Transportation management systems introduce a lot of value to organizations, yet the market remains inadequately saturated. Going through the findings by Cerasis, nearly 80% of buyers look for basic features like route optimization or shipment tracking. 24% of buyers still use manual methods to manage transportations, however, the majority are looking to implement a TMS solution.
Worth adding is also the fact that according to ResearchandMarkets.com the global TMS market will experience the annual growth of 19.13% until 2024. By 2022 businesses will spend $1.94 billion on TMS applications to better manage to route, automate freight auditing and payment processes.
This article will go through crucial information about building TMS software that will help you answer the question: how to build a successful transportation management system.
What is the Transportation Management System Software?
A transportation management system (TMS) is a part of supply chain management (SCM) focused on transportation logistics. TMS enables interactions between an order management system (OMS) and distribution centre (DC) or a warehouse.
This software helps suppliers keep track of shipments and keep in touch with the buyers. It is one of the most used systems in trading and logistics, bringing success to the trade deal.
Transportation management solutions are an amazing option for many shippers as they offer scalable and flexible options as a part of their services.
Trends in TMS
Just like in any other industry, we can observe some emerging trends in TMS software.
- Cloud-based systems - cloud-based systems are gaining popularity in all types of software. They allow shippers to quickly react to changing customer demands, as well as save money on equipment and servers.
- Open-source platforms - more and more companies are open to open-sourced platforms that are designed with customization in mind. They are quick to integrate with other solutions and reduce overall cost.
- More automation - automation is driving software development making it easy to build a routing guide ensuring that freight moves with the best and the cheapest carrier.
- Connected truck - customers demand real-time track-and-trace capabilities and TMS systems are able to connect and acquire GPS data from vehicles. It also allows schedule adjustments like rerouting or rescheduling pickups.
- People-centric - no automation is able to completely eliminate the human element, which means managed transportation providers continue to invest in people as well as in technology.
Those systems take over shipping processes including
- route planning - TMS determines the least labour-intensive route and develops a transportation plan according to the number of cargos, means of transportation and buyers’ demands.
- transportation itself - the software regulates the way cargo is being moved, it checks the schedule, accuracy of the driver’s performance and the overall safety of the cargo.
- support and execution - TMS performs administrative tasks needed to successfully get the shipment to its destination including customs clearance, documents verifications or workflow facilitation
Benefits of TMS: Why do you need TMS software?
For many companies, TMS software can improve operations and drive business in a better way in order to provide better service to customers. There are many benefits to those systems and some of them include:
- Delivery tracking
A TMS software provides the ability to locate packages in real-time, which ensures 100% transparency throughout the shipment process. The information like the amount of time a route takes can be later used to find a more efficient way.
- Supply chain efficiency
The ability to track drivers, inventory and other processes allow businesses to increase their productivity. This directly influences the supply chain and provides savings to users. By using TMS, your customers are at all-time informed about the shipping process.
- Reduced expenses
One of the greatest benefits of TMS is reduced freight costs. Thanks to complex analytics and optimization you are able to reduce expenses and use collected data to make smarter decisions. TMS can reduce freight costs from 3% to 12%.
- Better customer service
The software improves customer service levels due to the ability to monitor shipments and the distance from their destination. Your clients stay up-to-date and can access the tracking at any time.
- Warehouse efficiency and productivity
A well-organized warehouse is a crucial part of the logistics process. Pairing a TMS with WMS will allow you to create a record of orders and track where they are located in the warehouse or in transit.
TMS systems are an incredible database of information. They allow performing what-if analysis for tactical and strategic decision support where actual scenarios can be measured with actual results.
Today’s TMS platforms have extensive standard and customized reporting capabilities. They can be done on a schedule or on an ad hoc basis. Those reports can be operation, customer service or finance-oriented.
Who needs TMS software?
Transportation management systems are primarily used by businesses that ship, move and receive goods on regular basis, like:
- retail businesses
- eCommerce companies
- companies providing logistics services, 3rd and 4th party logistics (3PL and 4PL) and logistics service providers (LSPs)
Which Type Of TMS Should You Use?
There are 3 basic types of TMS you can build or use. Obviously, each of them has its own advantages and disadvantages, so before you decide on one, think which one would be the best suited for you.
A system that requires human resources, which consequently means more expenses to your business as human labour is costly and requires checkups. This type of system is quite outdated. Your team will require education and practice as it is prone to error. You must also consider the lack of data and low progress dates. On the other hand, you gain confidence that any system defects or technical failures are not applicable in this case.
The most profitable, cost-efficient and convenient system. All processes are taken care of by technology. This system is transparent for all participants. Updates like delays, issues on the route, changes in transportation will be displayed in the system. You might add a feature that all parties will be notified about any changes. The system can be accessed via mobile devices as it is cloud-based.
A system owned by a third-party company based on a subscription. They are responsible for solving any problems and managing the transportation system. This system is the least labour-intensive, however, you have to entrust the growth and expansion of your business to an external provider.
Custom vs Ready-Made TMS solution: which one to choose?
