One big benefit of knowing what modern Transportation Management Systems (TMS) can do is figuring out exactly what features your company needs to move goods efficiently. This helps you choose the right system off the shelf or see where you might need to add custom features to fill in any missing parts.
Integrating ERP and TMS
Companies can deliver products and materials faster and at a lower cost through the integration of TMS within Enterprise Resource Planning (ERP) systems.
The ERP system maintains data on products and business partners as materials and customers, respectively. This data then needs to be transferred to the TMS.
To connect the standalone TMS within the ERP system, companies often use middleware — a software layer that facilitates the exchange of data between the two systems.
Integrating TMS functionalities directly into ERP, the TMS can access and use the ERP's data without middleware.
With direct integration, both systems synchronize the product master data and harmonize the master data for key business objects, like organizational structures, business partners, and transportation networks.
After integration, companies often gain better visibility into their transportation processes, enabling real-time decision-making.
Transportation Management Process Flow
Manufacturers, distributors, e-commerce entities, and logistics service providers, in the movement of goods, heavily depend on TMS software to handle transportation data and processes.
Transportation requirements for Ordering and Delivery
Sales Orders, Purchase Orders, and Deliveries specify transportation requirements. The TM system can automatically extract information from these documents.
Whether through a sales representative or an online portal connected to the ERP system, a sales order is automatically generated when a customer places an order. It details the Sold-To Party (customer), Ship-To Party (delivery address), ordered items, and Net Value. In turn, purchasing documents serve multiple purposes, such as procuring raw materials, obtaining vendor-consigned inventory, or subcontracting the production of a material. Delivery documents group items for one recipient.
The Ship-To Party's address in the screenshot matches the Sold-To Party's, indicating delivery to the buyer's address. Matching fields are common when billing and shipping addresses are the same.
Upon the creation of the sales order, it is integrated with the TM system, facilitating the automated transfer of order details for delivery planning.
Changes to the transportation status of orders in the TM system are instantly reflected in real-time.
As the order progresses through different stages, various departments within the company update the system:
- The logistics department adjusts transportation details, such as scheduling, pick-up times, and carrier information.
- The system receives updates from the warehouse team when they pick, pack, and get items ready to be shipped.
- The transportation team or external carriers may enter the status of the shipment, indicating its current location in transit or if it has been successfully delivered.
- Some updates are automated via system integration with external partners or Internet of Things (IoT) devices. For example, tracking systems in trucks or ships can send live location data to the system, keeping the transportation status up to date.
The TMS uses a document flow to keep track and manage the lifecycle of a freight unit, which is a shipment planned as a single entity.
This includes all associated paperwork and electronic records from creation to delivery.
There are three key components in the document flow:
- 'Outbound Delivery' refers to the dispatch of goods from a specific location.
- 'Sales Order' details the products, quantities, and agreed prices for the products or services.
- 'Freight Order' corresponds to the transportation request for the freight unit and includes details on routing, scheduling, and carrier information.
Forwarding Orders are instructions used by shippers to provide Logistics Service Providers (LSPs) with shipment details. This includes the number of items, dimensions, weight, destination, and any special handling requirements.
These orders are particularly useful for individual shipments or when transportation requirements do not follow a regular schedule. They can be issued as needed.
Scheduling Agreements are long-term contracts that olutline rules for regular deliveries such as quantity, timing, cost and other details. These agreements are used when a company requires regular delivery of the same items without the need to place a new order each time.
Transportation capacity management is about planning logistics in advance, thereby securing better rates and avoiding premium charges for last-minute arrangements. It also guarantees that transportation is available during peak times.
Strategic Freight Procurement
Strategic freight procurement involves negotiating long-term contracts with carriers or LSPs for various freight services, including return freight, container provisioning, packaging, customs processing, and insurance.
Freight Agreement Documents
A freight agreement document details terms between a shipper and a carrier or logistics provider. The process includes updating current contracts and forming new ones. Within a TMS, users create these documents, specifying a responsible organizational unit and the associated carrier. Each agreement contains a calculation sheet for charges based on built-in rates.
