UP: What Is a TMS?

What Is a TMS?

Transportation Management System definition and FAQS

Learn what a transportation management system is and get answers to the most frequently asked questions about them. (Hint: Don't miss the video at the end!)

If you’re in logistics, you’ve probably heard the term “TMS,” but do you know what it means? If you’re looking for a simple definition and answers to the frequently asked questions about transportation management systems, we’ve got you covered.

What Is a TMS?

TMS stands for “Transportation Management System.” A TMS is often a subset of a larger supply chain management system that is focused specifically on transportation operations. In essence, a TMS is the underlying operating platform for any logistics operation or supply chain. By helping organizations plan and coordinate the shipping, tracking and delivery of freight, a TMS is intended to streamline the shipping process. If you are in logistics, this type of platform can assist with the planning, execution and optimization of moves.

Why Is a TMS important?

A TMS can help your operation (and your team) perform more efficiently and streamline the shipping process. A TMS can offer you enhanced visibility into your operation, allow you to compare rates, help you simplify processes, reduce costs, save time and provide better service to your customers, among other things.

What Kind of an Investment Does a TMS Require?

The price you pay for a TMS will depend on the platform and partner you choose as well as your licensing agreement. Beyond price, it’s important to know that a TMS is a long-term investment of your time and dollars and will require a long-term partnership with the provider you choose. Oftentimes, it takes years to get a new TMS up and running and integrated into your organization, and companies can expect to see an ROI in 5 to 10 years. However, most organizations leverage their TMS platforms for well beyond 10 years.

What Are the Different Types of TMS Platforms?

Download a printer-friendly PDF of the TMS Infographic

In general, there are three types of TMS platforms:

Home-grown: An enterprise solution that is built by a company for its own use and hosted on its own premises.
On-premise: A provider-purchased platform that is purchased from a TMS vendor but is kept on premises and maintained by the purchasing company.
Cloud: A cloud-based platform, which is hosted on the vendor’s servers and is available to you via the Internet. This is often called Software-as-a-Service (SaaS), and such platforms are maintained by the vendor.

When Should You Replace Your TMS?

While many companies keep their TMS for 10 or more years, several factors may prompt a company to update their TMS, including:

the age of an existing TMS
technology upgrades
changes in the supply chain industry

Looking for Ways to Optimize Your Supply Chain?

If you’re looking for ways to optimize your supply chain, let us know. We can put you in touch with a logistics expert who can help.

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VIDEO: Transportation Management System FAQs

Upcoming Webinar - Nearshoring: Best Practices for Shipping to and from Mexico

On Thursday, May 16 at 1:00 p.m. CT, Union Pacific is hosting a 1-hour webinar on nearshoring, a business strategy that involves companies shifting manufacturing and production operations to Mexico, closer to main markets in the U.S. If this is something you’re interested in, you can use this link to register.

How to Ship Sustainable Aviation Fuel

In the next three decades, more than 35 billion gallons of sustainable aviation fuel (SAF) will be produced in the United States. It’s part of a government program, called the Sustainable Aviation Fuel (SAF) Grand Challenge, that is designed to help airlines decarbonize. The rise of renewable fuels, including SAF, makes it critical for producers and receivers to have a supply chain in place to meet upcoming fuel demand.

The Rise of Sustainable Aviation Fuel

In 2022, the U.S. government shared the Sustainable Aviation Fuel (SAF) Grand Challenge. This government-wide approach works within the industry to reduce costs, enhance sustainability, and expand production to 3 billion gallons per year of domestic SAF. By 2030, the U.S. must achieve a minimum of a 50% reduction in life cycle greenhouse gas emissions (GHG) compared to conventional fuel. By 2050, 35 billion gallons of annual SAF production must be reached.

What Is Nearshoring and How Does Transportation Support It?

In the 1990s, offshoring became a trend among U.S. companies. With more affordable labor available abroad (primarily in China), some entities relocated factories to lower production costs and increase profits. Offshoring relies on shipping those products back overseas for sale in the United States.

For decades, this model was working. Then came the pandemic, and the resulting supply chain disruptions (especially for overseas shipments) began to poke holes in offshoring strategies. With products stuck overseas sometimes for months on end, the drawbacks of offshoring started to outweigh the benefits.

Lessons learned from the last few years have prompted some companies to bring operations back to North America, specifically to Mexico. Establishing production facilities closer to end markets minimizes the impacts of potential supply chain disruptions while keeping costs in check. This is the genesis of the nearshoring trend.