Earlier, when logistics was all about paper trails and manual calculations, it invited a lot of guesswork from the decision-makers. This often led to delayed or missed deliveries, affecting the bottom line—the supply chain.
Hence, they needed a cohesive freight management system (FMS) to choose the right vendors, plan routes efficiently, and track cargo. Freight management enables dynamic route optimization, predicts disruptions, and recommends carrier selection.
For the same reason, the transportation management system market is expected to grow to USD 33.3 billion by 2028. The growth rate of 19.7% from 2023 makes investing in building such a system worth the complexities of modern logistics operations.
In this blog, we’ll uncover how automated processes and integrated data systems of an FMS enable keeping up with modern freight management operations.
What is a Freight Management System?
A freight management system (FMS) is a crucial part of logistics that covers the entire supply chain operations of transportation companies. By automating and optimizing shipping, tracking, and comparing carrier rates, an FMS helps them address all critical freight movement tasks.
From warehousing and inventory control to client networking, it ensures that any cargo moves on time and is delivered to the right destination at the lowest possible cost. Here’s a brief explanation of the entire process workflow of an FMS:
Carrier Selection
FMS enables companies to choose the most favorable carrier company that would transport cargo from one location to another based on rates and agreement terms.
Cost-effective Route Identification
Shipping companies can identify the most affordable route and optimize it by selecting the mode of transportation, balancing the cargo, and assigning drivers for vehicles.
Scheduling and Tracking
FMS helps schedule cargo pickups and increases visibility by allowing third-party carriers to track vehicles and drivers in real-time.
Documentation
Companies can prepare necessary documents for vehicle and cargo insurance and regulatory compliance with FMS.
Analytics
Lastly, FMS allows companies to analyze the collected data and gain insights into shipping processes to enhance the efficiency of future operations.
Benefits of Freight Management System
The complexity of your freight processes, combined with the demand for logistics, may influence supply chain management. This is where an FMS comes in to streamline speed and efficiency with technology.
For an FMS to be successful, companies need to build a system that reduces transportation times and costs, provides better supply chain visibility, and optimizes cargo safety.
Let’s understand its benefits:
Cost Reduction
An FMS helps shippers choose the most affordable and feasible transportation routes for deliveries by focusing on maximizing speed and reducing costs. It ultimately leads to lower shipping expenses by minimizing phone calls and manual observations over internal and external operations.
Improved Efficiency
Customized FMS enables companies to automate several manual tasks, such as order processing, shipment tracking, and documentation. Some of the world’s transportation leaders, like DHL, utilize smart sensor technology in their FMS for RFID tracking and geo-tracking to manage inventory.
Enhanced Visibility and Tracking
FMS provides better visibility for your shipments, using real-time tracking to monitor status, reduce delays and disruptions, and resolve issues proactively. DHL has implemented AI algorithms to identify the locations of stalled shipments, determine the shortest warehouse route, and suggest immediate solutions if a disruption occurs.
Better Customer Service
FMS offers companies the opportunity to provide correct and accurate information about orders and shipments to the customers, increasing transparency. As an important part of their FMS, FedEx deployed Microsoft Dynamics 365 for better order management, tracking, and monitoring of time-sensitive shipments.
Scalability and Flexibility
Companies with multiple supply chains for different types of shipments, such as ocean freight and air cargo, in addition to order logistics, can implement FMS with other systems for scalability.
For example, FedEx replaced its different distribution channels with one comprehensive global distribution, FedEx Trade Networks for international shipments, trade networks, and customs brokerage.
Compliance and Risk Management
FMS enables small and large businesses to automate all their tasks associated with adherence to government regulations by ensuring proper documentation. Real-time monitoring and predictive analytics help eliminate risks associated with handling safety protocols, delays, and fines.
Data-Driven Decision Making
With FMS in place, companies make decisions based entirely on data to control shipment movement better. With a massive digital supply network, they can also automate and simplify customs clearance.
FedEx, for instance, uses FedEx Ship Manager, FedEx Delivery Manager International (FDMi), and FedEx Dataworks to map and utilize delivery routes and optimize internal operations.
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Types of Freight Management System
Goods transported in different cargos touch multiple checkpoints before being delivered to their destination. These checkpoints are different software systems necessary to navigate the challenges of moving and managing the freights efficiently.
Here are the different types of transportation management systems for managing freights:
Transportation Management Systems (TMS)
TMS optimizes transportation operations by integrating real-time data and analytics for centralized route planning, analyzing freight costs, and selecting suitable carriers.
USA’s top logistics company, J.B. Hunt, implemented TMS to streamline shipment management across multiple touchpoints. The system provides a 360-degree view to list scheduled appointments, planned stops, and items based on quantity and weight.
Warehouse Management Systems (WMS)
WMS streamlines inventory tracking, optimizes storage spaces, and fulfills orders with integrated sensors for real-time insights and swift movement of goods.
