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What is transportation management in logistics?
Transportation management in logistics is about planning, conducting, and optimizing the movement of goods, materials, information, and inventory across a supply chain. In transportation management, it is crucial to choose the most efficient transportation methods (both the routes and modes), manage carriers, ensure compliance, and leverage technology to improve cost efficiency, delivery speed, and overall supply chain performance.
With the expansion of AI and digitalization, logistics companies are gaining many opportunities. However, customers are also becoming increasingly demanding, and while managing material and information flows for the customers, logistics companies must also comply with increasingly stricter environmental regulations.
The Role of Transportation in Logistics
In today’s globalised and interconnected world, managing the supply of raw materials, semi-finished products, and finished goods is literally an art. This is because sources of raw materials, as well as manufacturers of semi-finished and finished products, are often thousands of kilometres away from their users. Often, they are even situated on different continents.
These days, over 50% of global manufacturing output comes from Asia, with China, Japan, South Korea, and India being the major contributors. China alone is responsible for around 30% of global manufacturing output, making it the world’s largest producer of goods.
Since the development of Special Economic Zones in China in the 1980s and China’s accession to the World Trade Organisation in 2001, global manufacturing has increasingly concentrated in Asia. This shift has led to the decline or disappearance of many traditional manufacturing industries in Europe and the US, such as the textile, glass, and steel industries.
Globalisation has created a situation where goods are produced in the most efficient and cost-effective locations, which are often on different continents from those where they are used and consumed. As a result, high demands are placed on logistics companies and transportation to ensure that raw materials, semi-finished products, and finished goods reach their destinations under optimal conditions and without unnecessary delays.
Recently, we have also observed changes in the speed that customers expect for delivery. The last-mile delivery, which refers to the final stage of the logistics process, where goods are transported from a distribution center, warehouse, or transportation hub to the end customer, is becoming more crucial for the smoothness of logistics processes.
Even if a logistics company manages to secure material and goods inputs and move them from one side of the world to another, nothing is won yet, because the goods still need to reach the final customers, who expect to have them delivered immediately after placing an order.
Last-mile delivery is thus a critical part of the supply chain, directly impacting customer satisfaction, delivery speed, and costs. Logistics companies, together with their clients, should work together to make last-mile delivery a smooth and fast process for their customers.
Source: Depositphotos
Key Components of Transportation Management
Choosing the right carriers and negotiating contracts
Freight management involves the coordination and oversight of the transportation of goods from the point of origin to the final destination. Freight management is a critical part of logistics that focuses on choosing the most efficient and cost-effective carriers, ensuring timely deliveries, and managing the associated risks.
Selecting the appropriate carriers and logistics service providers (e.g., warehouse operators, clearance houses, or shipping lines) is essential to ensure that goods are delivered cost-effectively and without unnecessary delays. The process involves evaluating logistics service providers based on factors such as reliability, speed, and cost.
Once a suitable carrier is selected, it is important to negotiate favourable contracts that balance pricing, service quality, and flexibility to meet varying shipment needs. A well-negotiated contract ensures that the logistics operations are smooth and cost-efficient while meeting the required delivery timelines.
Selecting the fitting mode(s) of transportation
In transportation management, it is crucial to consider all modes of transport and pick the right one(s) for each transportation job.
If the production inputs, semi-finished products, or finished goods are located on another continent, multimodal transportation is generally the only viable solution, which combines two or more modes of transport, considering air, rail, road, and sea transport. When choosing modes of transport, geography and infrastructure development, as well as the time and costs of each transportation option, must be considered.
💡For example, when importing goods from Asia to Europe, multimodal transportation can utilize air, rail, road, and sea transport. Air transport, typically combined with road transport, is the fastest but also the most expensive. It is therefore worth using for urgent shipments of smaller volumes and higher-value goods, where the importer has higher margins. Sea transport, often combined with road and rail transport, is the cheapest but also the slowest option for transporting goods from Asia to Europe. The best middle ground is rail transport, which is combined with road transport. When transporting materials, semi-finished products, and finished goods from certain Asian countries to Europe, road transport can also be used, which should theoretically be the shortest or take about the same time as rail transport. However, delays at border crossings can significantly extend its duration, making it quite unpredictable.
For last-mile delivery, road transport is generally used, and route optimization is crucial to avoid empty runs, underutilized vehicles, and unnecessary delays. Efficient routing is crucial for reducing transportation expenses and ensuring short delivery times. Technologies such as GPS tracking and AI-driven route planning can help logistics businesses optimize their routing.
Source: Depositphotos
Inventory and Load Planning
Effective inventory and load planning are vital to optimizing the transportation process, ensuring that goods are delivered in an efficient and cost-effective manner.
Full container/truckload (FCL/FTL) vs. consolidation strategies
When planning for inventory transport, one must decide between full container/truckload (FCL/FTL) and inventory consolidation, which takes the form of either less than container load (LCL) or less than truckload (LTL) shipping strategies.
FCL and FTL is used when a shipment is large enough to fill an entire container or truck, which is typically faster and more cost-efficient. LCL and LTL, on the other hand, are used for smaller shipments where multiple shipments share space on the same container or truck, leading to cost savings but potentially slower delivery times due to multiple stops.
Load consolidation involves combining smaller shipments from different sources or destinations into a single, larger shipment to reduce transportation costs. By consolidating shipments, businesses can take advantage of the cost savings associated with full truckload rates, even if they don’t have enough goods to fill a truck on their own.
This strategy helps maximize the efficiency of the transportation process and ensures that vehicles are utilized optimally, minimizing wasted space and reducing transportation costs.
The decision between transporting full loads and consolidated shipments depends on the shipment’s size, urgency, and budget considerations.
