What Is a Transportation Management System? (With Goals)

By Indeed Editorial Team

Published June 10, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Working in the supply chain management field provides opportunities to specialize in several process and system areas. One important aspect of the transportation sector is knowing how to best ship and receive goods. Learning about management systems can help you decide if the supply chain management field is right for you. In this article, we review the definition and benefits of a transportation management system, explore who uses these systems and the goals of these approaches, and examine the future of these systems.

What is a transportation management system?

Those working in supply chain and logistics are typically quite familiar with what a transportation management system is. It's a specialized system that often uses software, networks, or cloud-based applications to plan, execute, and optimize the shipping and receiving of goods. These systems ensure that shipments follow regulations and policies and include appropriate documents. Most often, the system connects to a company's or sector's larger supply chain management system.

These management systems provide information about day-to-day transportation operations, trade compliance, documentation status, and delivery timelines for freight and other goods. They also streamline the shipping process and improve how businesses manage their transportation operations across air, land, or sea delivery methods. As a core technology in the supply chain management field, these management systems are a significant investment for companies. The return on these expenses centers on more efficient operations and improved customer service.

Related: How to Become a Supply Chain Manager

Transportation management system users

Shippers, carriers, manufacturers, wholesalers, retailers, distributors, third-party logistics providers, and e-commerce businesses use these management systems. Moving goods is a central aspect of supply chains. Many businesses rely on systems to help manage this function. Most businesses that use systems are large. The availability of more affordable cloud-based systems creates more opportunities for smaller businesses to utilize them.

Why implement a system?

Transportation management systems connect to each part of a company's processes (including planning, procurement, and logistics). The systems' scope offers entire process improvements for companies to plan transportation elements and implement solutions for internal and external customers. As trade and transportation policies and procedures become more complex worldwide and demand rises, a modern system increases a firm's ability to do business and meet customer needs.

Management system benefits

A modern automated transportation system provides many benefits to any business that involves logistics. These systems improve freight and goods movement and may enhance operations and business performance. In selecting a system, supply chain professionals seek the following benefits:

  • Reduced cost for the business and customer

  • simplified supply chain processes across geographic locations, delivery modes, and carriers

  • Automated business operations for fast and accurate documentation and billing

  • Improved information and higher security, particularly when goods and freight are in transit

  • Saved time from having fewer manual steps

  • Accelerated delivery times for goods and freight

  • Enhanced compliance with regulators on import and export details which reduces shipment delays and potential penalties

  • Improved processes with accurate and fast business insights

  • Increased levels of customer service and satisfaction with real-time updates and faster shipping

  • Added opportunities for business expansion by meeting goals and customer expectations

Related: 9 Supply Chain Management Degree Jobs (With Salaries)

Goals of a management system

Implementing a system takes time and resources, but the return on these investments may be immediate and long-lasting. Today's supply chains are more complex given the global movements of goods. Many supply chain managers seek to overcome logistical demands, improve transportation, and streamline processes. Goals for these systems include the following:

Deliver goods on time

Delivering goods on time is perhaps the most important goal of a management system in the supply chain industry. Overall, such a system creates processes to improve delivery from start to finish. For example, a system may reduce the number of trucks that are empty or have partial loads, which is the main obstacle to transportation industry efficiency.

Create better planning

A transportation management system helps businesses plan the best way to ship, use the most efficient carriers based on the distance, and reduce costs. Planning, while utilizing a system, provides information about each supply chain step, including tariffs and trade. When shipping across borders, plans also include information about any potential delays owing to trade regulations or customs requirements.

Related: Understanding Key Success Factors in Business Planning

Improve small business processes

Smaller businesses tend to rely on manual methods, such as spreadsheets, to manage transportation. Cloud-based solutions create more affordable options for small businesses to invest in a system. Using a digital solution can improve smaller businesses' results, create higher levels of customer service, and establish a strong reputation for them in their industry field.

