A Comparison between Transport Management Software and 3PL
Transportation management systems (TMS) are positioned between enterprise resource planning systems (ERPs), and shipping distribution models such as TL shipping. There’re three key ways through which shippers can implement TMS:
- Creating an in-house TMS
- Outsourcing TMS tasks to a 3rd party logistics provider
- Using transport management software
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Most large carriers who operate shipping fleets usually have in-house TMS products, while smaller carriers who lack their own fleets outsource their TMS requirements to 3PL firms, or implement TMS. This is a kind of software used in logistics to allow carriers to carry out freight audit and other logistical functions without the need of logistic experts or third parties.
3PL versus TMS
Both 3PL and TMS have their unique benefits, and this depends on the requirements of the carrier. When comparing 3PL and TMS products, the benefits of each with respect to control, carrier options, and cost can be summarized as follows:
The Cost
The kind of a shipping company you use determines the overall cost of hiring a 3PL service. The types of shipping providers include standard 3PL companies, customer developer, customer adapter, and service developer. A standard 3PL provider offers limited logistical services whereas a service developer has limited value added logistics services.
Hence, standard 3PLs and service developers are not logical choices for the management of TMS. This leaves you with customer adapters and customer developers. The latter two offer comprehensive management of shipping logistics.
The costs of utilizing customer developers or customer adapters tend to be higher when compared to the cost of TMS. Even though they come with an outsourced management function, it’s still carried out by a logistics expert. Such experts earn around $75,000 to $90,000 annually.
Control
Outsourcing TMS functions to 3PLs relieves a carrier the function of control. This is something that most carriers want. However, for carriers who prefer doing their own shipping audit and have control over an entire shipping process, then it is ideal to utilize logistics software.
This is necessary to eliminate the costs of maintaining a logistic department within the company. It also makes it possible for a carrier to have control over the TMS within the firm.
Carrier Options
A key benefit of TMS is that it offers multiple shipping options to choose from. It is actually unclear to determine the current number of the available options. Some 3PLs utilize electronic systems for posting whereby the systems match available cargo with the available shippers.
Others use business relationships that are beneficial with specific carriers, such that they rely on them for most of the shipments. Utilizing TMS rather than 3PL is ideal for reducing the costs of shipping, and it can actually reduce the costs by up to 10% in a year. A reason why this is possible is the availability of many carrier options to choose from.
In conclusion, TMS offers cost effective alternative to carriers. Through TMS, carriers can audit their freight and perform other function, especially when compared with an in-house TMS product.
Outsourcing TMS functions to 3PL companies is also beneficial with respect to being more cost effective that handling the functions within the company, although it is less flexible than TMS with respect to control carrier options, and cost.
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