One of the USA’s leaders, XPO Logistics, launched its own cloud-based WMS, WMx, for distributed order management with intuitive dashboards for synchronized warehouse operations.
Enterprise Resource Planning (ERP)
ERPs are designed to centralize processes across various departments for better data management and the smooth flow of information. C.H. Robinson, a top-rated logistics company in the USA, accelerated its B2B supply chain operations by integrating it with more than 35 TMS and ERP platforms to automate freight bids in real-time.
Order Management Systems (OMS)
OMS automates and manages an order’s entire lifecycle with centralized data access and integrations with several supply chain tools. Automated order processing, tracking order status, and bridging sales ensure reduced errors from order placement to delivery.
Supply Chain Management Systems (SCM)
SCM enables companies to oversee each phase of a product lifecycle, enhancing the visibility of the routes from which raw materials are sourced and delivered to customers.
America’s finest, United Parcel Service of America Inc.(UPS), streamlines its logistics using AI to improve package sorting and identify the best routes to load packages.
Third-Party Logistics (3PL) Systems
3PL systems are specialized software for logistics third-party providers to streamline the complexities of transportation, outsourced logistics, and warehousing.
Global leader Amazon is a 3PL system that fulfills e-commerce orders for businesses selling products on-site and through outside sales channels.
What Types of Data Does the Freight Management System Process?
Companies need to ensure that all shipments are delivered on time and secure carrying capacities that align with their performance and budget targets.
Following are the types of data that an FMS processes for better real-time visibility, analyzing facility locations, and maximizing the efficiency of supply chains:
Shipment Information
Using automated data entry tools for Smart Inventory Optimization, such as barcode scanners and RFID tags, FMS integrates the information received into a centralized database through APIs for visualization and predictive analytics. RESTful APIs and Apache Kafka are some of the recommended technology stacks.
Carrier Information
Shipping profiles help understand shipping preferences, such as sizes, volumes, routes, total costs, average prices, and weights. RFID chips, truck sensors, GPS, geolocations, and street maps also collect cost-sensitive information related to weather patterns and transit times.
Customer Information
Customer information collected by an FMS includes transactional data like dates, times, locations, types of purchased products, payment methods, and purchase history. It also contains all types of communication records, account information, preferences, service level agreements (SLAs), and geographic data to optimize purchase decisions.
Inventory Data
Inventory information includes details of stock levels, SKU numbers, storage locations, inventory turnover rates, stock quantities, and conditions.
It also contains order data, transaction data, equipment data for incoming and outgoing shipments, expiry dates, damaged or returned goods, and supplier information. The recommended tech stack can range from SAP to Oracle ERP and EWS.
Tracking and Status Updates
Tracking and status updates include collecting data to optimize routes, such as geospatial information, to find the shortest and quickest routes.
Additionally, road networks, delivery windows, driver and vehicle data, traffic data, historical routes, and weather data according to customer preferences can be used. Amazon Redshift, BigQuery, and TensorFlow are some of the technologies that can be used.
Billing and Invoicing Data
Invoicing data includes invoice numbers for payment tracking and progressive numbers (PRO number) tracking to match them with corresponding bill of lading numbers.
Additional information includes transportation modes, shipping quantity and volume, consignee and carrier information, and transportation costs. The tech stack’s recommendations include Robotic Process Automation (RPA) platforms like UiPath, MySQL, and MongoDB databases.
Compliance and Regulatory Data
Compliance data includes regulatory certifications, safety compliance records, Hazardous materials documentation (MSDS), and environmental impact assessments.
The information is region-specific for permits and licenses, audit trails, insurance, emissions and fuel usage, and supplier documentation for labor laws.
Performance Metrics and Analytics
Collecting data for performance metrics involves finding the limits of outdated systems, connecting with IoT-enabled devices, partnering with diversified carriers, and partnering with logistics providers.
Further, the data for freight analytics also consists of KPIs like perfect shipment rates, timely pick-up rates, usage and costs of out-of-network carriers, and average dwell times for inbound and outbound drivers. Apache Hadoop and Apache Spark are some of the most commonly used technologies.
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Freight Management System Modules
Developing FMS software needs an all-inclusive strategy to create a robust logistics flow that covers all the systems that need to be integrated. The entire supply chain performs many functions with key system modules as follows:
Order Management
Shipment information includes recipient names, shipping addresses, and quantities with rates and routes defined at the entry.
The integrated shipping management systems process and analyze this information based on routes, assessed costs, and expected delivery dates to create shipments and place orders. Some well-known Shipping Management systems include Shippingeasy, ShipStation, FreightView, and Shipmonk.
Transportation Management
Manufacturers, distributors, and e-commerce companies can automate their daily transportation operations with custom fleet management software. For example, Fleetx is an AI-driven platform that digitizes supply chain operations. Similarly, Leaf Logistics enables shippers and providers to build the most resilient transportation plans.
