Freight Management Systems and Spend Visibility
For the past two years, global supply chains have experienced volatility beyond anything seen before. From inventory shortages to surging costs and unmanaged bottlenecks, industries faced challenges related explicitly to the COVID-19 pandemic.
Luckily, innovations in freight management systems also emerged at this time. Advanced technology allowed for end-to-end visibility into supply chain operations and helped businesses remain competitive in the market.
Read on to better understand the role of a freight management system in attaining transportation spend visibility.
As a leading logistics partner, Trax empowers businesses across various industries to achieve transportation spend management maturity. By following this data-driven approach, enterprises reduce their costs, increase efficiency, and derive meaningful insights for future optimizations.
What is a Freight Management System (FMS?)
At its core, freight management encompasses all processes related to tracking and managing the delivery of goods. This includes carrier selection, route optimization, documentation, tracking and tracing, and analytics. The software used to accomplish this is known as a freight management system (FMS) or transportation management system (TMS).
While the specific spend management software used varies, key elements remain the same. A reliable freight management system allows seamless connections between shippers, freight forwarders, carriers, and customers. In addition, if a company works with a 3PL, the freight management system drives the comprehensive transportation and warehousing services.
How a Freight Management System Works
There are four major outcomes from a freight management system that allows companies to achieve success.
- Increase transportation speed - With route and schedule optimization
- Ensure end-to-end visibility - With data from multiple sources
- Decrease unnecessary costs - By preventing Bill of Lading Correction Fees, detention fees, and demurrage charges
- Improve customer satisfaction - With fewer delayed shipment
Freight Management Systems and the Logistics Flow
According to a study by Shukla and Bansal (2013), freight management includes an inventory and information flow. These processes can be thought of as the supply chain logistics flow.
The inventory flow focuses on the physical movement and storage of goods, including everything from purchasing the raw materials to delivering the product. While the physical materials work their way through the inventory flow, an information flow identifies where the major information requirements arise in the logical system.
Looking deeper at the information flow, two parts emerge - coordination and operational requirements. First, the freight management system propels the logistics flow through its multiple functions.
For example, the Trax transportation spend management software covers freight audit and freight data management, performance management, and transportation optimization. By offering support in all the above areas, a solid FMS is expected to both cut costs and improve efficiency. However, some companies must still learn to adopt a freight management system or work with a third-party logistics company.
Technology Acceptance Model (TAM)
When adopting a new freight management system, supply chain leaders must consider the costs and benefits of implementing the technology. The technology acceptance model (TAM) predicts when new information technology will be accepted based on its perceived usefulness.
Therefore, understanding the direct benefits of TMS and FMS in day-to-day operations is necessary before accepting the risk associated with change. As discussed above, the features of a reliable freight management system have been shown, yet many companies still hesitate to fully integrate a 3PL’s transportation management solution with their current business model.
The main deterrent is the initial cost required to get the system up and running. In addition, if the client doesn’t have a relationship with their 3PL that includes trust, collaboration, and knowledge-sharing, it is difficult to justify a major technological shift.
Technology Powering Freight Management
Several pieces of advanced technology power freight management systems: the internet of things (IoT), big data, and real-time insights.
- Internet of Things (IoT) and Connectivity - By connecting disparate data sources, IoT enables visibility that can power automation for freight auditing.
- Big Data analytics - Companies can mine big data in different forms after achieving the connectivity required for streamlined auditing. Both structured and unstructured data can be used for machine learning models.
- Real-time insights - In today’s market, data must be ingested and analyzed in real time, which is now possible with advanced freight management systems. Supply chain leaders experience seamless communication between operational areas as the software manages and integrates data sources.
Of course, the technology backing a complete FMS solution includes an additional layer of complexity. If a company lacks in one area, there will inevitably be a negative ripple effect. Working with a reliable logistics partner reduces the risk associated with this new technology by allowing the client and the provider to combine their areas of expertise.
Visibility = Control
Freight management software offers businesses visibility into all areas of the supply chain, leading to increased control. Managing freight spend unlocks new opportunities to increase supply chain efficiency and deliver better results to satisfy customers.
Adopting a new freight management system takes time and effort, but the benefits discussed in this article demonstrate the growing need for transportation spend management maturity across all industries. If you are still searching for the right logistics partner, contact Trax today to learn how we can help you adopt the strongest transportation spend management software.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.