Many vendors provide ready-made TMS solutions, the only thing you have to worry about it to pay for the initial implementation and subscription. You may then wonder, if there is a need to develop yet another TMS if there are so many available like the top market leaders TIMOCOM or trans.eu.
Everything depends on your requirements and the specific needs of your business. Each case is unique and has its own internal processes, so it is crucial to define your operational needs, what you want to achieve by using TMS and consider your long-term goals. For example, one of our clients contacted us because he needed a trustworthy platform that could connect all of his partners.
Another thing to take into account is the costs. Some of them can be hidden, as they relate to the license, implementation, maintenance, subscription or the necessity to purchase and implement 3rd party software. Data security is also crucial, so here in-house solutions are a big advantage.
To avoid any problems with development, you can consider outsourcing the process to a software house that will be able to create a working solution from scratch. Companies like Selleo expertise in building custom software according to client’s requirements, with a design and functionalities best suited to the business served.
How to build TMS software from scratch?
1. Idea validation
Just like in the case of any development project, before you start building it is crucial to validate your idea and do market research. Conduct a self-assessment, review all operations within your businesses to identify your existing weaknesses, recognize limitations and come up with the features you will be needing the most.
2. Key challenges of TMS Software Development: What Makes a Good Transportation Management System?
The first step of the development is to carry out a prototype software that can be used for pilot testing. However, when building your own TMS solution you should be aware of the key challenges that you may face during the development process. Some of them are:
- Processes around the supply chain which are currently distributed among multiple peers can be optimized with a proper centralization via the dedicated platform.
- The application has to be capable of calculating the best route for cargo sea and road shipping when provided initial parameters (the type of cargo, weight, width etc.). It should also calculate routes based on the expected weather in order to optimize fuel consumption, time and costs.
- Your project may also involve an algorithm that matches cargo with trucks, which is primarily used by carriers and freight forwarders. The platform should serve as a tool to manually place/accept offers and edit routes when changes occur.
3. Key features of TMS software
Good transportation management systems are multifunctional and allow various data processing. Apart from the basic functionalities like real-time tracking, route optimization or automated carrier selection. When deciding on what features to go for, it is useful to come up with potential user stories that will help you better understand the needs of your customers.
Freight forwarder view
In the case of freight forwarding there are a couple of key features of a well-suited TMS system should possess, they are:
- specify cargo details - the ability to add details like weight, dimensions, type, customs clearance or route
- GoodLoading - the wizard should have similar functionalities to GoodLoading, which means assessing requirements and availability of space
- route checking - the ability to check the available carrier routes in a given radius from the provided location
- historical data - the forwarder should be able to check historical data and based on that, decide what to do next
- contact - forwarder can communicate with customers if assistance is needed
On the other hand, from the point of view of a carrier, crucial features may include:
- track location - carriers can track his location on a map
- check fees and documents - carriers should be able to check customs clearance fees and necessary documents for a given transport
- calculate costs - based on historical data or a price table, the calculation can be done semi-automatically and sent to the forwarder to make final checks and edits to be accepted by the client
- easy contact - the carrier is able to contact freight forwarder at every step of the shipment
In terms of an approximation solution, you can use what is already provided by Google Maps combined with https://pgrouting.org tool.
If you are looking into even more features, consider adding functionalities like:
- contract management (eg. viewing contracts, comparing costs, tracking terms and agreements)
- risk management
- reporting and analytics
- freight settlement (eg. paying invoices, auditing, creating payment vouchers)
- performance monitoring
- transportation process views
4. Choose a software development company
If you decide to outsource the development of your TMS software, you will need to find a trusted and experienced partner to turn your idea into a working product. During vendor screening, focus on the portfolio to find out if the provider has experience in building solutions like yours. Visit their blog, carefully review resumes and schedule a video call with the team. You can even give them some practice tasks in order to evaluate the quality of code.
If you need more information on how the process of vendor verification should look like, go to our article How To Choose A Custom Software Development Company or How To Scale Software Development Teams Successfully.
5. Tech stack
As an experienced software development house, we recommend using Elixir or Ruby for the back-end, as they both provide scalability and flexibility. The front-end of the application can be done in React.js or Ember.js. Our database of choice is usually PostgreSQL while the services could be hosted on AWS/GCP or customer servers.
In the modern world, global trading is taking over the market. Companies that want to meet the clients’ demands and stay up-to-date use TMS systems to automate logistics and trading. In the future, it is expected that we will be able to make use of autonomous trucks (currently being tested by Tesla and Mercedes), which may turn out to be the next big innovation in the TMS field.
There are many benefits to using a transportation management system including cost savings and improving customer satisfaction. You can choose to use a ready-made software or build a custom one - depending on your business needs.
Some of the key features of TMS software are real-time tracking, route optimization and automatic carrier selection. Apart from that, your solution can generate reports and provide detailed analytics of your historical data.
If you decide to outsource the development of your TMS system or need to introduce improvements into your existing product, contact Selleo. Over the years on the market, we have gained experience in developing such solutions. You can review our portfolio TIRAMIZOO GmbH, AscendHIT, Inc, Simplaex and 9Teams with similar functionalities.