It’s easy to confuse the various services of third-party logistics companies. The confusion may be because of the many service offerings, or because companies don’t want to waste time worrying about transportation, or it may be due to a general unfamiliarity with the logistics industry. Either way, it’s important for shippers to understand the difference between transportation management systems (TMS) and managed transportation services (MTS).
Transportation management systems and managed transportation services are not exclusive but are different.
TMS technology is necessary to improve transportation operations. It helps a shipper book outbound loads, find the lowest cost routes and carriers, and most importantly, provides visibility into transportation and shipment operations in order to find further cost saving opportunities.
Shippers can choose to operate a TMS themselves or have a third party logistics (3PL) company operate the software for them. Most opt for the latter since TMS implementation can be time-consuming and costly, not to mention the software can be difficult to learn when solely operated internally. TMS’ are available through 3PLs that employ experts who know how to use the system effectively.
Shockingly, around 85% of shippers don’t use a TMS to automate and manage freight spend and movement. This is more surprising since TMS software saves companies a lot of money – those who manage transportation poorly spend $53 for every $1,000 of total spend on outbound transportation, while those with proper TMS software and processes only spend $6.35 per $1,000. Mostly large companies implement TMS technology, even though the advent of cloud-based TMS software has made it profitable for small shippers too.
Managed transportation services include a wider scope of offerings from a third party logistics company. MTS not only includes access to a TMS, but a 3PL will operate and monitor the TMS for a company as part of the transportation services offered.
MTS differ slightly from fully outsourced transportation management. In a full outsource of transportation management, a 3PL will act as an entire transportation department, with full control of all shipping functions and data. Annual goals are set and the logistics company is left alone to meet those goals. Usually, the pay structure is a long-term contract.
MTS services are more collaborative in nature and frequently have a transactional pay structure. A 3PL will operate a TMS for you and still run any or all of the transportation functions you want them to and when you want them to. The 3PL still acts as an outsourced transportation department, but in the MTS scenario, they operate under your direction.
MTS are common in the transportation industry, but it’s not to be confused with a TMS. Managed transportation services almost always include the use of a TMS, but using a TMS does not necessarily mean a company is involved in outsourced transportation.
Want to learn more about managed transportation services? Click here.