What is TMS software

If you’re searching for a TMS software solution for your business, be sure to check out our full suite of logistics software. If you want to learn more about what TMS software is, this article discusses and defines it, the benefits it has brought to the world, who uses it, and how it’s used. This article is for beginners who want to attain a working and general understanding of TMS software.

What is TMS software

TMS software (Transportation Management System software) is a type of logistics software, or supply chain software, that automates a company or organization’s transportation management system – the system of processes they use to move goods for their business.  In order to understand what TMS software does, it’s important to first understand what a transportation management system is.

What is a transportation management system

A transportation management system is a set of integrated processes that helps move goods and freight from one location to another in an ideally organized, repeatable, economical, and transparent way (although not all transportation management systems achieve this). It also allows for those goods and freight to be manipulated in various ways along their journey to the customer. For example, a logistics company might need to unpack a container filled with goods at a warehouse and send those goods to different retail stores.  Conversely, they might need to combine goods from different vendors into a container at warehouse and send all those goods to a factory by truck, plane, cargo ship, or train.  The processes of moving, packing, unpacking, consolidating, deconsolidating, and shipping freight across different modes of transportation – in the air by plane, on the ground by train or trucks, or over water by cargo ships all make up the different segments or aspects of a transportation management system. Thus, a transportation management system makes up a majority of a company’s supply chain and logistics operations. We’ll talk more about the many other different aspects of a transportation management system in a bit.

It’s important to understand that the term transportation management system usually also refers to the logistics software used by a company or organization to manage their logistics operations – or the transportation of their inventory, goods, or freight. That’s because logistics software has become so vital and embedded into the process of transporting cargo that when people talk about a transportation management system, they’re also talking about the software.

Despite the fact that the terms logistics software and transportation management system have become synonymous in today’s technology driven world, it is interesting to remember that, in the not so recent past, a transportation management system could have been made up of just a network of carriers who used pen and paper to document the movement, distribution, and delivery of goods and that these individuals had no notion of logistics software (or any type of software for that matter)! Some industry veterans started their careers during these simpler times, evolved with the industry, and are still working today.

In addition to recognizing that the term transportation management system is synonymous with software, it’s also important to understand that it is a sort of ‘umbrella term’ and rather generic. So, when someone says ‘TMS software’ or ‘TMS system’, they can mean a variety of things.  The following terms are loosely interchangeable for TMS software:

  • TMS software
  • Transport software
  • Transportation management system
  • Freight software
  • Supply chain software
  • 3PL software
  • Logistics software
  • Freight forwarding software
  • Freight software
  • Shipping software

While these terms are interchangeable, some are more or less precise than others. In this article, we’ll do our best to help you understand how these terms are related, as well as how they’re different. These differences should become more clear as you continue to read this article, that said, some of the nuances may be beyond the scope of this article, and your interest.

The benefits of TMS Software

We’ve been shipping things for a long time. Internet technology has taken the ancient transportation management industry and revolutionized it with TMS software. As opposed to putting your cargo on a ship and waiting for the recipient or carrier to send you a letter by mail confirming receipt, a TMS software gives procurers (companies and individuals who have cargo shipped to them, also known as inbound cargo) and shippers (companies and individuals who ship cargo to others, also known as outbound cargo) real-time visibility and management capability over the movement of their cargo. That means that modern day TMS logistics software allows companies and individuals to know where their cargo is at all times, what’s being done to it, and even what temperature it’s at.  These companies and individuals can then make decisions based on weather conditions, supply, demand, and other real-time factors and changes even while the cargo is already in route. This visibility and agility would not be possible without a TMS solution, and allows for greater efficiency, reliability, and lower cost in shipping.

TMS software has also significantly reduced costs and increased efficiency in logistics operations by reducing error, speeding up and replacing manual operations, linking supply and demand via a transparent and easily accessible network of potential carriers, and more. While these technological improvements in the transportation of cargo might not sound like such a big deal at first, upon closer inspection (no pun intended), you’ll find that these advances in logistics software have enabled us to enjoy many of the luxuries we might take for granted today (luxuries that may have seemed impossible and even unimaginable in the past). For example, it’s TMS software advancements that have given us:

  • Access to the extraordinarily low prices and affordable products at major retailers like Walmart
  • Same day shipping of almost any product you can imagine from ecommerce companies like Amazon
  • Low cost, on-demand, seamless ride sharing with automated payments from companies like Uber and Lyft
  • Fresh, cold-pressed coconut water from Thailand sold on the shelves of grocers half a world away

TMS software has truly changed all of our lives. With these benefits, it’s no surprise that the TMS software market is expected to grow at a compound rate of 6.95% and reach 1.72 billion by 2019 – according to a 2016 report by Gartner.

Who uses TMS software?

A transportation management software system can be used by any organization that manages their supply chain internally, or ‘in-house’. These organizations are usually manufacturers, distributors, wholesalers, or retailers. That said, they can also include large institutions like the military, universities, hospitals and more. These companies may choose to manage either inbound cargo (which are goods that are procured) or outbound cargo (which are usually goods that are sold).

That said, because of the nuances, challenges, complexity and opportunity costs associated with managing a transportation management system in-house, TMS software systems are also used by logistics service providers – which are third party companies that oversee, manage, and organize the movement of cargo as a primary service that they offer to manufacturers, distributors, wholesalers, retailers, and any organization that wants to move cargo. These logistics companies benefit the organizations they move cargo for because they are able to leverage the sheer volume of logistics operations they manage in order to specialize and refine their transportation management system with cutting-edge processes and software that allows them to achieve economies of scale and cost savings for their customers. These logistics companies also benefit their customers by freeing them to focus on what they do best – whether that be selling toys, manufacturing automobiles, growing corn, or constructing sky scrapers.

Some companies only need a transportation software solution for one or two shipping operations, while others require an end to end solution. The type of transport software a company needs depends on:

  • Whose logistics operations they’re managing. Are they managing their own transportation management system in-house, or are they managing transportation for many companies like a 3PL, broker, or freight forwarder might.
  • What type of logistics operations and transportation methods they require. For example, do they need to simply move a container or do they need the container stored, unpacked, and further processed? This could include moving cargo through customs exams sites, inspecting cargo for quality assurance, repacking cargo, etc.
  • What type of cargo they want to move. Do they want to move temperature controlled perishable cargo like fruit or frozen meats, fragile goods like glass or furniture, or large goods like heavy machinery? If so, then they’ll need special equipment, TMS software, and processes.
  • Where the cargo is coming from and going. If a company needs to move cargo from the US to China, they’ll need to have relationships established that will give them ideal pricing and the right to manage exports and imports between these countries. If a company needs to move cargo from Malaysia to Italy, there will be different requirements, restrictions, regulations, import duties and unique organizations that they must cooperate with. Having established and managed relationships with all entities involved in the movement of your cargo a key part of a transportation management system.

These are just some of the major factors that could influence the type of TMS software a company might use. In future articles, we’ll discuss some of the major types of transportation management software on the market, and what processes those logistics software systems automate. Do keep in mind that every company makes their own choice as to what processes they choose to automate in their logistics software and what features and functionality they include. There are many logistics software companies out there that refer to their logistics software as TMS software. Many of these different TMS solutions offer very different features and functionality and automate different segments of the supply chain, despite all being referred to under the same umbrella term of ‘TMS software’.

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