In the example, an organizational unit with ID '50000206' refers to the internal department or division within the company that manages the freight agreement. A logistics service provider with ID '3200000046' is labeled as 'Foreign Vendor.'
The Basic Rate is a fixed cost for every shipment, covering overhead, like handling, administration, and basic operational fees.
Freight charges vary based on distance, weight, and transportation type. Shipment specifics affect charges.
By separating these two costs, a TMS can apply costs to a shipment more accurately.
LSPs handle numerous agreements with carriers. By analyzing historical data in TMS on capacities and costs in different aspects, they can identify the most cost-effective shipping methods. This helps them to decide whether to provide end-to-end transportation services or subcontract certain parts of the freight movement.
Establishing Key Performance Indicators (KPIs) enables LSPs to measure and assess the performance of their carriers. Identifying carriers that meet or exceed these KPIs ensures that LSPs work with efficient partners.
Sending RFQs through TMS helps select the best option. LSPs analyze carrier responses, either by charge type or through an optimizer-based comparison, considering constraints.
Allocations are reservations about shipping capacity with a carrier, such as a shipping company or a freight transporter. These agreements represent documented commitments that a specified amount of capacity is reserved for the shipper's use during a designated period. The purpose is to guarantee enough capacity for the shipper's goods on a carrier for a specific route and time.
In TMS, allocations can be based on time periods (weekly, monthly, quarterly, yearly) and the amount of space or weight capacity reserved.
In this example, 'freight allocation 2' is a specific allocation made for carrier '1000030' along trade lane '1000000000', from source location 'ZSVENDOR10' to destination 'ZSVENDOR1'. Four capacity-based buckets have been created for this allocation, each corresponding to a quarter within the validity period. Each bucket allows a maximum gross weight of 40 tons.
Strategic Freight Selling
The process begins when a shipper or customer shows interest by submitting a Request for Quotation (RFQ), which can be communicated through Electronic Data Interchange (EDI) transfer, email, or phone. For instance, a customer may make a spot booking or inquiry with an LSP agent.
Once the customer's interest is registered, a freight manager in the TMS analyzes their historical data to determine the best service offerings.
The next step is to create a forwarding agreement quotation within the TMS. This quotation includes multiple items with rates outlined in a charge calculation sheet. These rates are determined manually or with tools like the rate builder cockpit, using rate tables and scales.
The customer receives the completed quotation through EDI or email. It provides a detailed proposal with service and rate specifics.
A formal forwarding agreement is generated in the TMS once the customer accepts the quotation.
Freight bookings are the documents that reserve specific capacities with carriers. Based on strategic allocations and agreements, operational teams book capacity with carriers for specific shipments. Freight bookings specify the type and quantity of equipment (e.g., containers) and scheduling details.
Carriers and partners receive freight bookings and documents via Electronic Data Interchange (EDI).
Linking freight bookings to precursor and subsequent documents ensures traceable movements.
Using a dashboard enables transportation managers to monitor closely the performance of freight carriers against predefined targets. This section of the dashboard provides a visual comparison between the current load (the actual weight of goods being transported) and the target load (the planned weight) for each carrier.
For example, HD Busy Business and American Airlines Inc. have both reached 100% of their target load. Conversely, Aramex and Inter Transport GmbH have reached 0% of their targets, meaning no goods have been transported.
The aim is to optimize the loading of each vehicle for transportation, maximizing capacity to reduce fuel usage, minimize trips, and lower overall transportation expenses. To plan transportation efficiently, orders going to the same or nearby places are consolidated into fewer shipments.
Using the Package Unit interface in the 'Cargo Information' and 'Required Capacity' sections, logistics companies can input specific details like cargo weight and volume.
A Gantt chart displays when resources area in use and when they are available. The map feature in the cockpit shows cargo routes and movements visually.
Companies in diverse industries face challenges in distributing products to multiple customers across regions with varying sizes, weights, and special requirements.
To manage this, they can use a TMS to consolidate orders into freight units based on criteria such as destination, product type, and delivery schedules.
