By Stephen Craig and Erik Market

CP Consulting

There clearly is an increased interest in on-demand/hosted/ASP’ed Transportation Management Systems (TMS). Why is this happening?

From working with many companies looking at or deploying TMS, our belief is that there are several factors driving this interest:

• Some of the on-demand offerings are, to an extent, simpler, which appeals to some users.  For example, some on-demand TMS products may lack multi-mode, multi-leg international functionality.  But, there are a many companies that don’t need that functionality, either because they aren’t shipping like that or because when they do they use forwarders.
• Similarly, there is some self-selection going on.  Just as distribution-intensive outbound shippers may choose to use the TMS of their core WMS provider, we do think companies that perhaps have more straight-forward problems are just gravitating to the on-demand route.
• A broader explanation, we believe, is that when the TMS is hosted, the Implementing company is more willing to adapt to the application rather than to forcing the application to be adapted to them.  This doesn’t mean the applications are unable to be adapted to the implementing companies (because certainly some or even a lot of the same process configurability can be implemented).  This greater willingness to adapt to the application could be because:
• That is the way the vendors are pushing the deals – “The implementation cost is X if you do it our way and here are the names of 5 folks that will say it works,” and X is significantly less than a more customized implementation.
• Because of the lower price point, there is less pressure to make it be the perfect fit.”
• Just because on-demand TMS is perceived as a “service” as much as a product, buyers accept it as more standardized, demanding less customization.
• Transportation planning and execution is one of the places where process standardization (within companies and across companies) should drive a huge amount of benefit because, despite the fact that most shippers think they need to do things differently than everyone else, the many don’t need to as much as they may think.
• There is more to the carrier connectivity benefit of on-demand than meets the eye. Let’s say that there is a good solid 4 months of carrier connectivity work to do but the hosted vendor can drop that to 2 or 3 months by leveraging existing connectivity. The real comparison is not 2 to 3 months versus 4 months, but versus the 12 months it takes most shippers to actually get their top tier carriers connected.
• Relatedly, there is significant loss in value that occurs when shippers don’t go beyond their top-tier or top-two-tiers of carriers. This lack of follow through on carrier connectivity happens because TMS vendors often don’t well identify this cost or underestimate it when selling the application,  so it is not known or under-budgeted. Even if this is a known cost, the implementing firm’s IT/integration group often wants to run this either with their existing, preferred contractors or do it internally, and this frequently leads to long cycles to connect. If the IT group does it themselves, the project often slides further down their priority list every month, never gets done, and the transportation team isn’t politically powerful enough to force it through.
• There is also more to the technical infrastructure benefits of on-demand than meets the eye. Again, transportation is often not successful at getting much internal IT attention, so the comparison again is not so much between starting up in 2 days versus 2 to 3 weeks it “should” take, it is starting up in 2 to 3 days versus the 6 to 10 weeks it usually does take, with delays again at each technical step.

The on-demand model isn’t for everyone, and most tier 1 vendors are now also offering an on-demand alternative to traditional deployment. Companies considering TMS must carefully way the pros and cons and their specific circumstances, and weigh the short and long term in making the decision. We have even seen some companies start with a more generic, on-demand model to get the effort kicked off and build credibility, then move to a more customized, traditional deployment with the same vendor’s tool in a later phase.

Stephen Craig and Erik Markeset are principles at CP Consulting (www.cpco.biz), a focused consulting firm, helping companies improve transportation processes and adopt new transportation technology. Stephen Craig can be reached at stephen.craig@cpco.biz.