Fastest-growing key transportation and logistics providers such as AmeriCold Logistics and C.H. Robinson use a variety of technologies to improve the process of managing their supply chain operations. Constant automation helps these companies dominate by applying logistics best practices, leaving no chance for other players to give up on automation.
There are plenty of cloud and on-premise solutions for transportation optimization. But each logistics company has its own operational peculiarities that aren't fully covered by existing solutions. That’s why you, as a transportation or logistics provider — or as the owner of a business with a logistics department — have a hard choice: Should you create software tailored for your specific needs or adopt a commercial solution?
To answer this question, take into account your business requirements and compare them to available shipping software and supply chain tools. This will help you understand if you need to create custom software. This article sheds light on how to optimize your operations using key software systems. Let’s begin with a transportation management system (TMS).
How to build a TMS based on your business needs
Without an automated management system, keeping track of the transportation of goods requires an extensive team of employees. A TMS helps to manage all inbound and outbound supply chain operations. It covers transportation management, planning and decision-making, follow-ups, and analytics. There are two types of TMSs: on-premise and cloud-based.
On-premise TMS. These systems are installed and run on local computers. A TMS provider physically installs the TMS at the customer’s headquarters. To get an on-premise TMS, you first need to pay for installation. You’ll also have to pay to upgrade the system to new versions. In addition, such software requires a specialist to deal with security to backup data on your own enterprise system. Keep these expenses in mind if you choose an on-premise solution. With an on-premise solution, all data is stored locally, which means a disaster might result in the complete loss of data if you don’t back it up properly.
Cloud-based solutions. Cloud-based software is hosted online, so users can access it from anywhere. Most cloud-based TMSs are offered by providers using the software as a service (SaaS) model. Users subscribe to the service on a monthly or annual basis without buying the software outright. A cloud-based TMS always provides users with the most up-to-date version of the system. With a SaaS solution, you pay as you use the product without investment upfront. SaaS upgrades are normally free and transparent, and they roll out on the web as soon as they’re ready for implementation. But you’ll still have to buy, maintain, and periodically replace expensive server hardware unless a SaaS vendor backs up data as part of its service.
Choosing a cloud-based TMS matching the size of your company
Most cloud-based TMS platforms can integrate with external Warehouse Management Systems (WMSs), invoicing systems, and proprietary solutions. Each of these shipping platforms has its own peculiarities. You can decide which is right for you based on the size of your company. The following platforms are just examples of what’s out there.
Small and medium-sized logistics providers. BluJay and 3Gtms are among the key players in the transportation management software market. BluJay provides a standalone TMS and managed shippment tracking services. This software offers both domestic (US) and international capabilities. The platform also offers plug-and-play supply chain execution packages. Mid-sized shippers and third-party logistics providers (3PLs) use BluJay, but it’s capable of supporting larger shippers as well.
3Gtms aims at small to medium-sized shippers and 3PLs. Keep in mind that this service does not currently support rail and international air and ocean transport.
Large logistics providers. Oracle is a leading supply chain management software provider whose logistics platform is tailored to large shippers with complex shipments and third-party logistics firms. Oracle handles global supply chain requirements. Note that the total cost of ownership of Oracle software is higher than for other TMS platforms.
Logistics businesses of any size. MercuryGate’s customers are mainly in North America. The MercuryGate TMS supports domestic and international modes of freight for businesses of any size: 3PLs, brokers, shippers, and private fleets.
3PL providers offering their own TMSs
In addition to the above-mentioned platforms, third-party logistics providers also offer managed transportation services. Leading logistics service providers including C.H. Robinson, XPO Logistics, and J.B. Hunt offer their own TMSs for their clients.
For example, J.B. Hunt provides its J.B. Hunt 360 effective logistics management system. This system includes tools for shippers and carriers that ensure real-time business monitoring. It allows shippers to quote, book, and ship freight online and allows carriers to find loads. In addition, it provides access to various reports and analytics to analyze your business.
Here are some of the reasons businesses decide to work with a 3PL:
Scalability. A 3PL can help businesses scale, allowing manufacturers and suppliers to seize new territories using new supply chains with much less hassle.
Logistics cost optimization and time-saving. A 3PL eliminates costs for building and maintaining a warehouse, allowing your team to concentrate on strategic planning processes and operational activities.
However, using a 3PL’s services can entail some risks:
Loss of control. Exchanging critical data is risky if one party uses B2B integration software. Sharing proprietary data with a 3PL will make you vulnerable to a data breach.
Cost. A 3PL can save you time and money. But this provider might change its business strategy at any time. Consequently, standard transaction costs may skyrocket as you use more services.
Keep in mind that 3PLs usually have hundreds if not thousands of customers and might not provide you with the specific service you need. That’s why it’s vital to make sure the 3PL you choose is on the same page as your business.
Use ready-made or build from scratch: Which route to take?
You can decide to work with a TMS provider or build your own solution from scratch. You can even go beyond simply building a solution for your needs by offering it to other logistics service providers.
