Author(s)
Eloise Benissan
Published Date
April 11, 2023
Tags
Supply ChainPerspective
Credit(s)
Thanks to Anneli and Santosh for edits as well as the teams at Steam Logistics, Ascent Global Logistics, Vizion, and Raft for the feedback.
Summary
- Freight forwarders use transportation management system (TMS) software to manage their logistics operations. TMS software allows freight forwarders to efficiently plan and execute shipments, track inventory, manage carriers, and handle billing and payment processes.
- The global freight forwarding TMS software market is expected to grow from ~$375M in 2022 to ~$800M by 2028 with a 11.6% CAGR. In order to stay competitive in this increasingly competitive market, freight forwarders are turning to TMS software to streamline operations, automate processes, and gain real-time visibility into their supply chains.
- An opportunity presents itself as legacy TMS software fail to provide all the features freight forwarders need. Despite the industryâs reliance on them, legacy TMS software have become infamous for unexpected billing, poor customer service, and a complicated user interfaceâthird-party software integrations might be the solution.
A Brief Intro to Freight Forwarder Transportation Management System (TMS) Software
Freight forwarding is an essential component of the global supply chain. It involves the shipment of goods from one place to another through various modes of transportation, primarily across ocean and air but might also cover tangential surface transportation requirements in/out of ports/airports. Overall, they âquarterbackâ the process of arranging and coordinating the movement of goods on behalf of importers or exporters. Freight forwarders act as intermediaries between beneficial cargo owners (or BCOs)* and the various logistics service providers that offer a range of services to facilitate the transportation of goods.
* As a note, BCOs might also be called shippers in some parts of the supply chain but for the sake of limiting confusion between the steamship lines themselves, weâll refer to them as BCOs in this article.
Freight Forwarding 101
- What do freight forwarders do? Freight forwarders are responsible for managing the logistics of the shipment, including documentation, customs clearance, insurance, and transportation. They work with multiple carriers to find the most efficient and cost-effective routes for transporting goods.
- Freight forwarders save BCOs time and money. By using a freight forwarder, BCOs can save time and money, as the forwarder takes care of all the logistics involved in shipping goods. Freight forwarders have expertise in handling different types of cargo and can navigate the complexities of international shipping regulations.
- In freight forwarding, technology is the name of the game. Freight forwarders face several challenges in the transportation management process, including fluctuating fuel costs, changing regulations, and increasing competition. To stay competitive, freight forwarders need to continuously innovate and invest in technology to optimize their operations.
A TMS is the Freight Forwarderâs Cockpit
Just as a pilot relies on the cockpit to navigate their plane, a freight forwarder relies on their TMS to manage and optimize the transportation of goods.
- Real-time visibility: The software provides real-time information on shipment status, carrier rates, and transit times, enabling the freight forwarder to track shipments and manage the transportation process in real-time.
- Route optimization: Freight forwarders can optimize shipping routes based on factors such as distance, transit times, and carrier rates. This allows them to choose the most cost-effective and efficient transportation modes for their clients.
- Carrier management: Freight forwarders are able to better manage relationships with carriers, including negotiating rates, scheduling pickups and deliveries, and handling documentation requirements.
- Reporting and analytics: TMS softwares enable efficient report generation and analytics of key transportation metrics such as carrier performance, shipment volumes, and transit times. This helps freight forwarders to identify areas for improvement and optimize their transportation operations over time.
- Customs compliance: Staying customs compliant is critical for managing costs, so TMS softwares help by providing up-to-date information on import/export regulations and documentation requirements. This includes generating customs declarations and other necessary documents, as well as ensuring that shipments are compliant with relevant customs regulations to avoid delays or penalties.
The TMS Market
According to 360 ResearchReportâs 2022 freight forwarding management software market report, the global freight forwarding software market is expected to increase from ~$375M in 2022 to ~$800M by 2028, registering a CAGR of 11.4% over the forecast period from 2023 to 2028.
