Many companies don't realize their transportation management system (TMS) can offer value beyond the baseline utility of cutting freight costs. However, a study finds that users are finding new ways to leverage the software to meet rising customer service demands.

Suppliers in various industries are being pressed to provide more frequent but smaller shipments, which results in more complex fulfillment practices that can drive up their transportation costs and degrade their shipping accuracy, according to a report released in January by ARC Advisory Group, a Dedham, Mass.-based technology research firm. At the same time, they face elevated demands by individual e-commerce shoppers demanding expedited home delivery, as well as by major commercial retail buyers such as Walmart, which holds vendors to strict standards for delivery deadlines, according to ARC.

In response, shippers and third-party logistics providers (3PLs) are turning to their TMS for solutions, and they discover the software can generate a return on investment (ROI) through improved customer service, ARC found.

One reason TMS users have underestimated the software's potential lies with the difficulty of quantifying service improvements, according to the paper, "Using a Transportation Management System to Drive Service Excellence." The paper was written by ARC Advisory Group on behalf of MercuryGate International Inc., a Cary, N.C.-based TMS vendor.

Shippers' rising emphasis on improving customer service is not leading them to ignore other business metrics, the study found. Rather, shippers are now trying to balance multiple goals at once. An ARC survey found that 70 percent of companies that implement a TMS did so to reduce costs, while 65 percent said that customer service was also very important.

In one example, the cosmetics retailer Sephora relies on its TMS platform to improve service levels, which the French firm measures by tracking the number of on-time deliveries at their distribution centers (DCs) and stores, according to ARC.