Transportation Management - FAQ

TMS - General Questions

2023 Global Transportation Management Benchmark Report

Descartes conducts annual benchmark research among global transportation professionals. The 2023 study reveals that higher (fuel) costs and a shortage of drivers pose challenges, while investments in visibility present opportunities

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General Questions

What is a transportation management system (TMS)?

A transportation management system (TMS) is a software platform that supports businesses to plan, execute and optimize the physical movements of goods, both incoming and outgoing. A transportation management system will also make sure shipments are being compliant and that all the necessary documentation is available.

A TMS might also be known as a transportation management solution, transportation management system or some people might talk about a control tower which can often be largely covered by a TMS. A TMS manages the day-to-day transportation processes, consolidation, invoicing, documentation and makes sure freight and goods are delivered on time and within budget. A TMS helps organizations to improve their supply chain efficiency, reduce transportation costs, and increase visibility and control over their logistics operations whatever the mode: road, air, sea or parcel.

What types of TMS are available?

There are several potential TMS categories, but the two main ones are:

  1. Shipper TMS:

    A Shipper TMS is designed for companies that act as shippers or cargo owners. It helps them optimize logistics processes, improve efficiency, and reduce costs. Shipper TMS solutions offer features like order management, carrier selection, load optimization, route planning, freight tracking, and reporting. These solutions streamline transportation operations, provide visibility, and give control over the movement of goods for shippers.

  2. Forwarder TMS:

    A Forwarder TMS is specifically designed for freight forwarders or logistics service providers (LSPs). These solutions cater to the needs of companies that act as intermediaries between shippers and carriers. Forwarder TMS enables the management of multiple shipments from different shippers and coordination with various carriers. Key features include shipment consolidation, documentation management, customs compliance, rate management, freight tracking, and communication with shippers and carriers. Forwarder TMS streamlines operations and workflows unique to freight forwarding, allowing efficient management of shipments across multiple clients.

What is the difference between a TMS and a Routing solution?

While a TMS and a routing solution are related and often work together, there are some key differences between them:

A transportation management system (TMS) is a comprehensive software platform that provides end-to-end management of transportation operations. A TMS focuses on managing the entire transportation process, from planning and execution to visibility and analysis.

A routing solution is a component of a TMS or a standalone software that specifically deals with optimizing and planning the most efficient routes for transporting goods. They primarily focus on the tactical aspect of transportation planning and help maximize efficiency and cost savings in route selection.

A TMS is a broader transportation management platform that encompasses various functions, including routing, whereas a routing solution is specifically designed to optimize routes within the larger context of transportation management.

What is the difference between a TMS and an FMS (Fleet Management Solution)

A TMS covers the broader spectrum of managing transportation operations, including order management, carrier selection, route optimization, freight audit and payment, and reporting. It involves managing the movement of goods from one location to another, often involving multiple carriers, modes of transport, and logistics processes.

An FMS, on the other hand, specifically focuses on managing a company's fleet of vehicles. It deals with activities related to vehicle tracking, maintenance scheduling, fuel management, driver management, and compliance monitoring. The primary purpose is to ensure the effective management, maintenance, and utilization of the fleet.

How much does a TMS cost?

The cost of a Transportation Management System (TMS) will vary widely depending on a range of factors such as the number of shipments, the modalities in scope and the level of functionalities needed.

Generally, TMS pricing models fall into the following categories:

a) License-based pricing: Under this model, the company purchases a license for the TMS software, which is typically a one-time upfront cost. Additional costs may include installation, customization, training, and ongoing maintenance fees. The license cost can range from tens of thousands to millions of dollars, depending on the scale and sophistication of the TMS.

b) Subscription-based pricing: This model involves paying a recurring subscription fee to access and use the TMS. The subscription fee is often based on factors such as the number of users, transaction volume, or the level of functionality needed. Subscription costs can vary from a few hundred to several thousand dollars per month.

c) Transaction-based pricing: The most common model for a shipper TMS is transaction based (number of shipments) combined with an implementation cost. The transaction-based model offers scalability, as the cost is directly tied to the usage and workload of the shipper. It allows businesses to pay for the TMS based on their actual transportation needs and can be more cost-effective for companies with fluctuating shipment volumes.

It's important to note that the pricing structures can vary significantly among different TMS vendors, and additional costs may be incurred for implementation, integration with existing systems, support, and upgrades. Some other older pricing models also factor in the number of users.

There are other variants like freemium for small TMS with very limited functionalities where if you want to use a bit more functionality you need to pay extra is advisable to contact TMS providers directly to obtain accurate and up-to-date pricing information based on specific business requirements.

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