5 Ways a Transportation Management System (TMS) Reduces Freight Costs

Did you know that a Transportation Management System (TMS) can help you improve your bottom line and profitability? With innovative solutions and features that improve operational efficiency and the effectiveness of your operations, Transportation Management Systems have the potential to reduce your day-to-day costs as a freight carrier, driving long-term success. This list of 5 Ways a Transportation Management System Reduces Freight Costs will help highlight how a TMS — like TransPlus TMS — can improve your bottom line. 

How Does a TMS Reduce Freight Costs?

Profit margins can be razor-thin in the trucking and freight industry and a Transportation Management System (TMS) serves as a financial firewall to actively identify and eliminate waste across your supply chain. Research indicates that organizations implementing a TMS report freight cost savings of roughly 8% to 10%. These savings are the result of real-world operational improvements that can include a potential 15% reduction in fuel costs via better planning and a decrease in administrative overhead. By centralizing data and automating more complex logistical decisions, a TMS allows carriers to move beyond simply tracking costs to actively controlling costs, ensuring every mile driven and every load booked contributes to the bottom line.

1. Optimized Routing and Reduced Fuel Costs

A TMS replaces manual route planning with advanced algorithms that calculate the most efficient path for every delivery by factoring in traffic, road restrictions, and delivery windows. By minimizing inefficient miles and idle time, companies can see an estimated 10-25% reduction in total miles driven, which translates to lower fuel consumption and reduced vehicle wear and tear. For example — a TMS can automatically re-sequence a driver’s stops to eliminate backtracking, saving fuel on a single trip. These reduced fuel costs make route planning software a valuable investment for trucking companies.

2. Consolidated and Optimized Loads

One of the most effective ways to lower shipping costs is by consolidating Less-Than-Truckload (LTL) shipments into efficient multi-stop truckloads. A TMS has the ability to analyze order volume to identify opportunities where smaller, separate orders can be combined onto a single truck. This helps reduce the cost per unit shipped. Instead of paying for three separate LTL carriers to visit the same region, a TMS with load management capabilities enables you to build a single optimized truckload, maximizing trailer space utilization and slashing per-mile costs.

3. Strategic Freight Carrier Selection

Manual carrier selection can lead to overspending with a lack of visibility of real-time rates and performance data. A TMS can automate this process by instantly comparing your contract rates against the current market, ensuring you always choose the most cost-effective carrier for a specific lane without sacrificing service quality. For example — many systems can be set to automatically tender loads to the lowest-cost provider first, ensuring that you never pay a premium for a shipment that could have been shipped for less.

4. Zone Skipping

For carriers and shippers that move high volumes of cargo or LTL freight, a TMS makes zone skipping simpler. Zone skipping is the practice of consolidating individual packages into a full truckload for the long-haul portion of the journey. By transporting cargo directly to a sorting facility closer to the final destination, companies can bypass multiple expensive shipping zones. This allows freight companies to pay the cheaper local rates for the final mile delivery rather than more expensive cross-country rates.

5. Automated Paperwork and Billing

Administrative errors in freight billing are common and can be costly — but a TMS acts as an automated auditor for freight companies. By automatically reconciling invoices against quoted rates and proof-of-delivery documents, a TMS can identify overcharges and duplicate billings that humans may miss, potentially reducing invoice errors. This not only helps companies recover lost revenue but has the potential to reduce the administrative labor costs associated with manual data entry and dispute resolution.
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READ MORE: What Is the ROI for Transportation Management Software?

Reducing freight costs with a Transportation Management System is about more than simply negotiating lower rates. It requires a comprehensive approach that optimizes every facet of your logistics network and benefits from innovative technology. From smarter routing to automated billing, the right technology turns efficient operations into a competitive advantage.
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Contact TransPlus today for a demo of the TransPlus TMS and reduce costs for your freight company!