ERP Vs.TMS: Why Logistics Needs a Dedicated Solution


In the changing world of transportation, where efficiency is crucial, an important question arises: Have you ever considered the distinction between ERP and TMS and how they contribute to enhancing your shipping and delivery process?


Let’s delve deeper. ERP systems (Enterprise Resource Planning) are the backbone of businesses handling finances and inventory management. However, the Transportation Management System (TMS) comes into play when it comes to streamlining your shipping and transportation processes. It goes beyond the basics by assisting in tracking carrier performance, route optimization, and simplifying payment methods for shipping services. 


This blog post will outline the disparities between ERP and logistics TMS systems while highlighting their potential to enhance your shipping and delivery operations.

What Is an ERP System in Transportation?

An ERP system acts as a hub for managing logistics operations. It aids businesses in simplifying and organizing their supplies, manufacturing tools, and shipping processes to ensure completion and delivery.

Critical Components of ERP System:

  • Financial Management: Track expenses and revenue with accuracy.

  • Inventory Management: Keep checks on your goods in real-time.

  • HR Management: Handle your workforce efficiently.

  • Sales and Customer Management: Stay connected with clients.

What is the TMS System in Transportation?

Transportation Management Software (TMS) focuses on logistics and supply chain management. Utilizing technology helps businesses plan, execute, and facilitate the movement of goods from one location to another.


Shipment management software also guarantees that everything is completed precisely and that all the necessary documentation is organized correctly.

Key Components of Transportation Management System (TMS):

  • Route Optimization: Find the fastest and most cost-effective routes.

  • Shipment Tracking: Monitor shipments in real time.

  • Carrier Management: Choose the suitable carriers for your needs.

  • Warehouse Management: Streamline warehouse operations.

  • Reporting and Analytics: Gain insights for continuous improvement.

ERP vs. TMS: What Suits Best to Meet Logistics Operational Efficiency? 

When managing your logistics operations, having clear visibility into your freight is a game-changer. In this section, we’ll delve into the difference between ERP systems and Transportation Management Integration that can help you with Logistics Optimization in your freight and transportation processes.

Faster Implementation to Realize ROI


When considering a logistics solution, implementation speed can significantly impact your return on investment (ROI). Implementation speed refers to the time it takes to deploy and benefit from the software solution.


ERP: ERP implementations are known for their extended timelines, delaying the realization of ROI for logistics and supply chain improvements. Implementing an ERP system often requires a substantial transformational effort and can cost millions, depending on the business size and complexity. Organizations continually invest months in developing RFP criteria and evaluating ERP vendor options. After choosing an ERP system, the average implementation takes around 15-20 months, with 75% of ERP implementation projects exceeding their initial timeline. 


TMS: A transportation management software implementation typically takes 4 to 6 months. This faster implementation translates to quicker ROI across the supply chain organization. With TMS, logistics managers can realize the benefits and efficiencies sooner compared to ERP implementations.


Note: The above mentioned price and duration provide a general overview. The actual price estimation depends on your specific business needs and requirements.

Shipment Tracking, Visibility, and Control 


Effective shipment tracking, real-time visibility, and control are paramount for shippers in various industries, including steel and chemicals. These capabilities refer to the ability to monitor the real-time location and status of shipments and exercise control over them.


ERP: Transportation ERP software systems often need more robust tracking, visibility, and control tower features, resulting in a lack of real-time information, making it challenging to respond quickly to disruptions.


TMS: Transportation management systems offer comprehensive shipment tracking, real-time visibility, and control tower features, providing real-time updates on the status and location of shipments. This is particularly valuable for shippers across multiple sectors, as it enables them to monitor the movement of their sensitive cargo, make informed decisions, and address any issues promptly.

Route Optimization and Planning


Route optimization and planning involve discovering the most efficient and cost-effective routes for transporting goods from one location to another. Efficient route optimization and planning are critical for shippers dealing with heavy or hazardous materials, as they impact transportation costs and safety compliance.


ERP: ERP systems typically require more industry-specific algorithms and real-time data integration for dynamic route optimization in the steel and chemical sectors, potentially resulting in suboptimal routing and compliance issues.


TMS: Transportation management software solutions incorporate comprehensive features for route optimization and planning, considering cargo sensitivity, weight restrictions, and hazardous materials regulations. This optimization reduces transportation costs and ensures compliance with industry-specific requirements.

Achieving Cost-Savings, Unrealized Value, and ROI


Considering that the average transportation ERP software implementation costs $6,000 per user and takes 15 – 20 months to roll out, ROI on the system is likely years away. Lengthy implementation times and high costs can hinder cost-saving initiatives and delay the realization of ROI.


ERP: With their lengthy timelines and complexity, ERP implementations often result in delayed cost savings and a prolonged journey to achieving ROI. Also, ERP solutions don’t meet collaboration needs. One needs to invest additional cost from integrating a separate collaborative tool.


TMS: A Transportation software is mainly designed for your business-specified logistics needs by facilitating an optimized workflow to simplify the entire process. The logistics TMS often relies on intuitive user interfaces that transportation experts can efficiently operate to track logistics functions and for seamless collaboration. 


Simply put, a shipment management software solution can also be customized as a collaboration tool that saves the cost of integrating separate tools for communication across departments. This makes it easier for various departments to communicate and prioritizes the organization’s more significant objectives in one place.


Note: The above mentioned price and duration provide a general overview. The actual price estimation depends on your specific business needs and requirements.

Critical Transportation-Specific Functionality 


ERP and TMS systems software offer different and complementary benefits to an organization due to their unique functionalities. Inefficient software or lack of transportation-specific functionality can hinder efficient logistics operations, leading to higher costs and lower service levels.


ERP: ERP systems incorporate basic features and, therefore, need specialized tools and features to manage modern transportation and logistics complexities, limiting an organization’s ability to optimize its supply chain.


TMS: The Transportation management system software is specifically designed and integrated into your whole transportation lifecycle and provides comprehensive details on vehicle visibility, freight pay, and rate bid optimization. Furthermore, TMS software helps plan shipments, allowing organizations to respond quickly to market disruption.

Document Management and Compliance


Document management and compliance involve managing shipping documents and ensuring adherence to industry-specific regulations. Inadequate software can lead to document errors, compliance violations, fines, and delays in transporting sensitive cargo, impacting costs and reputation.


ERP: ERP systems may not provide the specialized tools and document management capabilities needed for the complex regulatory environment across sectors, potentially resulting in compliance issues and delays.


TMS: Transportation management system software solutions include document management features customized to the specific industry needs. They handle shipping documents, bills of lading, and compliance requirements, ensuring all essential documentation is attainable and compliant with industry regulations.


In the logistics landscape, efficiency is the top priority across the industries. Therefore, choosing between an ERP and a logistics TMS is becoming crucial. While ERPs offer versatility, TMS solutions are solely customized to meet logistics needs, offering real-time tracking, route optimization, and cost-saving advantages. Transportation management solutions are the clear winner for industries where precision is vital. 

To understand what suits your business, get in touch with Fretron’s experts and leverage the full potential of logistics management.

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