A transportation management system (TMS) is a subset of supply chain management

Supply chain management

Supply chain management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers...

 concerning transportation operations and may be part of an enterprise resource planning

Enterprise resource planning

Enterprise resource planning systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application...

 system.

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. Most TMS systems help shipper directly work with asset-based carriers and support dis-intermediation (including avoiding use of non-asset based brokers and other intermediaries).

Licensing

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 3 primary offerings are:

1. On-premise licensing (traditional purchased license)
2. Hosted licensing (remote, Saas, Cloud)
3. On-premise hosted licensing (a blend of 1 and 2)

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.

Functionalities

Transportation management systems manage three key processes of transportation management:

1. 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.
2. 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…)
3. Measurement – TMS have or need to have a logistics key performance indicator (KPI) reporting function for transport.

Various functions of a TMS:

• Planning and optimizing of terrestrial transport rounds
• Transportation mode and carrier selection
• Management of air and maritime transport
• Real time vehicles tracking
• Service quality control
• Vehicle Load and Route optimization
• Transport costs and scheme simulation
• Shipment batching of orders
• Cost control, KPI (Key performance indicators
  Key performance indicators
  A performance indicator or key performance indicator is an industry jargon for a type of performance measurement.. KPIs are commonly used by an organization to evaluate its success or the success of a particular activity in which it is engaged...
  
  ) reporting and statistics
  • Typical KPIs include but not limited to:
    1. % of On Time Pick Up or Delivery Performance relative to requested
    2. Cost Per Metric - mile; km; Weight; Cube; Pallet
    3. Productivity in monetary terms, e.g. $/lb or $/shipping unit
    4. Productivity in operational terms, e.g. shipping units/order or weight/load