Freight units are grouped by size and form, from a single pallet to a full truckload, container, or smaller package. These units remain stable throughout the transportation process, from origin to destination.
For example, by comparing automatically generated tables with known parameters, such as expected weight and volume ranges for products, the planner can ensure accuracy and make any necessary adjustments before incorporating the order into the planning workflow. Once the data is accurate, they can proceed with routing, scheduling pickups and deliveries, and allocating resources, such as assigning trucks and scheduling drivers.
If transportation demands or resources require adjustments, the company can choose to split or merge the freight units.
They can also use package simulation to calculate the ideal package size and quantity, minimizing wasted space and shipping costs. For orders with mixed products heading to the same destination, the company may create mixed packages to combine various products within a single package or pallet layer.
Freight orders detail and authorize goods' movement. If these orders are not in place, it will be impossible to transport goods or make use of transportation units like containers.
The Package Unit is part of the freight order, grouping multiple items. It consolidates items after finalizing freight units and establishing a load plan.
In practice, when a logistics company has goods to transport, it can use the Package Unit interface to enter detailed data, such as the cargo's weight and volume, in the 'Cargo Information' and 'Required Capacity' sections.
The 'Maximum Utilization' metric showes the percentage of the transport unit's capacity occupied by the cargo.
Logistics personnel can input cargo origin and destination in 'Source' and 'Destination'.
The 'Transportation' section records the total distance and duration of the transportation, as well as the frequency of visits to specific locations.
The Transportation Cockpit within a TMS serves as a dashboard for transportation planners and dispatchers who are responsible for executing planned shipments and planning incoming orders.
The Freight Unit Stages area displays attributes of freight units from orders or deliveries ready for shipment. This includes information such as freight unit number, original order number, loading and unloading locations, requested pickup and delivery dates and times, service level agreements, weight, volume, and quantity. Planners can split or merge freight units, insert or merge stages, and create or remove capacity/freight documents.
The Freight Orders/Freight Bookings area encompasses details such as freight order or booking number, means of transport, assigned carrier, and subcontracting status. Planners can mass-update multiple freight orders or bookings, enhancing efficiency over editing them individually.
Canceling orders or bookings can remove freight units from the schedule if the transportation plan is no longer valid. This may require a re-plan.
This section allows for the selection of carriers based on priority, cost, allocation, and more. The tendering process is facilitated within this area, allowing communication with carriers to accept or reject tendering requests.
The Capacity dashboard displays an available means of transport, their carrying capacities, registration numbers, and other critical information. Planners can add a new means of transport.
For manual planning, the planner analyzes the volume of products to be shipped, considers delivery deadlines, and then selects the appropriate vehicle, carrier, and schedule. Planning each order individually is time-consuming for companies with high shipment volumes. The Vehicle Scheduling and Routing (VSR) optimizer module of the TMS can handle high shipment volumes automatically. All freight units with delivery times, costs, etc. can be inputted by the planner. The optimizer proposes the best transportation plan, considering cost and time, and provides an explanation.
For example, before incorporating the order into the planning workflow, the planner can compare the plan with known parameters, such as expected weight and volume ranges, and correct any anomalies. If the data is accurate, they can proceed with routing, scheduling pickups and deliveries, and allocating resources, such as assigning trucks and scheduling drivers.
Load optimization improves the arrangement of goods in a truck or container to maximize efficiency and space utilization. It also minimizes disruptions when delivering to multiple stops.
Before departure, the TMS allows the company to check the load planning status, indicating whether goods are ready for loading or unloading at each stop.
The Load Planning process begins with defining a hierarchy in the freight order, typically involving a vehicle resource, and a package, followed by the product. The TMS displays the load plan status for package items directly in the freight order.
During package building, the system evaluates the items within freight units to select suitable packaging options. It then creates package units considering the items' compatibility and packaging requirements.
With package information, the TMS analyzes dimensions of the packages and the transportation resource (e.g., truck, container) to develop a comprehensive load plan.
Packaging materials vary widely in size, shape, and capacity. To effectively use different packaging materials in conjunction, a hierarchical system should be established.
