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A Transportation Management System (TMS) is a software application designed to manage inbound and/or outbound transportation operations. A TMS is an integral component of mission-critical supply chain execution (SCE) suite of applications.
A TMS typically sits between an ERP or Order Management System (OMS) and the Warehouse Management System (WMS). The ERP or OMS application passes inbound and/or outbound orders to the TMS application which determines the optimized transportation routing. The TMS evaluates the pool of orders; consolidates them into shipments; and determines the optimal mode / lane / carrier / route / stop assignments to minimize transportation expense within the required service level constraints.
In general, there are several different types of TMS applications.
- For companies that ship with third party FTL / LTL / Small parcel carriers, there is a group of TMS products that optimize transportation by evaluating all shipping options between the source and destination shipment points.
- There are TMS products dedicated strictly to optimizing small parcel shipments between USPS, UPS, FedEx, and other parcel carriers.
- For companies that ship with private fleet of trucks there are multiple TMS applications that optimize fleet routing and route/stop assignments to each shipment. As well, applications exist to manage the dispatch of outbound trucks as they are on the road with driver standards and load status monitoring.
- Lastly, there are TMS applications to manage international shipments inbound or outbound that may involve marine, rail or over the road modes.
Unlike the WMS market, the market for Transportation Management Systems has a very significant range in cost and complexity. Budgets for TMS applications can range from several thousand of dollars to tens of millions of dollars. Software cost and complexity tend to be related to the total transportation spend being managed by the application.
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