The Growing Role of Transportation Management Systems (TMS)

The world is an increasingly complex place. And as supply chain stakeholders can attest, the ripple effect of those growing complexities have a significant impact on how efficiently shipments can get from one place to another without breaking the bank.

To survive in such an environment, savvy logistics professionals are always on the hunt to find the most effective technologies to help get the job done.

In our coverage last year of a report from Transport Intelligence (Ti), Ti Technology Trends 2022, we noted that author Ken Lyon cited transportation management systems (TMS) as one of three “critical applications” to help optimize the supply chain.

“Over the past 5 years we have consistently identified the following technologies as critical elements that must be present to compete in the present market,” Lyon said. “In our view, they remain essential technologies for effective operation in the logistics and supply chain management sphere. …”

The technologies listed were:

More recently, Chris Cunnane, ARC Advisory Group’s expert on transportation technology trends concurred, including TMS innovation in his list of five primary transportation trends for 2023.

And in an article for SupplyChain247, Contributing Editor for Logistics Management Bridget McCrea noted that the increasing complexity of the transportation environment means that companies are leaning on their transportation management systems now more than ever.

“…due to the complexities that were created by the pandemic, shippers now truly understand the value of using TMS to automate their transportation activities,” McCrea wrote. “According to Peerless Research Group’s Warehouse Software and Automation Survey 2022, 26% of companies are currently using TMS and 72% of those organizations have had those systems in place for anywhere from one year to 10 years. About half of these TMS users say that they achieved a return on investment (ROI) on the software within 12 months or less.”

Here, we’ll take a look at a few TMS dynamics—including benefits, innovations, and market outlook.

What is a Transportation Management System (TMS)?

Inbound Logistics defines a TMS as “a software system used to plan, execute, and optimize the transportation of goods,” which is “often used by logistics and supply chain management professionals serving manufacturers, distributors, retailers, and other industries.”

The organization says that by automating transportation processes and providing a central platform to manage “all aspects of transportation,” a TMS improves efficiency and supply chain visibility, which results in cost savings.

Inbound Logistics says the typical functionalities of a TMS include:

“A transportation management system allows companies to optimize their transportation operations by streamlining processes, reducing costs, and improving the overall efficiency of their supply chain,” Inbound Logistics says. “Transportation management systems can automate many tasks, such as carrier selection, route optimization, and shipment tracking, saving time and money. Additionally, transportation management software provides valuable data and insights to help a company make better decisions about transportation and logistics.”

In a FreightWaves article, Anna Yen says the “overall goal” of a TMS is “to help logistics departments plan, execute and enhance transport management procedures,” and notes that a “fully functional” TMS may be integrated with other types of software platforms for logistics, such as Enterprise Resource Management (ERP) or Warehouse Management Systems (WMS).

In the following video, Rob Doherty, Key Account Lead, at TMS provider Rose Rocket, “answers the question ‘What is a transportation management system?’ in the time it takes to make a latte.”

TMS Innovation

Cited in a Forbes article by Steve Banker, Vice President of Supply Chain Services at ARC Advisory Group—who said Chris Cunnane was the “primary author” of the article—Cunnane noted that historically, companies have purchased a TMS to save on freight costs achieved through “simulation and network design, load consolidation and lower cost mode selections, and multi-stop route optimization.” With the persistent rise in freight costs, he said companies are increasing their reliance on their TMS.

However, Cunnane also said a “big reason” for TMS growth can be attributed to steady improvements in the technology, noting that three specific innovations are having a significant impact on growth dynamics: artificial intelligence (AI), real-time visibility solutions, and the internet of things (IoT)

Artificial Intelligence (AI)

AI “has been, and will continue to be, a key component of transportation management systems,” Cunnane said. Noting that its ability to “learn” about various shipping constraints leads to an improved estimated time of arrival (ETA) for shipments to various locations.

In addition to improving ETA, he said AI is important to other transportation dynamics, too.

“Shippers learn which carriers meet on-time service levels and which do not, which lanes typically carry more chance for delays, and whether there is an optimal number of stops before shipments become late,” Cunnane said. “AI aids shippers in better understanding how to drive efficiencies without sacrificing service levels.”

Real-Time Visibility Solutions

Cunnane said real-time visibility solutions can either be “standalone applications” or enabled because the TMS is “part of a multi-enterprise supply chain network.”

Underscoring the importance of real-time visibility for ensuring a “positive experience,” he listed some of the ways it provides value across shipping sectors—including containers and over-the-road (OTR) shipments, in which visibility is enabled by integration with truck carriers’ systems.

However, he said ETAs for ocean shipments are “much different” because “macro-factors” such as currents and wind speeds play a big role in transit times. In comparison, shipping by air is “easier for predictive ETAs based on the network and speed of transportation…”

Internet of Things (IoT)

Cunnane said IoT plays an improvement role in TMS innovation because an “IoT-enabled fleet management solution can improve visibility and versatility for companies across multiple industries,” and that using such a solution can improve performance by:

The Global TMS Market

According to a research report , “Transportation Management System Market by Component (Solutions, Services), Transportation Mode (Roadways, Railways, Airways), Deployment Type (On-premises, Cloud), Organization Size, Vertical, End User (Shippers, 3PL) & Region – Global Forecast to 2027″ published by MarketsandMarkets in August 2022, the global transportation management system market size is expected to grow from USD 11.7 billion in 2022 to USD 28.0 billion by 2027, at a Compound Annual Growth Rate (CAGR) of 19.1% during the forecast period.

Here are some of the key findings from the report: