The Role of the TMS in 3PL Transportation Services

If you’ve talked to a third-party logistics provider (3PL) in recent years, chances are you’ve heard it tout its transportation management system. There is good reason for all this talk. TMS systems are truly game changers that can lead to a much more efficient transportation operation and save you a substantial amount of money in the process. 

Too often, however, shippers are wowed by the concept of a TMS without really understanding the features that lead to these efficiencies and cost savings. In this article, we’ll take a closer look at these features and the impacts they have on 3PL transportation services.

What is a TMS?

Simply put, a transportation management system (TMS) is a software program that can manage just about every aspect of a company’s transportation operation. This includes load requests, dispatching, order route optimization, tracking and capacity sourcing (by non-asset-based 3PLs, or freight brokers).   TMS systems are typically integrated with enterprise resource planning systems (ERP) and warehouse management systems (WMS) for optimization of the entire supply chain.

Why does it matter if your 3PL has a TMS?

While 3PLs have always had the capabilities in place to manage your supply chain effectively, the pre-TMS ways of operating left much to be desired in terms of efficiency. The following TMS-system features (among others) enable 3PLs to improve service capabilities and give you, the shipper, greater operational insight and cost-saving opportunities. 

Customer Visibility. As a 3PL customer, a TMS provides you with visibility into your 3PL’s transportation services. You receive real-time updates on your freight’s location, similar to shipping updates provided by UPS and FedEx. The capabilities can also extend beyond notifications. For example, many TMS systems utilize geo-fencing technology which puts a virtual fence around (e.g., a radius of a few miles) a delivery location. Once the driver crosses the “fence,” you can see every move on a map. 

Driver detention. This technology is also very helpful in monitoring driver detention time. The TMS will precisely record when a driver arrives or departs from a given location. If the driver is held at the location for an extended period of time, you’ll know exactly how long – and then you can then pursue detention charges from your customer if you see fit. The TMS can also provide reporting on detention times so that you can see which customers are the biggest offenders.

Load Acceptance. Utilizing the load transmit feature of the TMS, you can send your load requests to your 3PL via an EDI connection. Your 3PL can then accept each load manually or set up the system to automatically accept loads that fall within specific parameters. This process removes any guesswork as to what loads are accepted and frees up 3PL associates to perform other functions. 

Route optimization. With a TMS, route optimization is more than just finding the most efficient route from point A to point B – though it does that too. As an example, KANE handles wine and spirits distribution for a state liquor control board. When new stores are added to the state’s program, it’s never a simple task as each store has its own specific delivery windows (e.g., one store can only accept orders on Monday, another can only accept on Tuesday, one is open until 7pm, another is open until 9pm, etc.). The route optimization component of the TMS aggregates all this information and plans the most efficient routes for each driver, while ensuring that the customers receive orders on time. 

Capacity Sourcing. Asset-based 3PLs use TMS systems to break down existing orders by region and date and offer customers freight capacity accordingly. The 3PL can also use the TMS to offer additional capacity via backhauls. The system will create the backhaul using the closest truck to the destination and assign the order to the driver. Importantly, the system will know if the driver has enough hours of service available to complete the haul. 

Freight brokerage. Non-asset-based freight brokers can use a TMS to match your loads with the right carrier through real-time tenders, bidding, and load execution. The carrier’s driver will have his or her own sign-in to the TMS portal, where updates to the order can be sent and received. 

Load optimization. When you utilize load consolidation as part of your 3PL transportation services, the TMS system will match your LTL shipment with others based on size and destination. The 3PL is then able to maximize its trailer space and you’re able to maximize cost savings by “sharing the ride” with loads similar to yours. 

Driver management. As loads are assigned to drivers via the TMS, drivers are able to accept loads in real-time. This then adds a time stamp to the load and thus removes any uncertainty about who accepted a load and when. Communication to and from the driver also occurs within the TMS, while updates to orders (e.g., use dock 4 instead of dock 2) can be communicated in real-time. The TMS also receives real-time information from each driver’s electronic logging device (ELD) to ensure that all hours of service regulations are met. 

Administrative features. TMS features related to reporting and record-keeping include:

• Reporting. Customized reporting can be set up by your 3PL and the TMS will feed you the information you want when you want it.
• Billing.  Prior to TMS systems, you used to have to wait for the driver’s packet and bills of lading to be submitted – which could take a while. Now, those materials can be scanned and uploaded to the TMS and made available for all stakeholders to see in real time.
• Records.  Information related to trailer inspections and registration is stored within the TMS and referenced when orders are placed, and loads are created.

Lean on 3PLs that lean on TMS systems

TMS systems were once thought to be an alternative to 3PL outsourcing. But, just as most companies don’t have the resources to effectively run their own transportation operations, they also don’t have the resources to effectively manage a TMS. 3PLs have the resources to do both. So, instead of having their role reduced by TMS systems, 3PLs have embraced this technology to run more efficiently and improve communication with drivers. This results in greater cost savings for 3PL customers who can focus on growing their businesses while leaving software investments and logistics operations – TMS included – to be handled within a robust 3PL infrastructure.   

To learn more about how your company can benefit from the capabilities of a 3PL combined with the efficiencies created by TMS systems, contact Kane Logistics today.