How Transportation Management Software Helps Reduce Total Expenses


How Transportation Management Software Helps Reduce Total Expenses

Transportation management software is often thought of as a tool to help shipping departments select the lowest cost carrier. Other times, it’s looked upon for consolidating shipments or enhancing the way a shipment is being routed. While these are definite features, a TMS also provides opportunities for savings in both soft and hard costs that create far-reaching benefits for your entire company, not just the transportation department. The TMS has a dramatic positive effect on the profitability of all departments. Let’s take a look at how.
Transportation management software can have the following effects on your total expenses:

Reduce inventory costs

Through integration with existing ERP (Enterprise Resource Planning) software and WMS (Warehouse Management System) software, a TMS can ensure accurate shipments of product(s) are tracked and removed from inventory. This allows correct inventory levels for planning purposes and therefore reduces the need to carry “just in case” inventory. It will also help you avoid the need for additional separate shipments.

Reduce wasted employment expenses

Since a TMS can automatically track and trace, it reduces the time required by employees to do so. By reducing the time it takes your employees to manually track shipments, it saves on employment expense, reduces overtime costs, as well as increases employee productivity.

Reduce services provided to less profitable customers

A TMS can track transportation cost down to the granular level. Since it can do this it allows a company to determine the total cost of a customer, compare it against revenue by customer and truly determine the profitability (or loss) of the customer. Perhaps this will allow you to adjust what is included in the sales agreement such as excessive lumper fees or detention. It can also identify where you may need to stop providing certain discounts or increase their cost to accommodate shipping expenses.

Reduce handling costs

With its ability to optimize and consolidate shipments, a TMS reduces the number of shipments and as such, you’re reducing the amount of hands required to touch the shipment and therefore lowering handling costs.

Reduce personnel costs

Without a TMS, daily operations can require significant fixed cost wages or salaries of the people equipped to handle logistics. With a TMS, many processes can be automated and outsourced to the point where it requires less personnel, allowing you to reassign staff to more productive roles or avoid adding additional salaries.
Example: Your TMS receives an order from an ERP electronically and notifies the WMS all within the blink of an eye. The WMS notifies warehouse personnel to pick, pack, and prepare for shipment. Once the shipment is ready for pick-up, the WMS notifies the TMS which automatically tenders the load and notifies the carrier. Overall, the requirement of human involvement and management has been minimized to exception management.

Avoid increasing physical network/facilities costs

As a TMS automates processes and integrates with other tools, just-in-time order fulfillment can become a reality! As a result, you’re able to reduce the amount of inventory stored “on hand” which decreases your need for more square footage and larger networks.

Leverage new and/or alternative distribution channels

Through optimization using a TMS, we can determine if your shipments qualify to be shipped through alternative modes such as LTL and intermodal. Alternative modes often carry significant cost savings.

Reduce billing costs

A TMS can automatically handle billing and is able to be integrated with your company’s software which may result in a faster billing and payment cycle without the additional costs of collections staff or agencies.
These are just a few areas of expense that a TMS can have a positive effect on. How much can you save with a transportation management system? Contact us for your free consultation and we’ll show you!