Improve operations

Features of a system vary and may include matching transportation loads, communicating with carriers, documenting and tracking shipments, and handling freight billing and settlement. Systems may also track and trace information among carriers, warehouses, distributors, and customers. Other operational improvements include handling international logistics, consolidating orders into shipments through load optimization and vehicle routing, and giving access to suppliers and customers so they can create their own shipments within the system.

Optimize overall processes using information

Having information available from dashboards and real-time reports is a system goal that may result in better business performance. This level of intelligence allows companies to make decisions about suppliers, carriers, delivery times, and resources. Information may allow companies to create discount programs for carriers. They can also budget for toll costs based on weight, the time of day, and the transportation day. Companies can also find the most effective trip plan from mileage reports and toll charges.

The future of management systems

As customer expectations rise, supply chain managers keep pace with new and emerging transportation management systems. Companies use these new technologies to integrate their transportation and global trade management systems to offer better customer service. Some innovative technologies include:

Internet of Things monitoring

Internet of Things devices and sensors connect through wireless networks, software, and sensors. This approach in the supply chain sector may include smart barcode tags on a package or pallet. It can also include data from transport trucks that make real-time fleet monitoring possible, including knowing the driving conditions, routes, and assets. For example, knowledge from these connected devices allows companies to make decisions that reduce fuel and maintenance costs, improve driver safety, and decrease delays.

Digital assistants

Digital assistants, known as chatbots, provide immediate conversational responses to standard shipment transactions or questions. Supply chain managers set up these online assistants with responses to frequently asked questions, information about standard operating procedures at specific points in the supply chain, and reports on any incidents in the transportation system. This technology enhances customer service by improving delivery quality and timing. It also provides data from the digital assistant logs to find problem causes and make improvements.

Adaptive machine learning and intelligence

Systems may use machine learning and intelligence on existing and historical data to predict transit time, identify at-risk shipments, such as goods with seasonal uses or those that expire, and plan capacity. The best travel routes may also result from data and machine learning models. Using these technologies may improve system efficiency by creating better methods to plan and budget for transport truck, rail, or other equipment maintenance or replacement.

Related: Machine Learning Certification Guide and Career Options

Blockchain

The blockchain began as a record-keeping system to help businesses safely and easily network and collaborate. Blockchains are available to integrate complex management systems among shippers, customers, and carriers. This technology may be most useful in creating systems that improve the following:

  • Food safety: Blockchain solutions record the quantity and transfer of all food-related assets, such as trailers, pallets, and containers, allowing you to access information for food safety investigations easily.

  • Potential for product loss: Retailers and distributors use blockchain management systems to prevent losing or damaging shipments by assigning accountability at each supply chain step.

  • Payments: The technology began with a focus on payments and now reduces billing errors from carriers, shippers, and third-party logistics companies.

  • Transparency: Blockchain software and applications keep each transaction in the cloud, virtually eliminating the potential for errors and increasing data accessibility for anyone with permission.

  • Security of payments: Processing payments through blockchain software as part of a management system in the supply chain industry ensures safe storage of bills and financial records while reducing double or missed billing.

Cold chain management

As a blockchain solution in these management systems, cold chain management applies to shipping when temperatures are important at checkpoints along the supply chain. Cold chain management is a system that monitors the supply chain with this important real-time information available to shippers, regulators, or receivers at multiple locations. For example, a requirement may include keeping perishable or temperature-sensitive products at a cool temperature in a container or truck and a slightly higher temperature on store shelves.

Related: 10 Careers in Logistics (With Salaries and Primary Duties)

Cloud-based transportation systems

A cloud-based management system improves economies of scale, lowers initial costs for software, offers lower or no upgrade fees, and provides a faster return on investment than traditional systems. These solutions include automatic updates with the latest features and improved systems security. Information technology (IT) professionals and supply chain managers can often install cloud-based transportation systems relatively quickly.

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