, a transportation management system can help you manage the different carriers that you work with.
2. Execution
A transportation management system can help with transportation execution. Even with the proper planning, executing an efficient transportation operation can be challenging without the right tools. A transportation management tool makes it easy to execute and track shipments every step of the way. That way, there’s no question as to where a shipment is and if it’s going to be delivered on time.
3. Settlement
A transportation management system can help with settlement. Without a system in place, it can be difficult for shippers to process payments on both the customer side and the driver side. However, with a transportation management system in place, shippers can quickly process payments from customers and pass on the appropriate amount of money to carriers in exchange for their services.
How Does a Transportation Management System Compare to a Warehouse Management System and Enterprise Resource Planning?
Now that you’re more familiar with a transportation management system, you might be wondering how it compares to other tools used in the shipping world like warehouse management systems and enterprise resource planning. A warehouse management system focuses on inventory rather than transportation to keep the warehouse organized and efficient. An organized and efficient warehouse ensures that orders can be fulfilled and shipped out accurately and quickly.
Both transportation management systems and warehouse management systems fall into enterprise resource planning. Enterprise resource planning helps shippers manage everything from transportation to inventory and everything in between within a single platform. Since everything is done within a single platform, enterprise resource planning makes it easy for shippers to manage their day-to-day business operations better.
What Are the Benefits of Using a Transportation Management System?
Using a transportation management system offers shippers a whole host of benefits. Here are just a few to keep in mind when considering a transportation management system:
1. Anticipating Needs
A transportation management system can help you anticipate your needs. As a shipper, it can be incredibly challenging to manage all the different aspects of your operation to change along with supply and demand. These days, the truck driver shortage is affecting many shippers, increasing delivery times, and even causing them to lose business.
Thanks to your transportation management system, the driver storage won’t affect you as you’re better able to anticipate both your supply and demand.
2. Optimizing Routes
A transportation management system can also help you optimize your routes. Manually planning your routes is both ineffective and inefficient. Instead, let technology do the hard work for you by finding the best routes based on factors including the shipping origin, destination, and intermediate stops in addition to roadwork and traffic.
Thanks to your transportation management system, you can get your orders to the recipients in record time with optimized routes.
3. Tracking Freights
A transportation management system can help you track your freight. In a world where customers have come to expect real-time updates and tracking of their orders, you can provide them with this information by using your transportation management system. Additionally, you can then use this tracking information to measure and improve carrier performance.
Thanks to your transportation management system, you can better meet customer expectations by providing them real-time shipping updates and guaranteeing on-time delivery.
4. Managing Carriers
A transportation management system can help you manage your carriers. It can be challenging for shippers to manage a network of dozens of different carriers manually. At the same time, you need to manage this network to ensure efficiency and quick booking. A transportation management system helps you select carriers and digitally tender loads to the selected carrier.
Thanks to your transportation management system, you can better manage a large network of carriers which means that you can keep expanding your network to keep up with customer demand.
5. Automating Business Processes
A transportation management system can help you automate time-consuming business processes. Some of these key automations have already been mentioned, for example, automating route planning for carriers, tendering loads to the selected carrier, and providing relevant data and insights.
Thanks to your transportation management system, you can save a ton of time by automating processes that previously had to be done manually. But you don’t just save time, you also get better results with automation as well.
6. Reporting KPIs and Analytics
A transportation management system can track key performance indicators (KPIs) and other analytics needed to run an efficient operation. While the exact KPIs you need to track will vary depending on your business needs, here are some of the most important ones that a transportation management system can help you with:
- Freight cost for each unit shipped: Divides total costs for freight shipping by the number of units shipped to understand the total freight spend for a given time
- Transportation time: Measures the expected shipping time against the actual delivery time for each shipment with a goal of better-than-expected performance
- Freight billing accuracy: Divides accurate freight bills by the total number of bills in the period with a goal of 100% accuracy
- Percent trucking capacity use: Dividing the shipment weight by the available shipping capacity to maximize your shipping capacity
- Fuel efficiency: Dividing the number of miles driven by the number of gallons of gas used to maximize fuel efficiency, save money, and protect the environment in the process
- Maintenance costs: Measures the cost of maintenance, both scheduled and unexpected, to determine which vehicles should be kept in service and whether or not paying for a repair is actually worthwhile
- Loading and unloading time: Measures the time spent on loading and unloading freight to prevent delays
- Border delays: Measures the time spent undergoing border inspections, processing border-related paperwork, and sitting in border-related traffic delays
- Labor productivity: Measures how productive employees are based on how much they’re getting paid
7. Payment
Finally, a transportation management system can help with payment processing. The best systems are designed so that you can automatically audit each carrier invoice and easily pay carriers.
For example, RPM utilizes a system wherein drivers can get paid within 72 hours after completing a load. With such a system, there’s no need for drivers to wait two weeks for payment; instead, they can get it within days. When drivers get paid quicker, they’re happier and are more likely to stick around as a result.
How Do I Choose the Right Transportation Management System?
