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A TMS usually "sits" between an ERP or legacy order processing and warehouse/distribution module. A typical scenario would include both inbound (procurement) and outbound (shipping) orders to be evaluated by the TMS Planning Module offering the user various suggested routing solutions. These solutions are evaluated by the user for reasonableness and are passed along to the transportation provider analysis module to select the best mode and least cost provider. Once the best provider is selected, the solution typically generates electronic load tendering and track/trace to execute the optimized shipment with the selected carrier, and later to support freight audit and payment (settlement process). Links back to ERP systems (after orders turned into optimal shipments), and sometimes secondarily to Warehouse Management System (WMS) programs also linked to ERP are also common.
These systems have been offered with different types of licensing arrangements. The four main offerings are:
- On-premises licensing (traditional purchased license)
- Hosted licensing (remote, SaaS, Cloud)
- On-premises hosted licensing (a blend of 1 and 2)
- Hosted – TMS free of licensing (same as 2 but free with no license requirements)
Additionally, some software providers were either acquired or merged with supply chain management consultancies and started offering shippers "blended" managed and software services as an outsourced process. Primary Tier 1 TMS providers are still independent, carrier and 3PL neutral, and ERP neutral. While ERP providers are moving to improve their on-premises transportation management offerings by adding TMS modules to their existing, implemented base, the advent of Software-as-a-Service or "SaaS" delivery resulted in a surge of emerging TMS providers.
Transportation management systems manage four key processes of transportation management:
- Planning and decision making – TMS will define the most efficient transport schemes according to given parameters, which have a lower or higher importance according to the user policy: transport cost, shorter lead-time, fewer stops possible to ensure quality, flows regrouping coefficient, etc.
- Transportation Execution – TMS will allow for the execution of the transportation plan such as carrier rate acceptance, carrier dispatching, and EDI.
- Transport follow-up – TMS will allow following any physical or administrative operation regarding transportation: traceability of transport event by event (shipping from A, arrival at B, customs clearance, etc.), editing of reception, custom clearance, invoicing and booking documents, sending of transport alerts (delay, accident, non-forecast stops.)
- Measurement – TMS have or need to have a logistics key performance indicator (KPI) reporting function for transport.
Various functions of a TMS include:
- Planning and optimizing of terrestrial transport rounds
- Inbound and outbound transportation mode and transportation provider selection
- Management of motor carrier, rail, air and maritime transport
- Real-time transportation tracking
- Service quality control in the form of KPIs (see below)
- Vehicle Load and Route optimization
- Transport costs and scheme simulation
- Shipment batching of orders
- Freight Negotiation
- Cost control, KPI (Key performance indicators) reporting and statistics
- Freight Audit
- Typical KPIs include but not limited to:
- % of On Time Pick Up or Delivery Performance relative to requested
- Cost Per Metric – mile; km; weight; cube; pallet
- Productivity in monetary terms, e.g., cost per unit weight or shipping unit
- Productivity in operational terms, e.g., shipping units/order or weight/load
- Typical KPIs include but not limited to:
However, all the above logistical functions need to be scrutinized as to how each parameter functions.
Several specific patents have been filed to protect the intellectual property rights of US TMS development corporations. However, judgments against several non-US software companies in 2009, 2010 and 2012 had not been unenforceable as of 2018[update].
The largest number of TMS patents were filed by IBM, SAP, Manhattan Associates, Oracle, Kuebix, JDA, and Sterling. Each holds over 15 patents protecting various aspects of their technology.