Handling disruptions and ensuring regulatory compliance
Logistics operations are vulnerable to various disruptions, such as severe weather conditions, strikes, or geopolitical events (e.g., border closures, trade wars), and transportation managers must take them into consideration, when planning logistics.
Effective risk management in logistics involves having contingency plans in place to address these disruptions. This could mean identifying alternative routes, sourcing from different suppliers, or having backup transportation options available to minimize delays and ensure that goods reach their destination on time.
Global trade is governed by a complex set of regulations and customs requirements that vary by country. Freight management must ensure that all shipments comply with local and international regulations, including customs documentation, tariffs, and safety standards. Non-compliance can lead to delays, fines, or even shipment confiscation.
Therefore, understanding and staying updated on customs requirements and regulatory changes is essential to ensuring smooth and legal international shipments.
Source: Depositphotos
The Role of Technology in Transportation Management
Technology enhances operational efficiency, provides real-time insights, and helps companies optimize their logistics processes. No logistics services operator can function without employing technology and it is crucial for the survival of all logistics companies to constantly monitor and assess new technological advancements and implement those that can offer them a competitive advantage.
Below are some of the key technological advancements shaping transportation management in 2025:
🎯Transportation Management Systems (TMS)
A Transportation Management System is a critical tool for managing the flow of goods from the origin to the destination, helping companies plan, execute, and optimize the movement of freight. Transportation Management System solutions offer features such as route optimization, carrier selection, and shipment tracking, enabling companies to reduce costs, improve delivery accuracy, and enhance customer satisfaction.
By integrating various transportation modes and managing complex logistics networks, a Transportation Management System helps companies streamline their operations and ensure that the goods reach their destination on time and in the most efficient way possible.
When deciding on a Transportation Management System, it is important for logistics companies to address whether they want to buy and implement a tailor-made Transportation Management System, which was made exclusively for them, or opt for one of the commercially available solutions.
If a logistics company chooses a tailor-made solution, it must account for higher costs and a high level of involvement needed from employees and management in the development process, as the system will need to be tested and adapted fully to the company’s requirements.
One risk associated with tailor-made solutions for logistics companies is that they might develop a system that quickly becomes outdated, whereas market solutions, which cater to the needs of thousands of users, are more agile and responsive to changes in the logistics market.
On the other hand, if a logistics company opts for a commercially available solution, it must take into account that some aspects of the selected Transportation Management System might not fully meet its specific needs, as this solution was designed for the entire market, not for this particular company.
However, the disadvantages of commercially available solutions for the mass market are largely outweighed by the benefits associated with cost savings on development and the system’s speed in adapting to market changes.
🎯IoT and Real-time Tracking in Transportation Management
The integration of Internet of Things (IoT) devices and telematics has revolutionized transportation management by enabling real-time tracking of shipments. With sensors embedded in vehicles and packages, companies can monitor the location, condition, and status of their shipments at any given moment.
This feature allows for greater visibility throughout the supply chain, reducing uncertainties and improving the ability to manage disruptions. IoT-enabled telematics also help optimize routes, monitor vehicle performance, and manage fuel consumption, providing valuable data to improve overall fleet management.
While theoretically, real-time tracking is an excellent component of logistics processes, as of 2025, it is used by only a few large logistics service providers, as it is an implementation and cost-intensive feature. However, we expect that real-time tracking will become the standard in global logistics in the coming years.
🎯Automation and AI in transportation forecasting
The use of automation and artificial intelligence (AI) is rapidly advancing in transportation management, particularly in the realm of forecasting. By using historical data, AI can forecast future demand, potential disruptions, and optimize resource allocation.
Automation can further help with shipment scheduling, route planning, inventory management, reducing the risk of human error and improving efficiency. With logistics forecasting, companies can proactively manage potential challenges, ensure timely deliveries, and maintain a high level of customer satisfaction.
🎯Sustainable Transportation in Logistics
There is a lot of discussion in transportation management and logistics about sustainability. Making transportation and logistics services more sustainable, however, is not only about reducing the carbon footprint, deploying electric trucks, and enforcing stricter government regulations. Even incentives for using eco-friendly transportation and the existence of alternative fuels are not enough to ensure sustainable transportation without some extra help and reinforcements.
Governments should aim to build infrastructure that naturally motivates logistics companies to implement eco-friendly measures, making them not only accessible but also affordable. Even in 2025, the price of electric trucks is still significantly higher than that of standard trucks running on gas or diesel, and subsidies are either insufficient or non-existent.
Additionally, there is a lack of charging stations near the roads, which discourages many logistics companies from even considering the purchase of electric vehicles.
Transportation Management in Logistics
Transportation management in logistics involves planning, executing, and optimizing the movement of goods across the supply chain. It requires selecting efficient carriers, managing transportation modes, ensuring compliance, and leveraging technology to reduce costs and improve delivery speed.
With globalization, logistics companies face the challenge of transporting goods from distant manufacturing hubs, particularly in Asia, to customers worldwide. Last-mile delivery has become crucial for customer satisfaction, as consumers expect fast deliveries.
Technology plays a key role in transportation management, with tools like Transportation Management Systems (TMS) enabling route optimization, carrier selection, and shipment tracking. IoT and real-time tracking offer increased visibility and efficiency, though implementation remains costly.
Automation and AI are enhancing forecasting and reducing errors. Sustainability in logistics goes beyond carbon footprint reduction, with governments needing to build infrastructure to support eco-friendly transportation solutions, making them more accessible and affordable for companies.
Resources:
UNIDO Statistics: https://stat.unido.org/publications
World Bank Data: https://data.worldbank.org/
Source: Depositphotos
