Searching for a transportation management system (TMS) is something like buying a new car. There are plenty of models out there—from the luxury styles to bare bones versions—and the models come with plenty of options. Some will manage your freight around the globe; others provide good, reliable execution tools at relatively low cost.
Want a TMS to help purchase transportation service? You got it. Book freight? Done. Execute against existing carrier contracts or customer requirements? Done. Analyze speed and cost tradeoffs? Done. Run sophisticated algorithms to help choose carriers? Done. Create bills of lading? Audit carrier billings? Track shipments and notify everybody of delays? Measure carrier performance against contracted standards? Ensure international shipment documentation is correct? Done, done, done and done.
Standing alone, a TMS can accomplish a lot: Transportation management systems have helped shippers reduce transportation costs, increase transportation reliability, improve asset utilization, and capture and manage critically important information before, during, and after shipment.
But combine it with other systems and suddenly, you've got something very powerful. All the information captured and managed by a TMS can be used as a key component of a supply chain execution (SCE) system, providing visibility of inventory out on the road, on the seas and in the air. In fact, transportation, warehousing, order management and inventory systems can all support one another, helping create a seamless flow of information that is the backbone of supply chain management success.
Long on execution
TMS packages, or at least shipping software in some form, have been around for some time now. But what exactly does a basic execution system do? Razat Gaurav, senior manager of product marketing and business development for i2, explains that the software is designed mainly to help users handle the following four functions:
Given that this software has been around a while, it's no surprise that there are plenty of vendors vying for this space. One of the major players is i2, which offers a broadbased system that encompasses inbound, intra-facility and outbound transportation. The i2 Transportation and Distribution Management system includes strategic planning, tactical planning and operations execution components. Features include Web-based transportation procurement, load planning and optimization, transportation modeling and real-time visibility.
Another big player is Irista, an HK Systems company that markets its package to mid-sized and large shippers, those with $10 million to $100 million in annual distribution costs. Its software is designed to provide users with a topflight execution tool. Doug Metcalfe, Irista's director of business development and transportation solutions, says the company's software handles "nitty-gritty shipping and load building [tasks] using the wide variety of constraints associated with moving goods." The system is designed, he says, to juggle multiple carriers, modes, customers and sites and take into account a wide variety of constraints based on a customer's business rules. "We're able define all those things," he explains,"then use our rating and routing engine to consider all those factors in executing."
The Irista software, which provides highly detailed information before, during and after the shipping process, compiles data for freight audit and claims, for example. It is also able to handle dynamic load planning and look for consolidation opportunities, for possible pooling points and at direct shipping versus linehaul options. The company has also worked closely with carriers to ensure compliance with labeling, manifesting, bill of lading and other requirements through a single system.
Metcalfe adds that the software is designed for use by DCs that don't have vast IT resources to draw upon. "We want practical, usable systems," he says. "The basic reality is that true transportation optimization can be difficult to manage and typically cannot be performed by distribution personnel alone. We recognize and promote optimization as a valuable tool for the right companies-it just isn't for everyone. The overhead necessary to implement, manage and maintain optimization engines may, in fact, eclipse the savings, yet 'low-hanging fruit'—such as eliminating chargebacks, producing carrier-compliant documentation and performing an internal freight audit-is often overlooked. Irista takes a practical approach to solve real business needs today while providing a plan for the future."
One of the oldest providers of TMS software is Pitney Bowes, which has offered shipping software for more than a quarter century. Its TMS, Pitney Bowes Distribution Solutions, "has focused on execution," says Scott Koopmans, director of strategic marketing and business development for the product. "That's been our claim to fame for 25 years." But the TMS is really more than that, he adds. "We see shipping as only half of what's happening. It's really package management. What's outbound to me is inbound to you. Our solutions contribute to the full life cycle of a package. It's not just about lowering transportation costs. It's about balancing delivery requirements with cost."
Part and parcel
Though a TMS can be extremely effective in kicking operations up a notch,it is most valuable when incorporated into a larger system, Koopmans says."In the end," he explains,"a TMS is an essential element of a comprehensive supply chain solution. It both accelerates the order fulfillment process and provides the means to manage carrier spend. It allows for optimal carrier selection to achieve delivery objectives at the least cost and provide for order visibility."
