Navigating the transportation software market is often difficult because there are thousands of companies marketing themselves as Transportation Management System (TMS) providers. In addition to the number of providers out there, it can be hard to nail down the very definition of a TMS and what functional and technical capabilities are required to support the business case.
Understanding the Tools
It is important to remember that definition of these terms are fluid, and the exact definition will vary by industry, geography, company size, etc. However, it is useful to create structure like this in a situation where a business case is created and tools are evaluated, because all parties involved need to agree (at least temporarily) on the definitions in order to design an effective solution path.
Transportation Management System (TMS)
A TMS is used to buy and/or sell transportation services leveraging outside parties, sometimes called purchased transportation, carriers/brokers/forwarders, third-party logistics providers (3PLs), or logistics service providers. Common functionality includes planning (i.e. rating, optimization, etc.), execution (i.e. tendering), in-transit management, and post-delivery activities (i.e. receiving invoices, creating invoices for services, etc.) This is usually the most integrated software with internal systems and external trading partners in the supply chain. Common modules supporting the core TMS platform include strategic carrier sourcing, modeling tools, and reporting engines, and BI software.
Shipment Execution Software
Shipment executive software is used to rate and manifest (or tender) shipments typically in a high-volume environment when there is a one-to-one relationship between the order and the shipment. Therefore, an additional object, (such as a load or a route), is not necessary. Rate agreements for parcel carriers and LTL carriers are native; however, APIs are frequently leveraged. This tool supports highly automated processes, as bolt-in or bolt-on solutions to a warehouse management system (WMS), enterprise resource planning (ERP), TMS, or are integrated with a warehouse execution system/scales, scanners, and printers for labels.
Vehicle Routing & Scheduling (VRS)
A VRS is used to plan (optimize) orders into street-level routes for an asset operation, such as a private fleet, dedicated contract carrier, or independent contractor vehicles. This is almost entirely for an outbound scenario; however, these tools can consider inbound orders or third-party movements in a fleet-for-hire scenario. This software “stops” at the point where a driver is assigned, and the route becomes dispatched. With that said, many if not most VRSs, have FMS capabilities to various extents.
Fleet Management System (FMS)
An FMS supports the processes from dispatch through driver pay, and in some instances, vehicle maintenance. Fleet management solutions, like a TMS, typically rely on several integrated third-party software providers to be fully functional, but in reality, you cannot expect to find an FMS that does it all. The FMS is what ties in the electronic logging devices for hours-of-service, tracking actual mileage, capturing proof-of-delivery, and tracking asset (tractor/trailer) service availability.
We have seen many shippers, logistics service providers, and carriers select more than one of the above in an effort to meet business case items across several parts of their business. To enable that approach, the company needs a well-designed integration, supported by the right middleware.
Where Is the Money?
To determine which software category should be considered in a future state, start with documenting the current state processes. Next, establish the key opportunity areas by hypothesizing on “where is the money?” Lastly, create the critical requirements, based on those areas; establish the gaps from the current state vs. the future state; model and analyze the data to calculate the potential size-of-the-prize; and figure out which of the software above meets your needs.
The highest hard-dollar return-on-investment opportunities are optimization (TMS and/or VRS), strategic sourcing/bid optimization (TMS), tactical sourcing/use of spot market (TMS), sophisticated rating & routing guides (TMS and/or Shipment Execution), reduced maverick spend (TMS), proper driver count & fleet size (VRS), improved asset utilization (FMS), and reduced maintenance costs (FMS).
Geoff Milsom, Senior Director of Transportation Consulting, leads enVista’s transportation consulting practice, primarily focused on transportation strategy, system selections, implementations, and modeling & analytics for global shippers and third-party logistics companies. Geoff has successfully implemented transportation strategies and systems for many companies including CVS Health, Belk, Sephora, Nestle, Kraft, RR Donnelley, Peet’s Coffee & Tea, Tempur-Sealy, Corsicana, Sprouts, Wegmans, Giant Eagle, C&S, the NSA, Lutron, Trinity Industries, Gavilon, Koch Industries, Michels Corporation, Dohmen Life Sciences, ArcBest, Lasership, Port Jersey / Continental Logistics, Ranger Logistics, Covenant Transport, and DSC Logistics.