Licensing your logistics software will help you recoup your software investment costs by becoming a managed third-party logistics firm. Your game-changing software can be used by multiple shippers to lower costs and facilitate their service.
Although the initial investment you’ll need to build your own system is higher than the cost of a monthly subscription, over time you can save money.
What a sophisticated TMS offers its users
If you’re choosing between paying for an existing solution and developing an in-house one, we’ll try to help you make that decision.
Start by creating a requirements document listing all features by importance. This will help you simplify the decision-making.
We also suggest you consider working with a trusted partner to implement your TMS. This will help you not miss any essential details that might lead to weaknesses in the system.
In addition, make sure the solution you choose addresses these five challenges faced by any logistics business:
Price calculations. You’ll need to calculate fuel costs, drivers’ fees, vehicle costs, and vehicle depreciation if you own the vehicle. The total delivery price will also include a fixed margin. Prices are typically higher on certain days of the week or month, so your system should also be able to account for that. After a user chooses a day and add-on services, your system should be able to define the price of delivery.
For the Smart Logistics project, Yalantis built a TMS solution that automatically calculates rough delivery prices based on up-to-date fuel costs, drivers’ hourly rates, and a vehicle’s amortized cost.
Load building and optimization. Load planning takes many hours a day for a company with more than a hundred shipments annually. A TMS should minimize this process to a few minutes thanks to algorithms. Filtering by parameters such as route, warehouse, order type, commodity group, delivery date, account, and order source allows users to build optimized loads.
A TMS should enable users to drag and drop orders into trucks and then update the truck’s specifications. Load optimization helps solve the problem of cargo distribution among cartage agents based on shipment requirements. As a result, truck space is used more efficiently and transportation costs are reduced.
Users should be able to add LTL constraints such as single stop, pickup, and delivery date. As they are added, the system should be able to optimize all orders.
Building optimal routes. Poor routing leads to higher mileage and higher fleet costs. Route optimization helps to avoid such trouble by building efficient truck loads and multi-stop schedules. In Smart Logistics, we made a system that suggests alternative vehicles meeting the required delivery timeframe and other requirements such as refrigeration. The system also sets routes based on the optimal price/speed ratio. A user can manually prioritize between cheaper and faster as needed.
Tracking shipment progress. The ability to track shipments in progress helps you identify and solve issues that occur during delivery before they affect customers or raise your costs. For this reason, a TMS should also have offline capabilities. Trucks often enter areas with poor connections, and offline mode allows drivers to report the delivery status even if they’re offline. The TMS we built allows a manager to receive notifications if a problem occurs and choose a solution to it. For example, if a delivery point is unexpectedly closed, a driver can notify the system via the driver app. A manager can see this problem and choose a solution right in the system. For instance, they can instruct the driver to wait or skip the delivery point.
Integration with other software. Your TMS might need to integrate with other software to ensure the smooth operation of your business as a whole. You might integrate it with a customer relationship management system, warehouse and accounting software, and payment gateways. Yalantis generally integrates such services using REST APIs. Read our article on how to create a great RESTful API if you’re interested in this topic.
In addition to all of this, make sure the TMS you choose can track documents and can meet the needs of a wide range of users. If you operate internationally, your system must handle both metric and imperial units: kilometers/miles and kilograms/pounds. A TMS should also support a variety of languages to ensure cooperation between users in different countries.
Read also: How to Make Your App Available Offline
Supply chain risk management software
A TMS is the most important element in a connected supply chain, but it’s capabilities are still limited. By integrating a TMS with other data sources and tools based on big data and predictive analytics, businesses can achieve greater efficiency. Such integration also helps business owners get real-time visibility of cargo as it moves from the warehouse to the delivery point and react faster to unexpected issues.
Risk management software can be integrated into a TMS to manage a variety of risks including security, financial, governance, legal, reputational, and even natural disasters. Supply chain risk management tools are powered by big data, machine learning, and artificial intelligence.
The following technology solutions help businesses reduce the likelihood of uncertain events and provide effective solutions to handle situations that might result in higher costs and wasted materials.
IBM AppScan and CA Veracode solve the problem of vulnerabilities introduced by third-party code integrated into a proprietary system. All third-party code should be scanned for integrity before it’s allowed anywhere near internal systems or data.
Geoquant aggregates information from social networks, news, and other sources. Then it analyzes this data using natural language processing and machine learning algorithms to deliver near real-time indicators of geopolitical risk.
DHL has built its own supply chain risk management platform, Resilience360. This platform allows businesses to predict, measure, and minimize the risk of all potential supply chain disruptions. DHL supported the platform with an app to give businesses constant access to supply chain data.
As you can see, the decisions you make for your business process optimization should be based on research and careful consideration. We hope this post was informative enough to help you simplify a tough choice. Keep in mind that you can always lean on a partner experienced in corresponding mobile and web app development and in software architecture design. They will help you make better software than that widely-available in the market as it will be tailored to your specific needs. Yalantis has vast experience creating optimization solutions for the logistics industry. Let us know if you would like to take advantage of our services.