Proper warehouse management is critical to inventory flow, but it doesn't start at the warehouse, it starts at order and continues through delivery, which brings into play a transportation management system (TMS).

Too much inventory leads to lost product, especially if it is perishable, and wasted costs. It also leads to inefficiencies in everything from management workflow to warehouse workflow. Use of a TMS in this process, while seemingly having little to do with warehouse inventory, can be a critical step to get inventory and orders in line with financial expectations.

Combined with a warehouse management system (WMS), these powerful tools collect thousands of data points that can improve inventory flow and storage. Modern warehouses utilize barcodes or radio frequency identification (RFID) on pallets, and in some cases, even individual boxes. This helps track products, but it also helps TMS improve the entire process with more effective ordering that ensures proper levels of inventory are on-hand, through to delivery by the carrier, which can positively verify the product was delivered and done so on-time and damage-free.

Every movement of a piece of inventory can be tracked in this way, and that is only possible with a modern TMS that connects the disparate systems. In addition, in the case of e-commerce in particular, some systems are capable of automating inventory replenishment, freeing up critical time for managers. It could also ensure vendors are meeting product requirements through exception management, a crucial role that modern TMS are able to play for companies.

When dealing with e-commerce orders, some 30 percent of shipped goods are returned. The new TMS systems are able to manage this process as well, which is one of the driving trends for retailers to outsource their e-commerce fulfillment to a third-party logistics provider (3PL).

"This can relieve some of the complications of using vendors or other retailers to ship orders, where the fulfilling party may be less than motivated to ensure good customer service," Commonwealth Supply Chain Advisors wrote in a white paper last year. "In addition, a 3PL's business consists of filling orders on behalf of others, so they may be better versed in the rigors of specialized labeling and packaging."

Commonwealth noted that not all 3PLs are the same. Some, it wrote, are no more than public warehouses while others have robust real-time technology to aid the process.

Choosing a 3PL with the right tools

For a 3PL to properly meet customer needs, it needs a TMS that can handle the rigors of e-commerce and its demands. Not all 3PLs are equipped to handle e-commerce, so finding one that can is critical. The 3PL may not specialize in online orders, but it must have the ability to utilize technology that can interface with the various stakeholders in an e-commerce transaction.

The TMS provides shipment creating, consolidation and mapping. From the time an order is received, the TMS provides insight into the best way for that shipment to move from location to location until it reaches its final destination. The visibility and ability to combine it with like shipments onto a truck improves the margin on every LTL shipment on that truck by spreading out the operational cost across more freight customers.

The ability to aggregate shipments, especially LTL and e-commerce-related shipments, is helping carriers hold down costs and shippers and end-customers benefit from that.

The complexity of the supply chain has grown exponentially from various factors, including free two-day, next-day, and even same-day delivery. Regardless of the number of days it takes, free delivery is still free to the customer, but not to the shipper. That cost has to be baked in somewhere, so anything that can be done to lower the shipping cost improves the bottom line, and that includes aligning inventory closer to actual demand.

TMS needs to communicate with the WMS

When it comes to inventory control, the ability of the advanced TMS to communicate with a WMS helps improve inventory flow, but also stock. Inventory that sits in warehouses for long periods of time also sits on that company's financial books in both the cost of that product, any potential carrying costs (the cost to hold inventory) and even increased insurance costs or interest on borrowed money that may have been needed to secure the inventory.

Tighter controls on transportation – loading and unloading times, transit times, etc. – allows a shipper to more accurately locate and store inventory. A WMS can send shipment information and receive shipment information from a TMS, effectively connecting the shipper, the trucker, and maybe even the end-customer with real-time delivery alerts and shipment tracking and more accurate inventory levels.

When it comes to the physical shipping of goods, a TMS can shine. The visibility the system provides not only into one particular shipment, but all shipments, offers great opportunity to drive savings. For instance, two LTL orders might arrive on Monday, both scheduled for a Thursday delivery. In one case, the product is in the warehouse in Chicago, whereas the other is in a warehouse in Milwaukee. Both shipments are heading to Detroit.

The inclination is to ship both orders from their origin locations to Detroit, but that requires two trucks and may cost more as each is a smaller shipment. Using the TMS, though, the shipper could route that order from Milwaukee to Chicago for a Tuesday morning arrival and then consolidate the two loads onto a single truck that moves to Detroit on Wednesday at a lower cost.

Driver efficiency improves warehouse efficiency

So while a TMS is not an inventory management tool, anyone involved in e-commerce or LTL shipping can leverage its capabilities in ways that lead to more efficient inventory management.

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