According to the screenshot, a company determined that one carton can hold 200 units of the product. Then, 10 of these cartons can be securely and efficiently stacked onto a pallet. The pallet facilitates the transportation of the grouped cartons.
Once the goods are loaded optimally, the next step is to determine the most efficient transportation route. This is where the Distance and Duration Determination function comes into play. It leverages a third-party geographic information system (GIS) to calculate the shortest distance between locations, considering geo coordinates stored in the system.
Additionally, the service order manages services beyond transportation, such as customs clearance, container cleaning, and inspection of container seals.
Carrier selection and subcontracting
Evaluating the organization's fleet and external shipping companies is part of carrier selection. Considerations include cost, service quality, reliability, coverage, and meeting shipping requirements. Subcontractor selection involves assessing compliance with regulations, insurance coverage, and meeting obligations. The track record in on-time delivery, goods handling, and reliability are important factors.
Carrier Selection Constraints
TMS narrows carrier options based on constraints like hazardous materials and limited service areas.
After creating a freight order and selecting a carrier, the TMS uses tendering functionality. This involves communicating transportation requirements to potential carriers and receiving their responses. Tendering can be done via peer-to-peer methods, which may or may not require a response, or through broadcast methods, which accept either the first or the best offer depending on the situation.
The TMS provides tools like the Tendering Analysis dashboard to review and analyze tendering activities, including the cycle times of various carriers.
For instance, if Carrier GmbH consistently has the shortest tendering cycle time, it may be preferred for future shipments to enhance efficiency.
Manage Freight Agreement RFQ Masters
This functionality enables shippers and LSPs to secure optimal carrier partnerships and rates.
It involves sending detailed transportation requirements to potential carriers and evaluating their bids. Actions such as accepting a freight RFQ without changes, proposing adjustments, or outright rejection are supported based on negotiation outcomes.
Transportation monitoring and execution
Completing freight activities includes scheduling vehicle dispatch, ensuring proper loading, and preparing necessary documentation. Real-time tracking with GPS and RFID allows companies and customers to know the exact location of a shipment. Communication between drivers, managers, and customers helps in sharing information about delays, or route changes. Real-time monitoring enables fast decision-making, such as changing the route or finding an alternative way to send the goods.
Transportation monitoring provides updates on the location and status of the freight. The dashboard may offer insights into carrier on-time performance, order status, delays, and unexpected events during transit.
Reporting and Analytics
The Freight Order Execution Dashboard allows for daily monitoring of data. It provides insights into shipment status, the number of orders in process, and any delays. For example, if a manager notices that a specific carrier consistently performs poorly during peak periods, they can choose not to assign critical shipments to that carrier to prevent potential delays.
The overview page shows that there are 52 freight orders currently In Process, with 0 delayed in transit.
Managers can analyze KPIs such as weight, volume, and the number of shipments on a weekly, monthly, or custom date range basis. This analysis can be done for carriers, shippers, or the final destinations of shipments.
The Freight Order Execution dashboard includes features like the Tendering Peer-to-Peer Cycle Analysis.
Managers can also make daily decisions about workload distribution among carriers to ensure a fair distribution of orders.
Creating and handling waybills and bills of lading is part of Documentation Management. A bill of lading is a receipt and legal document for claiming shipped goods. LSPs act as intermediaries between shippers and carriers and may issue their own bills of lading. Shippers must provide a bill of lading to the consignee when transporting goods. However, a waybill serves the purpose of tracking and includes a list of the goods being transported.
The role of Event Management is to track and document significant moments during the lifecycle of a freight order. It captures the location and timing of key milestones from the origin to the destination.
Planned events are scheduled steps in the shipment's journey, like departure from a warehouse or arrival at the destination. These events are based on the logistics plan. Let's say, if a shipment is set to leave a distribution center at 9:00 AM on a Tuesday, this departure is a planned event that falls under the scope of Event Management.