Warehouse Management
A warehouse management system (WMS) automates pickups, stock reservations, and transfers for incoming and outgoing goods from 3PL warehouses and transit warehouse stations.
It also acts as a cargo tracking system to view stored stock in warehouses. Popular names include Fishbowl and WareIQ, which provide real-time visibility into inventory.
Inventory Management
Inventory data refers to information related to goods, products, items, and raw materials. Inventory management and order management systems can use this information to order, track, and receive orders arriving at warehouses and to customers. Some of the leading inventory management and order management softwares include ShipThis, Trimble TMS, and E2open.
Carrier Management
Carrier information includes delivery dates, times, billing and invoicing, rates, and discounts. Carrier management systems analyze the data to monitor and manage all aspects of carrier operations through scorecards, claims, and rate management. Some of the carrier management softwares includes Blue Yonder, Oracle, Kuebix, and Rose Rocket.
Billing and Invoicing Management
By collecting and analyzing data, it conducts bill audits and invoice reconciliation and executes contactless carrier invoice processing. These system modules can be integrated with FMS and TMS for verification of generated bills and supported documents submitted by the carrier to settle payments. Some well-known names include Moon Invoice, Invoice Ninja, and Airbase.
Analytics and Reporting
Data collection related to freight and shipping rates, routes, invoices, and performance provides access to understanding future freight trends. It also helps in analyzing forwarder performance, identifying new vendors and carriers, measuring strategies towards tracking and negotiating to gain insights into freight lanes, and onboarding suppliers to reduce inconsistencies.
Customer Relationship Management (CRM)
Customer information consists of information about an individual or a shipper company, including details of sales, communications, and marketing.
For freight forwarders, a customer relationship management (CRM) system helps manage customer data to track shipment counts, frequency, and rankings. Some CRM systems include Salesforce, NetSuite, FreshSales, and EngageBay.
Document Management
The efficiency of an FMS depends on accurate paperwork for tracking shipments in a cargo. Hence, integrating the document management system module offers data capture and uploading in multiple formats and ensures government compliance.
It can be divided into accounting management, tariffs, regulation management, and claims management. Examples include SAP Document Management and Kofax Capture.
Features to Consider When Building a Freight Management System
When developing an FMS, transportation companies need to ensure it serves as a centralized platform for data convergence. Right from inventory levels and shipping rates to delivery routes and times, an FMS helps reduce the scope of human error with the following features:
User-friendly Interface
The user interface forms the front end of FMS software, with a rich set of features for automating each process. It includes features for planning routes and schedules and analyzing data to improve delivery schedule precision. React and React Native are some of the popular choices for responsive interfaces.
Real-time Tracking and Updates
Whether your business is in ocean, air, or ground transportation management, real-time tracking provides a comprehensive view of inventory levels, movements, and storage locations. GPS and RFID technology allows tracking of scanned products through several points even when they are not in sight.
Integration Capabilities
An FMS can be integrated with multiple other systems, such as ERP, CRM, WMS, OMS, and SCM, to ensure a seamless communication flow. This reduces data redundancies, enhances efficiency, and ensures consistency in controlling all aspects of logistics. For robust integration, API tools like Apache Canal and MuleSoft offer on-premises and cloud environments.
Automation of Processes
With real-time features, each process of an FMS is automated, helping businesses proactively address all issues related to delivery delays.
Moreover, documentation is also automated by uploading paperwork in all formats and types, customized as per government compliances. Apache Spark MLib and IBM Watson are recommended for AI and ML tool integration.
Scalable and Customizable Workflows
These process workflows can be customized and scaled according to business needs to place orders and store goods, time stamps, available carriers, owners, drivers, vehicles, and shippers. Back-end frameworks like Node.js and Spring Boot are some of the recommended technologies.
Security Features
A FMS enhances management security with biometric and multi-factor authentication for secured access to sensitive data. It also includes automation features for real-time monitoring that ensure regulatory compliance and standards, as described in GDPR and other security standards.
Tools like OpenSSL, Okta, and Fortify are recommended for integrating security technologies.
Comprehensive Reporting Tools
Reliable freight management software includes advanced analytical tools to optimize service changes and calculate shipment time and costs. With reporting tools, it evaluates routes, analyzes carrier and partner performance, manages warehouse allocation, tracks vehicle availability, and audits departmental operations for improved business outcomes.
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Conclusion
An efficient and reliable route for moving goods is crucial for transportation companies of any scale to ensure the smooth operation of freight systems. Frequent delays due to unpredictable weather conditions can cause damages and customer dissatisfaction, leading to financial risks and losses.
Developing a custom FMS with a freight management software development company is a quick and efficient way to provide an omnichannel experience.
At Moon Technolabs, we utilize advanced predictive analytics with AI, ML, and IoT integrations to improve shipping operations. Reach out to our experts to develop your own FMS with visualization tools to manage multiple distribution channels and gain better visibility into the supply chain.
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