Most companies in the transportation and logistics industry are using outdated plans to make purchase orders while their customers expect quicker service delivery at a cheaper rate. Experts in the logistics industry also believe that freight costs are high. It is essential for companies to find a way to reduce costs while saving time.
In order to deal with these issues, companies can implement Transport Management Software (TMS). TMS is able to give detailed information that allows users to plan, execute, and track shipments. It offers information about the physical movement of goods both incoming and outgoing, ensuring that the shipments have proper documentation.
Transport Management Software Benefits
Prior to selecting a TMS for your company, you need to understand the value that the software brings and how it can beneficial for your company. TMS benefits include the following :
1. Improved service levels
TMS offers the ability to monitor on-time performance which in turn improves customer service levels. Since you are able to locate shipments in real time, you can inform customers of this information. Customers are then more satisfied with the service offered as they can access shipment and freight information when needed.
2. Increased supply chain efficiency
Productivity increases through the ability to track drivers, inventory and other processes. This also leads to improved supply chain and it reduces any inefficiencies.
It improves supply chain through full visibility in the shipping process.
3. Reduced freight expenses
TMS is able to reduce freight through analytics and optimization. The system offers valuable information through data on suggestions that may be able to cut costs.
4. Tracked deliveries in real time
Through TMS you can track the location of shipments and drivers in real time. It also offers the average time a route takes and a more efficient route. It allows you to choose which drivers and routes to take.
5. Improved warehouse efficiency and productivity
TMS creates a record of where shipments are located in the warehouse. It also displays when shipments are in transit and when they arrive. Users can review processes and implement changes to make them more efficient.
KPIs offered by Transport Management Software
In order to understand the value that TMS adds, shippers should track KPIs. They lead to more information on the strengths and weaknesses about freight management. The following KPI examples will assist you in viewing your operations:
- Freight cost per unit – To determine this KPI you must divide the total costs of freight shipping by the number of units shipped during a specific time. This information is used to understand the total freight spend for your organisation. It can also be calculated by using the mode.
- Outbound Freight Costs per Total Sales – To calculate outbound freight costs as a percentage of net sales, divide outbound freight costs by net sales, shippers are able to isolate inbound and outbound freight costs.
- Inbound Freight Costs per Purchases – You measure this KPI by dividing your freight costs by the costs of the goods purchased during a specific time. It is important to understand the underlying detail.
- Transportation Time – This is measured by calculating the expected shipping time compared to the actual delivery time for each shipment. The transportation times can vary because of the different transportation methods and freight that can be used. It is better to use it to compare quotes from different carriers for the same product, destination, and mode of transport.
- On-Time Pickups – To determine this KPI, divide the number of pickups by the total number of loads sent out in a specific time period. This data can be used to examine the performance of the different third party logistic companies and carriers.
- Turnaround Rates – To determine this rate, calculate the average time spent between a truck’s arrival and when it exits. The goal is have the time as low as possible. When the time is high, aim to improve the loading and unloading process.
- Accessorials by Total Freight Costs – The inability to track accessorial charges discourages freight management capability. You should monitor accessorial fees and ensure that they are close to zero. Many extra costs incurred are due to inefficient processes.
- Freight Claims as Percentage of Transportation Costs – To measure this KPI divide the total freight claim loss by all the transportation costs. This will give you direction to which shippers and carriers are safer delivery options. Choose a shipper with a lower number as the higher the number, the more problems.
- Freight Billing Accuracy – Divide the number of accurate freight bills by the total number of freight bills within that time period. This ensures that all your payments are in order. There are errors that can exist such as incorrect pricing, incorrect information and incorrect weights.
- Percent trucking capacity to use – To determine the capacity available, divide the shipment weight by the available shipping capacity. It is important determine the unused capacity as an opportunity for more efficiency.
- Mode selection compared to optimal use – This is calculated by dividing the number of shipments sent through the optimal mode by the total number of shipments for that specific period.