A transportation management system (TMS) is a platform for managing freight and freight flows. Often included within supply chain management, it is one of the most important tools in the logistics toolbox as it helps to plan, implement and optimize shipping operations. A TMS also assists with streamlining and automating shipping, providing valuable insights into time and cost effectiveness. More modern systems also support day-to-day freight operations as well as strategic decision-making through advanced analytics. A TMS is often used in conjunction with a warehouse management system and/or a yard management system for full insight.
Transportation management systems (TMS) have developed into extremely powerful supply chain optimization engines. However, having acquired an advanced TMS, companies need specialist skills as well as in-depth domain knowledge to get the most out of such an investment.
Many companies gain access to this expertise and the latest TMS solutions by contracting with a fourth-party logistics provider such as Penske Logistics. Penske's dedicated teams of expert practitioners use TMS technology to drive improvements in supply chain performance and control costs on behalf of shipper clients.
To capture the full value created by transportation management processes, every component of a TMS solution must be attuned to the demands of the consumer-driven marketplace, explains Andy Moses, senior vice president of sales and solutions at Penske Logistics.
Achieving such alignment while realizing the full potential of a TMS solution requires skills that a shipper may or may not support in-house; a primary reason why many opt to work with an industry leader such as Penske Logistics to harness the benefits of TMS.
“Expertise in managing TMS master data as it relates to executing freight transportation decisions is one area where a talented team can make a huge difference," says Moses. Ensuring that a TMS is loaded with the right data “enables us to create a data-driven environment for managing transportation."
For example, the TMS must be programmed to handle different delivery business rules, which can vary dramatically from one customer to the next. Perhaps individual facilities can't accept loads before a specific hour or receive trailers that exceed a specified height, for instance. Another critical input is cost-to-serve metrics for individual customers in different geographies. A common mistake in the broader logistics community is failing to load data such as details of overseas shipments that are critical to the performance of a TMS.
“You have to be expert at building nuanced business rules and every essential data set into the TMS," Moses asserts.
Moreover, it's necessary to retain people with this expertise, which can be a challenge today. Within companies, TMS specialists are often promoted or move on, leaving skills gaps that need to be filled. The longer these talent shortfalls persist, the more likely it is that the effectiveness of the TMS – and hence freight network performance – could be compromised.
Another critical area of TMS expertise that many companies rely on Penske to provide is “activities around assembling the carrier base as represented in the TMS system," says Moses.
An example is checking that carriers have appropriate, up-to-date credentials. A lack of vigilance in this area can lead to mistakes such as unwittingly tendering a load to an unqualified carrier.
Executing the load tendering process requires a high level of expertise. A TMS should be set up to select the most advantageous mix of modes and the most reliable carriers. This is not a trivial task, especially when shippers are moving loads with different time sensitivities in a highly dynamic freight market.
Also, a well-run TMS enables shippers to react quickly to market changes by, for example, quickly identifying spot market capacity when demand unexpectedly spikes. It helps to have working relationships with a wide base of carriers; Penske has some 8,000 carriers under contract.
After completing a freight delivery, the next phase is the financial settlement. Again, TMS solutions supported by an able transportation management team tend to be the ones that deliver the most efficient process.
The system must manage the flow of information so that every authorized stakeholder – including relevant departments such as purchasing – is kept in the loop. And, of course, accuracy is paramount when it comes to managing financial settlements. “For instance, we make sure that no unexpected out-of-period costs pop up," says Moses.
Skills at a Premium
The ability to leverage TMS solutions to optimize supply chains is more important than ever given the demands of managing freight transportation in changing markets. It follows that the skills required to put these solutions to work also are increasing in importance.
Moreover, TMS technology continues to evolve, requiring companies to keep updating the skill sets they need to maximize the competitive advantage they gain from these systems.
Penske Logistics devotes significant resources to staying ahead of the TMS development curve, both in terms of the broader market and Penske's proprietary ClearChain® technology suite. “ClearChain has functionality that is not available from off-the-shelf TMS software," points out Moses, “and creates opportunities to optimize transportation management that might not be available elsewhere."
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