Companies that implement a Parcel TMS, or Transportation Management System, realize benefits that go far beyond just reducing their parcel shipping spend. This alone is no small benefit, of course, but the benefits go far beyond that simple metric. Using a Parcel TMS can also enhance process efficiency, improve visibility, and enable you to provide a better experience for customers through faster delivery.
There are also other ways to leverage a TMS to maximize ROI by using the data it captures — probably more so than any other supply chain technology that is available to small parcel shippers.
A Parcel TMS is a technology solution that can be standalone or an integrated module within the enterprise resource planning (ERP) platform that many high-volume parcel shippers have already invested in. A seamless flow of data between systems is vital for a TMS to provide its full value.
At a high level, a TMS optimizes the process shippers go through to choose the right service level and best carrier for a given shipment. This function is crucial because the priority for every shipment, big or small, is to always get the exact level of service it requires at the best possible price. Attaining this objective is the essence of sound logistics management.
This is simple in concept, but extremely complex in practice. When you consider that any number of national and regional small parcel carriers COULD be the best choice for any given shipment — it’s impossible to ever be SURE the right one is being selected without some help from technology. There are too many inputs that need to be considered for any given shipment. This is especially true for any facility shipping hundreds or thousands of packages a day.
A Parcel TMS also includes tools that facilitate order optimization (such as by finding opportunities to consolidate orders going to geographically proximate addresses), invoice payment and audit, order track and trace, and carrier rate management. Manufacturers, distributors, retailers, and third-party logistics providers all benefit from using a TMS.
According to ARC Advisory group research, implementing a TMS application can save a company up to 8% of its shipping spend. That is a significant savings by almost any standard and reason enough for companies not using a TMS to do their due diligence and evaluate if such a platform could help their operation.
As we’ve mentioned, a TMS works best in connection with existing systems to manage its part of the transportation process. A Parcel TMS is an integral part of any optimized logistics operation because it will provide information to, or pull information from, systems beyond just an ERP.
WMS (warehouse management system), OMS (order management system), and shopping cart programs are some examples. A common type of data shared from a Parcel TMS is a carrier tracking number. Once a package is tendered to its carrier — say UPS — that tracking number is pushed into other systems where it can be accessed by the customer (perhaps through the shopping cart interface or sent by email), or for the shipper’s own customer support team to reference when they receive a call about the order. Making this information available to customers enables them to do real-time track and trace on their own, directly from the UPS website.
Customers appreciate this sense of control and knowing what’s happening with their order, while shippers like that it mitigates many calls to customer support to ask when an order will be arriving.
Data in conjunction with the reporting capabilities of a TMS can improve strategic decision-making for small parcel shippers, too. Selecting a carrier based on cost and a promised delivery date is not a failsafe strategy. What if the service performance of the cheaper carrier does not meet the promised service level and packages are late 50% of the time? Having the ability to identify and track service failures in this way enables shippers to better balance cost and service based on actual delivery performance — not on transit times listed in a service guide or an employee’s anecdotal stories about who the best carrier is.
A TMS enables all decisions to be made objectively, based on data.
Parcel TMS has become a more popular technology because shipping has become more complicated. There are more parcel shipping options than ever, and rates are more complex as well. Today, knowing your company is consistently using the best carrier and optimal service level for any given shipment requires technology.
Its functionalities make it suitable for both large, complex shipping operations, as well as smaller, more simple ones. The potential ROI from a TMS in soft and hard savings makes this technology a worthy investment for most small parcel shippers.