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Leveraging Transportation Management Software to Increase Service and Lower Costs

Posted by Turney Thompson on Jul 28, 2015 2:00:00 PM

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If your freight spend is approaching $500,000 a year and you’re not utilizing a Transportation Management Software System (TMS) to consolidate orders; you’re likely leaving money on the table and missing out on valuable process optimization and customer service opportunities.

 What is a Transportation Management System (TMS)?                                           

A transportation managment software application is used to increase efficiency, reliability, and cost effectiveness as inbound or outbound freight is moved from origin to destination. Suitable for moving freight of all sizes, from parcels to bulk commodities, a TMS optimizes domestic and international freight movements across all modes, including intermodal, by:

  • shopping rates of contracted motor carriers
  • optimizing orders into as few shipments as possible
  • selecting the correct route for shipment according to cost, transit time, and customer requirements
  • managing freight bills and payments

Throughout the process, the TMS provides real-time shipment visibility across multiple carriers.

How It Works: A Breakdown of the TMS Process

At Kenco, we leverage MercuryGate, a flexible, powerful, and cost effective TMS that is adaptable for companies of all sizes and shipping volumes. Utilizing MercuryGate, the standard process we follow for customers is as follows.

  • Submit. Customers submit their orders via an electronic data interchange (EDI), by spreadsheet, by phone, or fax, which our team enters into the TMS.
  • Plan. An optimization algorithm is run to consolidate orders into the most optimum shipment plan for the customer’s shipping constraints. While the planning algorithm often presents the most optimized shipping option, there are times when our experience determines that plan deviations are preferable. Exceptions are easily managed.
  • Double check. Our TMS automatically references the federal DOT website to verify the safety and insurance status of each contracted motor carrier. This automated process saves a significant amount of time compared to manual checks.
  • Execute. Shipment execution is carried out by offering the ideal carrier the load, which they can accept or decline electronically. Upon acceptance and shipment pick up, the TMS provides real-time shipment visibility across all carriers; a significant benefit for companies concerned with Sarbanes Oxley compliance and FDA regulations related to supply chain integrity.
  • Audit and Pay. With the contracts loaded in the TMS, the carrier simply sends a paper or electronic invoice. If the anticipated cost matches the invoice, payment is immediate and automatic. If there are discrepancies, the reconciliation process begins.
  • Report. Month, quarterly, and on-demand reports for customers are flexible and complete customizable, and can detail delivery metrics, cost per unit, and other desired variables; with the option of loading GL codes to ensure accurate financial records. Carriers receive a scorecard that shows on-time delivery and acceptance rates.
  • Optional vendor portal. Controlling inbound freight cost presents a big cost-cutting opportunity for most freight payers. Our TMS vendor portal tool allows the payer, or the customer receiving goods, to control shipment routing and related cost. The customer signs into the portal to enter their location and unique shipment information and then selects the preferred freight option. The TMS and Kenco take over from this entry eliminating time and potential communication issues.

Save Time and Money, Drive Value

While reducing freight spend is often the driving force behind the adoption of a TMS, it is only one of the benefits. These savings are achieved through process enforcement, analytics, and optimization.

Additionally, the data that resides in the TMS can be leveraged as priceless business intelligence. Key metrics like on-time delivery and freight cost per pound or unit can be used to measure overall performance and understand what is driving costs. No other supply chain application provides so many value and cost-saving opportunities.

Powerhouse Optimization: TMS and WMS

WMS is focused on controlling the movement and storage of materials within a warehouse as well as other associated transactions. While Kenco’s TMS is available to any customer, customers who leverage both our TMS and WMS benefit significantly by gaining complete supply chain visibility and cost control.

The ability to look into both transportation and warehouse systems allows management to weigh competing interests to find the lowest supply chain cost. For example, if a warehouse-bound truck is delayed past closing time, is it more cost effective to pay extra warehouse labor or layover the truck? Complete supply chain integration makes these decisions easier.

Is a Transportation Management System a Good Option for me?

If you’re unsure about implementing a TMS at your company, begin by considering the importance of freight visibility and the current and estimated future scale of business. If volume has grown so much that spreadsheets are no longer a sufficient management tool, it may be time to think about how a TMS can reduce logistics costs, increase service levels, and improve overall supply chain positions.

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Turney Thompson

Written by Turney Thompson

Turney Thompson is Vice President of Kenco Transportation Management LLC (KTM). Turney has been with Kenco since 2008. In his current role, Turney has overall responsibility for the successful performance of Kenco’s transportation management services. His key responsibilities include business development, budgeting, customer and employee communication and implementation of strategic initiatives at KTM.