March 20, 2018
Posted by Hien Mai

What is Transportation Management System 2.0 (TMS 2.0)

Not long ago filing cabinets and post-its were the systems of choice. Now, it's hard to give a filing cabinet away for free on Craigslist. Transportation management systems (TMS) are one of the most valuable pieces of software a company can invest in. TMS used to be a solution that only large companies used -- they were expensive, difficult to implement and came with limited features. As time progressed, TMS became more accessible to small and mid-sized companies and are now seen as a necessary aspect of shipping. Now that we’re in the digital era, newer TMS systems are able to integrate with other business software and provide a whole new world of shipping to any company.

What are Transportation Management Systems?

A transportation management system (TMS) is a shipping software that provides companies with a variety of shipping features. Any current TMS system will provide companies with:

  • Label and Bill of Lading Printing Software
  • Carrier Management Software
  • Single or Multi-Carrier Rating, Booking and Dispatching Software
  • Shipment Tracking Information
  • Order Management Software

Central Objectives of a TMS:

TMS directly affects the customer experience before, during and after a sale -- shipping rates and shipping times can determine whether or not the customer will purchase your product. Their satisfaction with the shipping experience will dictate whether or not they will continue purchasing your products and be loyal customers. TMS can be the defining point in a positive customer experience.

Here are the five key goals that you should expect a TMS to meet:

  1. Allows you to create a data-driven shipping experience unique to your brand
  2. Proactively notifies your customers of updates
  3. Analyzes carrier performance and uses accurate information to enhance your delivery systems
  4. Gives you the capability to make changes in real-time to improve sales performance
  5. Supplies fact-based insights to promote faster, more efficient business scaling 

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TMS 2.0 are cloud-based SaaS systems, allowing the shipper or company to automate much of the shipping and fulfillment process, and have visibility along the way. They can integrate with customer ordering systems, enterprise resource planning systems (ERP), warehouse management systems (WMS) and other vital software, to give data-driven information and analytics which helps both the shipper and the customer.

Take a look at our blog post on how ShipHawk can optimize your shipping process within your ERP.

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TMS 2.0 are more than just internal software. While they handle the shipping and transportation aspects of the business, TMS also ensures a smooth and price-sensitive shipping experience for the customer. This can make the difference between a sale and an abandoned cart.

With TMS, shipping rates are more accurate, so there are no surprises for the customer nor the shipper. Customers benefit from a wide variety of carrier options, more accurate and often less costly shipping prices and visibility of their order status at all times.

TMS 2.0 eliminates errors and allows human intervention when problems are spotted, thus furthering the optimized customer experience. Companies can also use branded tracking pages, adding gravitas to build brand trust and the TMS 2.0 system will send automated shipping updates to customers. Returns are easier, as they are fully integrated into the TMS 2.0 system.

For shippers, shipping and transportation affects their bottom line, whether that be a company sending individual products to customers through Amazon, sending full truckloads of metal pipes via long-haul trucking or even using several modes for one shipment. Today’s carrier marketplace and pricing policies are too complex to manually negotiate the best prices for each shipment based on optimized packaging and carrier routing options.

With TMS 2.0 systems, it’s automatic, allowing the best shipping option based on the type of shipment and negotiated rates. Additional elements that can affect cost are considered, like the buyer’s address, residential versus commercial delivery and other surcharges.

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Shipping is only one part of getting products to your customer. A good TMS 2.0 solution will support fulfilment services as well. It is estimated that 20% of shipping costs are soft costs, which support shipping but aren’t tariffs or packaging costs. Soft cost include areas such as customer service, labor (fulfilment, handling returns etc..) and errors and exceptions. A TMS 2.0 system can lower these costs as well as direct shipping costs. 

When the TMS 2.0 system is integrated with a WMS, order information is directly transmitted for picking, saving time, paper costs, labor costs and reducing errors. TMS 2.0 selects the best packing size and type for the product, which lowers shipment costs.

Packing optimization is an option with TMS 2.0 systems, and the shipping rates can be determined at the same time, with labels printed out and ready when the package is sealed. With order and invoicing information integrated with the ERP, returns and other inventory updates are seamless as well.

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With the plethora of data available with the help of TMS 2.0, shippers can make real-time changes to improve sales execution and enhance the delivery system through analyzed carrier performance.

Operating in the cloud, TMS 2.0 programs allow visibility of shipping across multiple carriers and third party service providers, and allow for uniform rate negotiation with carriers. This standardization means better shipping control oversight and lower shipping costs.

Additional Functionality

While the basic functions already mentioned should be part of any TMS 2.0 program, many systems have additional functionality, making them even more valuable as an integrated solution. Here are some to look for:

  • Importing orders
  • Standard or custom reporting
  • Basic integration with eCommerce platforms and Quickbooks
  • Packing optimization
  • Order fulfillment automation
  • Rules-based business logic
  • Vendor fulfillment interface
  • Real-time data/analytics - full internal visibility
  • Access to all carrier types (parcel, freight, white glove)
  • Returns management
  • Automated reconciliation
  • Integration with scales, scanners and dimensioners
  • Integration with ERPs, WMS, IMS, CRM and accounting systems

Choosing an automated system minimizes potential for errors and damages. It also produces the lowest possible shipping costs. The more automation and real-time analytics you can implement, the better your TMS system. 

The Future of Transportation Management - TMS 3.0

What is TMS 3.0? We’re working on it now! With TMS 3.0, the software system makes all decisions for the shipper based on real-time and historical shipping data.

When choosing a platform, find one where the company is also moving in that direction, one that will offer the increased capability. Machine learning, with enough experience and direction, will give TMS just the right tweaks to make it an even more valuable system.

It’s the goal of all transportation management systems to help shippers send products and automate and manage that in some way. All transportation management systems aim to help shippers deliver product to customers more quickly and efficiently, using automation. However, a company still using a legacy system is missing out on the drastic improvements in TMS 2.0.

Companies large and small sending out products should see a TMS as a vital part of their business strategy. Customers understand mistakes, late shipments, costly transportation and difficult returns. Those things affect the customer experience, which ultimately cost the shipper money as well.

If you want to learn more about choosing the best system for your needs, check out ShipHawk's TMS 2.0 Buyer's Guide or speak with a transportation management specialist today.

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