Koopmans goes so far as to say a supply chain execution solution is incomplete without a TMS. "It is often the only operations-focused system that provides a link between a company and its customers and the carriers it uses,"he continues. "It allows order fulfillment to continue beyond the DC. DCs have to balance speed and cost. How do you achieve the requisite speed of orders delivered to customers without its being cost prohibitive? A WMS can't do it. An order management system can't do it. An ERP [enterprise resource planning system] can't do it. Even a carrier provided shipping system can't do it in a world where a well-designed supp ly chain uses a variety of carriers."
Koopmans isn't alone in his view. Doug Metcalfe of Irista says, "It is our belief that the systems have to work together. It's a more holistic view of the supply chain. Tying them together can be challenging, but the value you can derive is immense."
Gaurav from i2 likewise considers TMS to be a key component of supply chain execution, along with warehouse, order, inventory, and international trade management systems. He offers this hypothetical example of what can happen when those components are properly integrated: A shipment out of Southeast Asia that is stuck at the port of origin should generate an exception report from the TMS. That is communicated to the warehouse management system at the DC awaiting the shipment. The inventory management system is automatically notified: The missing shipment may bring inventory below safety stocks predefined in its business rules. That would generate an alert to the order management system to seek an alternative source. Once located, the TMS would execute against the new order—all without human intervention.
Yet another player who believes that a TMS offers the most value to customers when combined with supply chain execution systems is Greg Johnson, vice president, products for GT Nexus. Transportation management is crucial to managing supply chain costs, he says, adding that the biggest supply chain execution expenses are typically logistics related. "[Logistics costs] represent 12 to 14 percent of a company's revenues," he reports. Of those costs, generally about 30 percent are for transportation and another 25 to 30 percent are inventory-related.
Johnson sees yet another plus to bolting TMS software onto SCE systems: Integrating systems helps overcome traditional bar riers within enterprises. "The users of systems often don't talk to each other," he says. "An order is created, and you talk over the walls to the transportation guys. Collaboration is thin. The ability to link processes for both the transportation guys and the merchandisers and procurement specialists on the other side of the wall allows them to base decisions on common data and knowledge."
TMS software's importance to supply chain execution was unders cored by the announcement late last year that Manhattan Associates, one of the leading players in the supply chain execution field, was buying Logistics.com, a company that offers both carriers and shippers a broad suite of transportation planning and execution systems. Manhattan spent $20 million to purchase Logistics.com's major assets from Internet Capital Group. In announcing the purchase, Manhattan said the acquisition would bridge the gap between transportation planning and execution and strengthen its position in the global supply chain execution market.
Then last month, Kewill Systems, a provider of transportation management and supply chain control software, and Catalyst International, a provider of supply chain execution systems, announced that they would expand their existing partnership. Catalyst will market, integrate and license the Clippership and Kewill.Ship shipping automation solutions as well as Kewill's e-fulfillment application, Kewill.Trade.
No longer an option
Whether they stand alone or are combined into SCE systems, TMS packages are becoming an essential tool, not a nice-to-have option, especially in international transportation. Import regulations in particular are becoming more onerous all the time, which means shippers require both timely and dead-on accurate information on all their shipments. International shipping places other demands on a system as well —the ability to manage currencies, time zones and language among them. "The ability of the TMS to handle global idiosyncrasies is important, "says Johnson of GT Nexus.
GT Nexus, which has its roots in international ocean transportation (its GTN pOréal is the leading Internet pOréal for ocean transportation), specifically designed its Web based Enterprise Series 7 suite of software products to link supply chain performance management, supply chain execution and transportation management. Its decision to use the Web reflects another fast-growing trend. Many providers now offer systems that are Web-based and priced on a subscription basis, which allows for a quick startup and minimal integration costs. "It's a huge advantage for customers," says Johnson. "It minimizes their risk and transfers the risk to us. We can manage risk better than they can themselves. They pay as they go."
Johnson reports that in most cases, clients recoup their investment costs in four to five months. Beyond that, the benefits derived from linking the TMS to other execution software systems may be hard to quantify. Hard to quantify, maybe. But if software revenue reports are any indication, not a hard sell.