Supply Chain and Operations Management Weekly Tips

- For many companies logistics makes up 10% of their costs and transportation is a big part of that. Using a transportation management system, or TMS, can help you manage those costs more effectively. When you think about managing transportation picture your supply chain in terms of three links. The first link is your Inbound Material. That's all of the products that your suppliers are shipping to you. The second link is your Internal Logistics.

Where you move products around between your own factories distribution centers and stores. And the third link is Outbound Materials. Things that you're shipping to your customers. Companies can use a TMS to manage the flow of inbound and outbound materials. They might use the same TMS for both, but not necessarily. The TMS managing your Inbound Transportation helps you see which shipments have come from which suppliers and what production orders their intended to fill.

The TMS managing your Outbound Transportation can tie shipments to customer orders and production schedules. TMS's can help with planning for the future and with executing daily operations. And they can help you track capacity utilization, optimize your distribution network, and negotiate better rates. For example, the data from your TMS can help you combine several small lanes into a single larger lane so that you can get a better price from your carriers.

When it comes to transportation execution, a TMS uses a document called a Routing Guide to provide instructions for how to ship each load based on the current agreements you have in place with carriers. If you need to ship a 20 thousand pound load from Anchorage to Albany the Routing Guide might instruct you to use one carrier. But, to ship a 10 pound load from Miami to Minneapolis you'd use another. Some TMS's can even tender loads automatically and then track the shipments while they're in transit.

Choosing the right TMS and using it correctly can help you reduce costs and increase efficiency. And there's another benefit that's important to all of us. By improving the efficiency of our transportation processes we automatically improve the environmental sustainability of our supply chains. Transportation is an important part of logistics in supply chain operations. TMS's are a great example of how we can use the power of technology to lower costs, increase efficiency, and drive real improvements in today's supply chains.