What does a transport management system do

What actually is a transport management system and how does freight forwarding software differ?

If you as a user are looking for a suitable Transport Management System, or TMS for short, you will quickly be overwhelmed by a large number of product hits during Internet research. On closer inspection, however, you can see that the keyword TMS conceals products with sometimes very different functionalities and use cases. Sometimes the impression arises that a system only has to have something to do with transports or forwarding agents in the broadest sense in order to be called a TMS. Reason enough to shed light on what is to be understood by a transport management system in general.

Definition of terms

First of all, it should be noted that the abbreviation TMS is used both as an abbreviation for Transport Management System and for Transport Management Software. This is not a problem, since both terms denote the same type of software system and can therefore be used synonymously.

In general, a transport management system deals with the planning, execution and optimization of the physical movement of goods. [1] It is to be seen as a logistic platform that enables the user to plan, monitor and optimize the daily use of the available means of transport. This list pretty much describes the central tasks of the dispatcher. This makes it clear that the main user of a TMS is the dispatcher.

In principle, the means of transport can be ships, trains, planes or trucks. Most of the transport management systems currently available on the market focus on controlling truck fleets.

Usually the TMS term is only used in connection with external transports. In-house transport is referred to as “conveying” according to DIN 30781 [2] and, in terms of software, is usually not mapped via a TMS, but via an intralogistics system.

Functions of transport management systems

The software solutions offered on the market under the term Transport Management Systems often include the following functionalities:

  • Registration and management of transport orders
  • Cost calculation
  • Tour planning and disposition
  • Telematics functions for transport control and route monitoring
  • Shipment tracking
  • Billing, internal billing or connection of downstream ERP systems

Whether all of these functions or only some of them are actually required depends heavily on the individual requirements of the company using them. In particular, the perspectives of carriers and shippers must be clearly differentiated from one another.

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Different perspectives on the TMS: transport service provider versus shipper

Historically, IT support for transport management was initially provided by the forwarding software of the transport and logistics service provider. Today's transport management systems represent a further development of conventional forwarding software and are also being used to an ever greater extent by shippers, i.e. industry and trade.

The sometimes considerable functional differences between TMS solutions can also be explained by the different perspectives and requirements of transport companies and shippers. For the transporter, the execution of transports represents the core of the value creation of his company. For him, almost all processes revolve around this core. With regard to software support, the transport company must therefore be able to map all company processes in a single monolithic system, if possible. So-called "forwarding software systems" have been created to meet this requirement since the late 1980s. However, they initially focused on the sales and commercial requirements of the transport company. Later, simple functions for scheduling and route planning as well as for implementation monitoring were often added to the systems. With the emergence of the TMS term, these forwarding software systems were then also sold under the label Transport Management System.

The view that “today's transport management systems represent a further development of conventional forwarding software” [3] is justifiable against the background of this historical development. However, this does not take into account the fact that the requirements of shippers for a transport management system differ significantly from those of transporters and forwarding agents.

For the shipper's transport management, administrative, commercial and sales tasks such as customer management, preparation of offers or billing are generally irrelevant, since these functions are usually mapped in ERP systems and relate not only to the transport service, but primarily to the goods delivered. Rather, the focus of the transport management systems required by the shipping industry is on the functions that were already mentioned as core elements in the definition of the term cited above: planning, optimization and monitoring of transports. The TMS core elements for the shipper are supplemented by functions for the selection and data connection of the carrier.

If you take into account the requirements of the shippers in the conceptual differentiation between forwarding software and TMS, the following formulation probably applies best: Forwarding software solutions also include TMS functions in some cases, but they usually also offer a lot of additional functionality in the commercial-administrative area , since this is where the application focus of freight forwarding software lies.

The following figure compares the TMS requirements of transporters and shippers and makes it clear that the overlap lies in the core functions of planning (route planning), optimization and monitoring of transports.

Additional functions for digital networking with customers

In the course of the digitization of transport management, more and more transport management systems also offer the possibility of including the customer or goods recipient in the electronic data flow. This is done, for example, via functions for shipment tracking or for the automatic dispatch of advice notes, i.e. electronic notifications on the estimated time of arrival (also known as the Estimated Time of Arrival or ETA for short) of the goods.

By integrating telematics systems, delivery notes can also be sent electronically to the driver and provided with digital customer signatures when goods are delivered. The electronic delivery note including the customer's signature can then be digitally sent back to the TMS and made available to the customer in paperless form.

These additional functions for digital networking are relevant for both shippers and carriers and should not be missing in any transport management system these days.

Conclusion

The core elements of a transport management system are the functions for route planning, optimization and monitoring of transports. The main user is the dispatcher. The software solutions offered on the market under the term Transport Management System sometimes include significantly more functions, especially when it comes to freight forwarding software. These multiple functions can be of interest to freight forwarders, but generally not to shippers.

Unfortunately, some systems are also offered under the keyword TMS in which the core functions of planning, optimization and monitoring are not available at all or only to a limited extent. For these products, the use of the term Transport Management System is to be regarded as borderline.

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