Transportation management system
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A TMS usually "sits" between an ERP or legacy order processing and warehouse/distribution module. A typical scenario would include both inbound (procurement) and outbound (shipping) orders to be evaluated by the TMS Planning Module offering the user various suggested routing solutions. These solutions are evaluated by the user for reasonableness and are passed along to the transportation provider analysis module to select the best mode and least cost provider. Once the best provider is selected, the solution typically generates electronic load tendering and track/trace to execute the optimized shipment with the selected carrier, and later to support freight audit and payment (settlement process). Links back to ERP systems (after orders turned into optimal shipments), and sometimes secondarily to WMS programs also linked to ERP are also common.
Recently, these systems have been offered with many different types of licensing arrangements. These different arrangements have given shippers who otherwise would not be able to afford sophisticated software the opportunity to utilize TMS to better manage this vital function. The 4 primary offerings are:
- On-premise licensing (traditional purchased license)
- Hosted licensing (remote, Saas, Cloud)
- On-premise hosted licensing (a blend of 1 and 2)
- Hosted - TMS free of licensing (same as 2 but free with no license requirements)
Additionally, some software providers have either been acquired or merged with traditional supply chain management consultancies and are now offering shippers "blended" managed and software services as an outsourced process. Primary Tier 1 TMS providers are still independent, carrier and 3PL neutral, and ERP neutral. While ERP providers are moving to improve their on-premise transportation management offerings by adding TMS modules to their existing, implemented base, the advent of Software-as-a-Service or "SaaS" delivery has resulted in a surge of emerging TMS providers. Independent TMS providers have an advantage in that their smaller size and specific focus on transportation process automation enables them to be more responsive to shifting transportation needs. Moreover, transportation is the core competency of the independent TMS provider whereas for large ERP providers, transportation is not a top priority. This is why according to a survey of 400 transportation managers produced in 2012 by analyst firm Peerless Research Group, a plurality reported that load optimization/consolidation, electronic communications, settlement, reporting and integration with other enterprise applications were prime objectives. Shipping organizations are increasingly drawn to SaaS model TMS implementations due in large part to the low level of up-front costs (in terms of hardware and IT resources) required to implement and integrate SaaS-delivered TMS with industry standard ERP systems.
Transportation management systems manage four key processes of transportation management:
- Planning and decision making – TMS will define the most efficient transport schemes according to given parameters, which have a lower or higher importance according to the user policy: transport cost, shorter lead-time, fewer stops possible to ensure quality, flows regrouping coefficient, etc.
- Transportation Execution – TMS will allow for the execution of the transportation plan such as carrier rate acceptance, carrier dispatching, EDI etc..
- Transport follow-up – TMS will allow following any physical or administrative operation regarding transportation: traceability of transport event by event (shipping from A, arrival at B, customs clearance, etc.), editing of reception, custom clearance, invoicing and booking documents, sending of transport alerts (delay, accident, non-forecast stops…)
- Measurement – TMS have or need to have a logistics key performance indicator (KPI) reporting function for transport.
Various functions of a TMS include but not limited to:
- Planning and optimizing of terrestrial transport rounds
- Inbound and outbound transportation mode and transportation provider selection
- Management of motor carrier, rail, air and maritime transport
- Real time transportation tracking
- Service quality control in the form of KPI's (see below)
- Vehicle Load and Route optimization
- Transport costs and scheme simulation
- Shipment batching of orders
- Cost control, KPI (Key performance indicators) reporting and statistics
- Typical KPIs include but not limited to:
- % of On Time Pick Up or Delivery Performance relative to requested
- Cost Per Metric - mile; km; Weight; Cube; Pallet
- Productivity in monetary terms, e.g. $/lb or $/shipping unit
- Productivity in operational terms, e.g. shipping units/order or weight/load
- Typical KPIs include but not limited to:
However, all the above logistical functions need to be scrutinized as to how each parameter functions.
Several specific patents have been filed to protect the intellectual property rights of US TMS development corporations. However, judgments against several foreign software companies in 2009, 2010 and 2012 have thus far proven unenforceable. Several "job shop" developers in India, China and other Asian countries have been knowingly violating existing US patents. The US Patent Office has been working on a long term solution to protect US TMS patents but enforcement has proven difficult.
The most notable and largest number of TMS patents have been filed by IBM, SAP, Manhattan Associates, TheFreeTMS.com, Oracle, JDA, and Sterling. Each holds over 15 patents protecting various aspects of their technology.