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What is a Transportation Management System for Parcel Shipping and Why is it Important?

In this article:
1. The two primary functions of a TMS for parcel shipping: planning and execution
2. TMS for parcel shipping: capabilities overview
3. Omnichannel distribution challenges: increasing order volumes, changing customer expectations, disconnected business systems


Scaling parcel shipping, whether you’re a retailer, a manufacturer, or a 3PL, has traditionally been an intimidating challenge. Companies contract with one or two domestic carriers, and logistics teams manually enter orders into on-premise carrier workstations to produce carrier-compliant labels and documentation. This means as parcel volumes scale and demand for same-day and next-day delivery surges, companies are left with little ability to rate shop and even less ability to execute.

And there’s no end in sight to this dynamic. As Bloomberg News summarizes in a recent article on the Amazon-FedEx delivery feud, “…the common features for all involved are an ever-increasing flood of packages combined with greater pressure on profits.”

There’s no escaping reality: smart parcel shipping management is critical, and it literally pays for a business to invest in a Transportation Management System (TMS) for parcel shipping. The proof is in the numbers. According to the Wall Street Journal, in 2017, total spending on logistics rose to a record of nearly $1.5 trillion, up 6.2% from the year before, and about $250 billion more than companies spent on logistics in 2008. And on average, here at Logistyx we’ve found it costs companies at least 10% more to manage shipping without a TMS for parcel shipping than with one. That adds up to tremendous savings – in hard dollars as well as in labor and time saved week after week.

With 2019 on track to demonstrate record-breaking growth in the parcel shipping market,
now is the time for companies to invest to keep their parcel shipping spend under control. When at least 60% of a company’s total shipping volumes are parcel, TMS for parcel shipping is essential technology.

Omnichannel Retail | 1:21

What Is a TMS for parcel shipping?

A TMS for parcel shipping has two primary functions: planning and execution. The planning stage begins with overall carrier rate calculations and ends with carrier selection and package consolidations based on factors such as a shipper’s business rules, a customer’s delivery preferences, and the inventory’s location. The execution stage encompasses everything from printing shipping labels and documents to ensuring the execution of the delivery commitment. Basically, if you need to get a parcel from point A to B, or even C to D, a TMS for parcel shipping will handle that, and more.

They’re able to:

  • Streamline order fulfillment ops and set each parcel up for cost-effective, on-time delivery before it leaves the warehouse
  • Integrate with leading business systems to seamlessly execute shipments from any operation, whether it’s automated, manual, or somewhere in between
  • Identify the best carrier service and automatically provide a label that complies with the carrier’s requirements
  • Account for the variables in carrier contract negotiations and eliminate the guesswork in budgeting
  • Calculate the impact of a new carrier contract on the bottom line
  • Identify savings opportunities across attributes such as origin-destination, carrier services, modes, and accessories
  • Automatically compare carrier invoices against expected transportation costs and identify discrepancies
  • Report on transportation spend according to geography, business unit, accruals, and GL Coding
  • Identify opportunities to deploy different multi-carrier parcel delivery strategies that yield greater returns
  • Send instant warning alerts if a parcel is off track or behind schedule

Why is a TMS for Parcel Shipping Important?

Market factors such as an increasing demand for omnichannel distribution. Rapidly growing ecommerce order volumes have changed how companies operate, requiring them to support faster order fulfillment processes, millions of parcel delivery variables, infinite supply chain work streams, and a more global customer profile.

Additionally, demand for same-day/next day delivery is growing and carrier services are expanding. The C-Suite is under growing pressure to reduce net landed cost of goods and manual labor expenses. End-to-end order fulfillment data is trapped in silos. Companies are trying to navigate this new market, and they need a powerful software solution to succeed.

Implementation Cannot Happen Soon Enough

Any efficiencies achieved in the distribution model can help companies successfully navigate these new market dynamics, and shippers who can invest in TMS for parcel shipping systems stand a better chance of keeping overall transportation costs in check and improving customer satisfaction. With the right TMS solution, modern companies are eliminating multiple steps in the order fulfillment process, optimizing carrier service selection, syncing shipping data across business-critical systems, and yielding tremendous gains in on-time delivery in full rates – all of which helps them compete in an ever-changing market.

Learn how a TMS for parcel shipping can benefit your business today.