TMS Market Breakdown
The TMS market is highly fragmented, with a wide range of providers offering a variety of solutions to meet the needs of freight forwarders of all sizes and specialties.
- Legacy TMS Providers: There are several âlegacyâ TMS providers, such as Descartes, CargoWise, and Kuebix, which have been in the market for many years and have a strong presence in the industry. They offer comprehensive solutions that include features such as carrier management, shipment tracking, and customs compliance.
- Freight Forwarder-Specific TMS: Some TMS providers, such as Magaya and Logitude, specialize in providing TMS software specifically for freight forwarders. These solutions are designed to meet the unique needs of freight forwarders, including managing carrier relationships, automating customs documentation, and optimizing routes.
- Enterprise Resource Planning (ERP) Providers: Many large ERP providers, such as SAP and Oracle, also offer TMS solutions as part of their logistics software suite. These solutions are typically aimed at larger companies with complex supply chain operations, and offer features such as inventory management, warehouse management, and transportation optimization.
- Cloud-Based TMS Providers: In recent years, there has been a trend towards cloud-based TMS solutions, such as Transporeon and 3Gtms. These solutions offer a scalable and flexible platform that can be accessed from anywhere with an internet connection and are often offered on a subscription basis.
Legacy TMS Software: Pitfalls, Key Features, What Theyâre Missing
The proof is in the pudding. We spoke to Joe Saggio over at Steam Logistics and David Ross from Ascent Global Logistics about their experience with CargoWise.
1. Pitfalls
- Customer service access/action is low. Legacy TMSâ are notorious for their lack of personalized support, language barriers, slow response times, and limited support hours. Additionally, there may be difficulties in escalating issues or resolving problems due to the size and complexity of these companies.
âThey believe so strongly in their system that they point our issues back to help guides or videos.â
- Steam Team Member
- Controlling data access. Other than being expensive upfront, with licensing fees, implementation costs, and ongoing maintenance costs, legacy software stores user data and triggers fees when a user tries to use their own data. These high, unexpected extra costs can eat at a customer's bottom line and leave them feeling trapped to the TMS.
âAll of the data is stored through CargoWise in the Cloud. Itâs our data, but CargoWise has gatekeeping (and billing triggers) in place to use our own data.â
- Steam Team Member
2. Key Features
- Customs-related features: Freight forwarder TMSâ software stays up-to-date with complex, international, customs regulatory requirements enabling freight forwarders to avoid fines and always stay in compliance.
âAll of the customs-related features are critical for us. CargoWise is light in Drawback area. It functions in submitting to US Customs, but we have built a database outside of the system to run the logic and then feed to CargoWise fields so we can then submit to US Customs.â
- Steam Team Member
3. Features Everybody Wants
- Better end-to-end multi-modal solution: To have the ocean-dray-warehouse-truckload process all in one file. Customers often have to piece this together manually.
- Multi-lane quote output: The industry (in general) still uses Excel and âSave to PDFâ for large multi-lane RFPs (request for proposal).
- Greater visibility throughout the customs process: Freight forwarders and BCOs want greater visibility of their loadâs status throughout the customs process. The obstacle here lies in incentivizing customs officers to communicate status updates.
Concluding Remarks
As global trade becomes more complex, freight forwarders have emerged as key intermediaries between beneficial cargo owners and logistics service providers. To remain competitive, freight forwarders must continually innovate and invest in technology, with TMS software being the essential tool for managing and optimizing transportation. However, customers have identified many pitfalls in legacy TMS software including unpredictable pricing, data control, and poor customer service. These represent obstacles in a freight forwarderâs primary motive: to lower their costs and increase their margin. To achieve this, they need TMS software that automates the entire forwarding workflow, increases visibility along the supply chain, and allows for proprietary data control and ownership. As we have discussed, the current solutions are far from covering all of these areas, but third-party integrations and add-ons may be the key to bridging these gaps.
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