What is a transportation management system (TMS)? Explanation of overview and functions

Table of contents

What is a transportation management system (TMS)?

A transportation and delivery management system is a system that comprehensively manages the transportation and delivery of products to their destinations after they are shipped from a distribution center. It is also called TMS, an acronym for “Transport Management System.” The purpose of the introduction is to systemically manage operations such as delivery planning, progress management, loading, and freight calculation.

Transportation costs account for the majority of logistics costs. According to the 2019 Logistics Cost Survey Report by the Japan Logistics Systems Association (JILS), the composition of logistics costs in all industries is 58.2% for transportation costs, 15.8% for storage costs, and 15.8% for other (packaging costs, cargo handling costs). expenses, logistics management expenses) is 26.0%. Therefore, in order to improve business operations, it is important to improve the efficiency of transportation and delivery operations such as vehicle allocation planning and operation management. Therefore, systematization of transportation and delivery management operations is attracting attention as an effective method.

Background of the need for a transportation management system (TMS)

The reason why it is necessary to introduce a transportation and delivery management system is due to the major problems faced by the logistics industry. There are two issues: a serious shortage of human resources and an aging workforce.

The logistics industry is an important element that makes up the supply chain , from procurement to manufacturing, inventory management, delivery, sales, and consumption , and is said to be an industry where constant demand is expected. However, the industry as a whole is facing the problem of a chronic shortage of human resources and an aging workforce, so there is not enough human resources to keep up with demand. As a result, long working hours have become an issue, and there is a need to improve the working environment by increasing work efficiency. In order to solve the problems faced by the logistics industry, such as a chronic shortage of human resources and an aging workforce, it is essential to introduce a transportation management system (TMS).

Functions of transportation management system (TMS)

The advantage of systematizing transportation and delivery management is that information can be visualized by managing various operations with an IT system. By being able to see the business flow, you can get a bird’s-eye view of the entire business structure, making it possible to build business integration strategies. We will specifically explain what kind of functions a transportation management system (TMS) has.

Delivery planning function

Optimizing delivery planning is one of the most important functions. As the number of delivery destinations increases, it becomes more difficult to design plans manually, and the burden of delivery management tasks increases. Since the appropriate route changes depending on the combination of delivery destinations and traffic conditions, it is difficult to derive the optimal solution for delivery planning.

If you use a transportation management system (TMS), it will automatically create the optimal transportation and delivery course. By simply inputting various conditions into the system, such as vehicle and driver, load capacity and destination, delivery time and road traffic conditions, it is possible to select a route that yields maximum return with minimum effort. The task of deriving the optimal solution from such a myriad of options can be said to be the area in which IT systems excel.

Progress management function

Even if the optimal delivery plan is created, there is a possibility that the delivery plan may be disrupted due to unexpected traffic accidents or other troubles. Therefore, it is important to have the ability to obtain vehicle location information and driving status in real time by managing information about vehicles being delivered in conjunction with digital devices such as smartphones and tablets. This progress management function allows for flexible responses. In addition, obtaining feedback from this information will lead to further improvements in the accuracy of delivery plans. This function is also called a “dynamic management function” because it manages movement and status, or a “vehicle management function” because it manages information about the vehicle.

Transportation management function

Shipping charges are generally calculated using three patterns: inter-region fare table, transportation time, and transportation distance. Traditionally, this work was performed by knowledgeable and experienced employees or by people skilled in operating spreadsheet software. However, this results in work becoming individualized, making it difficult to respond when an employee resigns or takes a leave of absence.

Optimizing such freight management and billing management is a specialty of IT systems. By utilizing transportation management functions such as the “fare management function” that calculates freight charges and the “billing management function” that manages billing and payment, the efficiency of transportation management operations will be greatly improved.

Loading planning function

In order to carry out efficient deliveries, it is essential to have a loading plan that takes into account various conditions such as delivery route, delivery time, loading and unloading restrictions, weight restrictions, and consolidation restrictions. You need to calculate backwards from the delivery route and consider safety and ease of unloading when loading. By using the loading planning function, the required number of vehicles and the optimal loading method can be automatically calculated, making it possible to create an efficient loading plan. Loading planning requires a lot of time and effort, and is an important task that can greatly affect delivery efficiency. Therefore, the introduction of a system with a loading planning function can be expected to significantly improve operational efficiency.

Cloud-based transportation and delivery management systems are mainstream

There are two types of platforms for building IT systems: on-premises and cloud. On-premises type is a form in which servers and network equipment are installed in-house to operate and manage the system. Cloud type is a system that uses systems provided by vendors over the Internet, and is called SaaS, which stands for “Software as a Service.’ ‘

Cloud-based SaaS is the mainstream transportation management system (TMS). SaaS is often a subscription model with monthly charges, and compared to on-premises, it has the advantage of significantly reducing installation and maintenance costs. Another big advantage is that if you have an internet environment, you can apply and customize it immediately. Systematizing transportation and delivery management is an important element that is the key to logistics strategy. Therefore, it is necessary to select and implement a system that matches your company’s business strategy.

summary

Despite expanding demand, the logistics industry faces many issues such as a chronic shortage of human resources, and there is an urgent need to improve operational efficiency. Therefore, it is important to introduce a transportation management system (TMS). TMS contributes to improving the efficiency and maximizing productivity of logistics operations, and will help solve problems faced by the industry. Please refer to this article and apply it to your own business strategy.