Unplanned events, however, are incidents that happen without notice and are not part of the original plan. Some examples of these obstacles are traffic delays caused by congestion or accidents, breakdowns of transportation vehicles, and unforeseen weather that make travel difficult. These events demand immediate attention and may require adjustments to the shipping plan to minimize delays or damages. For instance, if a truck breaks down, the logistics team must respond quickly to fix the vehicle or find an alternative transport method to keep the shipment on schedule.
Freight charge management and settlement
This process involves managing the costs associated with transporting goods, from maintaining contracts with transportation service providers to handling the invoices and payments for freight orders. After transportation services have been provided, carriers will issue invoices to the shipper. Managing freight charges involves verifying these invoices to ensure they align with the contracted rates and terms, and that they accurately reflect the services provided. Part of freight charge management involves resolving disputes over invoices. This might include issues with the billed amount, discrepancies in the weight or classification of shipped items, or services billed but not provided. Once invoices are verified, payments can be processed.
When a company establishes freight agreements with carriers, it delineates the rates for various services. These agreements come in two forms: forwarding agreements, where charges are billable to the customer, and freight agreements, where the charges are billable to the carrier.
The selection between these two types hinges on the department procuring the service—sales for forwarding agreements and purchasing for freight agreements.
As charges for freight orders are calculated, the system's retrieval of rates from a specific line item within an agreement.
Transportation Charge Calculation Sheet
Central to the execution of these agreements is the Transportation Charge Calculation Sheet (TCCS), which records charge types alongside their corresponding rate tables. This sheet is vital for determining the charges to be paid to freight vendors. The focus of the TCCS lies on an item table, with each item representing a specific charge.
Rate tables, which must be linked to their respective calculation sheet, can be maintained manually or through Microsoft Excel integration.
Freight Settlement Document
The charge management process kicks off with the creation of a freight settlement document.
This document sets off a chain reaction, leading to the generation of a service purchase order, goods receipt, and service entry sheet. These documents are pivotal for the subsequent posting of accruals, invoice verification, and the facilitation of self-billing processes.
Originating from freight documents—be it a freight order, freight booking, or service order—the supplier's invoice is compiled. The freight settlement document gathers all relevant invoicing data from the freight documents. Additionally, it may cover extra services such as customs brokerage, container cleaning, or fumigation, thereby extending its scope beyond mere transportation services.
After the invoice undergoes processing and verification, the freight settlement document displays the verified invoice amount, marking the culmination of the charge management process.
In the screenshot, the "Verified Invoice Amount" field shows an amount of "60,00 USD," indicating that after the verification process, the invoice for $60.00 was deemed correct and is the amount that should be paid to the service provider according to the terms listed in the document.
Components of Enterprise Transportation Management System
General Master Data and Organizational Structure
Organizational master data refers to the core information that defines the structure and boundaries of an organization.
Legal Boundaries can detail the different legal names under which the company operates, the jurisdictions in which it is registered, and any regulatory frameworks it must adhere to. For transportation, it helps to manage legal responsibilities in different territories, ensuring compliance with shipping regulations.
Geographic Boundaries outlines the locations of headquarters, regional offices, warehouses, and distribution centers. In the context of transportation, geographic boundaries help in planning logistics networks, optimizing routes, and managing shipping and receiving across different locations. It also plays a role in determining tax obligations and compliance with local laws.
Organizational Boundaries define the internal structure of an organization, such as departments, business units, and teams, along with their specific functions and relationships. This structure is critical for managing the flow of goods, information, and decisions. It helps in assigning responsibilities from ordering and inventory management to shipping and customer service.
Product Master Data
The term "product master data" encompasses details about tangible items like consumer goods, components, and raw materials that a shipper deals with, as well as services provided by logistics service providers like transportation or warehousing.
Product master data includes various attributes and details of each product or service. This could range from basic information like product names, descriptions, and pricing to more specific details such as dimensions, weight, material compositions, and any other characteristic that defines the product or service.
The product master can also include information on transport materials and equipment used in the shipping process, such as pallets, pallet cages, and cardboard boxes.
Dangerous goods can cause harm due to their chemical or physical properties. Transporting these goods requires careful handling and adherence to strict regulations.