Clearly, using a transportation management system can provide you with a whole host of benefits. So if you’re convinced and are ready to move forward with one, here’s what you need to consider to choose the right one for your business:
Business Size and Needs
First of all, you need to consider your business size and needs when choosing a transportation management system. If you’re a smaller business with only a few shipments a week, you may not need a bonafide transportation management system. Instead, you could manually manage these shipments using traditional methods like spreadsheets.
If you’re a larger business with dozens of shipments a week, you could definitely use a transportation management system. Additionally, if you have a large carrier base, use multiple modes of transportation, and operate out of multiple shipping facilities, using a transportation management system would make your life easier. Just make sure that it’s a comprehensive system with plenty of automation to really get the most bang for your buck.
Depending on your situation, it may also be possible to use your provider’s technology platform instead of investing in your own transportation management system. For example, RPM is a top logistics provider that offers personalized digital solutions for your shipping needs. We provide real-time integrations and onboarding, automated shipment creation, machine learning, electronic data interchange, and application programming interface.
We also provide error-free shipment updates, carrier and equipment visibility, multi-source data aggregation, optimized network efficiency, and automated order and payment processing. So if you’re looking for the best technology and the best transportation provider, then you need to check out RPM.
Cloud-Based vs. On-Site
When choosing a transportation management system, you also need to choose between a cloud-based system and an on-site system. An on-site system can only be accessed at specific locations where it has been downloaded onto computers. A cloud-based system, on the other hand, can be accessed anywhere since all the data is stored in the cloud rather than on the device itself.
Cloud-based systems are definitely the more convenient and useful option as they provide remote access to employees that are often on the go. These systems have become increasingly popular as technology has advanced enough to provide us with fast and convenient systems that are also secure. So if you’re looking for the best transportation management system for your burgeoning business, then you may want to consider a cloud-based system over an on-site system.
Outsourcing
While a transportation management system can definitely make your life easier, you still have to do a lot of the work, and doing this work requires basic knowledge and understanding of the industry. If you don’t already have this knowledge and understanding, you may want to consider outsourcing your transportation management services to someone that does.
When you outsource your transportation management services, you’re relying on a third party to provide you with the insights and support you usually receive from an in-house team. This is a great solution for companies that are just starting out and may not have the experience or resources to handle transportation management in-house.
Outsourcing your transportation management services provides a dedicated support team that helps with KPI creation, monitoring, and reporting, requests for proposals (RFP) management, and demand forecasting while offering continuous network improvement and optimizations.
How to Implement a Transportation Management System?
Once you have chosen the right transportation management system, you need to implement it. Here are some steps for a successful implementation:
Step 1: Involve Your Team
Implementing a transportation management system should be a team effort. Before you begin the implementation process, you need to involve your team. Have discussions about why you need a transportation management system and how they can benefit from it. When your team is on board, the implementation process will go a lot smoother.
Step 2: Define Your Goals
To make it clear exactly why you’re implementing a transportation management system and what you expect to get out of it, you need to work with your team to define your goals. For example, are you trying to boost your on-time delivery rate or retain carriers? No matter what your goals are, it helps to have something concrete to work towards.
Step 3: Train Your Team
In order to successfully integrate a new transportation management system into your established business operation, you need to provide your team with adequate training. They need to know how the system works and how to take full advantage of it. Make training as quick, easy, and engaging as possible to keep your employees on board with the change.
Step 4: Involve the Entire Company
For your transportation management system to truly be a success, you don’t just need to involve the employees who will be using the tool on a daily basis, but you need to involve the entire company. This is because the right transportation management system will impact every corner of your business, so everyone needs to be aware of what you’re doing and why.
Step 5: Establish an Open Door Policy
It also helps to establish an open-door policy when implementing a new transportation management system. This policy helps employees feel more comfortable coming to you with questions or concerns about the implementation process.
You can make your employees feel valued and heard with more and better communication.
Step 6: Perform Adequate Testing
Before you formally launch your transportation management system, you need to test it out to make sure that you’re ready for launch. You can perform a variety of different tests, including end-to-end (E2E) tests, user-acceptance tests (UAT), and stress tests to cover all your bases.
When Can I Expect to See Results From a Transportation Management System?
After implementing a transportation management system, you may expect to see results right away. However, it may not work this way. While some benefits will be immediate, it will take time for the system to aggregate your data and make meaningful insights. The more data the system has, the more accurate and useful it will be.
It’s important to stay patient when transitioning to a transportation management system. There will be bumps in the road, but that doesn’t mean that you should give up entirely. Instead, work to find a solution to these bumps and move forward so that you can begin benefitting from your hard work and investment.
Conclusion
While a lot of work goes into implementing a transportation management system, it’s definitely worthwhile if you choose the right tool and implement it correctly. If you’re looking for an easier approach to transportation management, you should consider working with a logistics provider like RPM.
RPM is a top logistics provider in both freight and vehicle transportation that offers a whole host of different services and methods of transportation for a variety of different industries. Our carrier network and technology platforms are unmatched, making us one of the best in the business.
Reach out to our logistics experts today to see how we can help with your transportation needs.
Sources:
What Is a Transportation Management System? | Oracle
9 KPIs to Track for Proper Transportation Management | LinkedIn
User Acceptance Testing | Stanford University IT