The ERP system may have the capability to recognize and flag products that are classified as dangerous goods. Without accurate recognition of these goods, applying the necessary precautions for their handling and transport would be impossible.
Once dangerous goods are identified, the system can verify that the goods meet all required safety standards for transportation. This includes checking for proper packaging, labeling, and handling instructions. It ensures compliance with relevant local and international regulations governing the shipment of dangerous goods.
A user, such as a logistics manager, can initiate the check process manually within the ERP system. Alternatively, the system can automatically conduct these checks
In the context of transportation execution, a business partner typically refers to legal entities or individuals (customers and vendors) with whom a company maintains business contacts. The data for these business partners should be consolidated and stored in a single location within the company's system.
The transportation network outlines how goods and freight move from one location to another.
Locations are the precise geographic points where goods are either picked up or delivered. These can be warehouses, factories, retail stores, ports, or any physical place involved in the supply chain.
Transportation Zones group locations together to simplify and manage planning, routing, pricing, and service level agreements. The criteria for defining a zone might include geographical proximity, as well as factors like shipping volumes, delivery times, or operational convenience.
Transshipment Locations are designed for the transfer of goods from one form of transport to another. Examples include ports where goods are transferred from ships to trucks or trains, rail terminals where goods are moved from trains to trucks for last-mile delivery, and major logistics hubs where goods might be consolidated for further transportation or distribution.
Transportation Lanes are the paths between locations, such as from a manufacturing plant to a distribution center, and are defined for specific modes of transport (like road, rail, air, or sea) and carriers available to operate within these lanes.
Trade Lanes are lanes that include specific paths known for their efficiency and lower costs. Companies often enter into agreements with carriers for a certain amount of cargo space within these trade lanes, ensuring that shippers have the capacity when needed. Knowing that space has been allocated for their goods on specific routes allows companies to plan their supply chain operations more effectively.
Routes are detailed paths within the transportation lanes, including all intermediate stops and transshipment points. They are the exact sequences of transportation lanes that a shipment will pass through.
The transportation schedule contains a set of departure rules among the locations.
A standard port sequence refers to a predetermined order in which a vessel (cargo ship, container ship, cruise ship, etc.) visits ports along a specific route during its voyage.
- SHORE (which may be a manufacturing site), and PLATFORM (which could be a refinery) are the names or codes for the locations.
- '10' precedes '20', suggesting that SHORE is the first location and PLATFORM is the second.
- Location Type Codes categorize the type of location (port, terminal, station, etc.).
- Location Address provides a specific address.
- 2,735.98 KM specifies the distance between the SHORE and PLATFORM locations.
- Carrier ZB08ER1 is the code that identifies the carrier company or specific vessel responsible for the carriage between these two locations.
A departure rule for a voyage outlines the guidelines under which a vessel is scheduled to leave a port.
- The rule applies to the route, starting at SHORE and ending at PLATFORM.
- Departure Rule indicates the start date for when the rule becomes active and the end date.
- The checkboxes under the days of the week (Monday, Tuesday, Wednesday, Thursday, Friday) indicate on which days the voyages are scheduled.
By setting this voyage schedule, the manufacturing company ensures that there is a dedicated transport service available five days a week to move goods between SHORE and PLATFORM. This enables the company to avoid delays in their supply chain. The schedule also allows for advance planning of both production and shipping resources, improving overall efficiency and predictability in the company's operations.
The 'Standard Port Sequence' section in the ERP system provides a structured framework for defining the static aspects of a maritime route, including the specific locations and the sequence in which they are visited. The 'Voyages' section, on the other hand, deals with the dynamic scheduling and operation of these routes over time.
Vehicles represent the different modes of transport available, such as trucks, trains, ships, and planes, that physically move goods from one place to another.
Transportation Unit Capacity refers to how much each vehicle can carry or transport, for planning how to efficiently load goods.
Calendar Resources denote the operating hours of locations like warehouses, ports, and distribution centers for scheduling pickups, deliveries, and transfers to ensure everything runs on time.