I had planned as promised last week a part 2 review and comment this week on the usually interesting annual report from MHI and for 11 years its partner Deloitte. (See Review and Comment: MHI Annual Report 2024.)
However, as we cruise into an Easter weekend, recent news that Walmart is making its in-house developed Transportation Management System (TMS) available to the markt led me to delay the part 2 of the MHI review in favor of some thoughts on the prospects for commercializing of internally developed supply chain innovation.
Gilmore Says.... |
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| So can Walmart and its TMS break the history here? I would guess probably not in the end – I do not believe it will be in the TMS business a decade from now. |
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The Walmart move is actually a big deal. The retail giant recently announced in a blog post that it was making its AI-power TMS available to all businesses as a Software-as-a-Service (SaaS) solution through its Walmart Commerce Technologies unit.
Walmart says it is the same TMS it is using internally, and is targeted to businesses of all sizes, with functionality to optimize driving routes, load trailers efficiently and minimize miles traveled. All that would obviously reduce costs and CO2 emissions.
Walmart says with its TMS it avoided 94 million pounds of CO2 by eliminating 30 million unnecessary miles driven through use of routing optimization. That of couse saves Walmart a lot of money as well.
I will note it’s not clear what the baseline is here, as I believe Walmart has long had a evolving TMS. Are the metrics cited from a more recent TMS deployment?
If successful, Walmart could really shake up the existing TMS market. I will assume the product has advanced capabilities, if it’s running Walmart’s vast transportation operations. So it may appeal to high end shippers.
If the price is right, it may also appeal to mid-sized companies, especially if they are Walmart vendors.
So Walmart’s move will concern most current TMS vendors.
But will the strategy work? That’s a whole other story.
My experience is that it is very difficult for regular companies to commercialize homegrown technology.
One example: for a few years in the 1990s, AT&T was at all the trade shows marketing a WMS that they had created (with some outside help) I believe for a DC in Wichita. I am sure it had good functionality – but a few years later it was gone.
When I worked as an analyst for META Group, I met in Atlanta some managers at Georgia Pacific who were considering taking an ocean freight booking and tracking solution they has built for their own use to market, as they felt they had solved a real problem that others were also dealing with.
I am sure they were right. I still advised they should probably pass on the idea, which I believe is what they did.
Around the same time, I met with some folks from DH, I believe in San Francisco. They had built a global freight visibility application for their own needs, and thought it was pretty cool. Could they take it to market?
It was cool. But what they didn’t realize was that a number of other software vendors were all building very similar solutions, with it being a much more competitive landscape than they realized. In the end they deferred.
There are other examples I just can’t recall. I am not familiar with any companies successfully taking an in-house solution to the general market.
There are several reasons for this.
First is functional. While companies may have built something really nice, the solution was developed to meet their specific needs. It would not be built to meet the requirements others need, or for different verticals. They would not be built to provide high levels of configurability to support a broad range of other companies and requirements.
Second is technical. Though not nearly as important a factor in this age of Cloud delivery as it used to be, again technology infrastructures for these applications were adopted to meet internal standards and requirements, not the broad landscape of general and highly variable market needs. Why would you build an internal solution to support multiple database if you didn’t have to as one example.
 Third, and perhaps most important of all, technology companies generally and software companies specifically are just very different businesses and cultures than making and distributing widgets.
How product development, sales and marketing, and just everything really is managed is alien to regular companies.
“We need to hire how many pre-sales consultants?” I am sure some executives have asked when seeing the plan.
Companies considering this will usually say the “newco” will be walled off, run independently and other tactics to mitigate the alien impact of the operation, but it’s never enough. After a while, management usually changes or changes its mind, and wonders whose idea it was try to do this.
There are sometimes plans to spin out the newco as a truly standalone business if it reaches some level of success- but few if any get to that stage. And even if they would, some company or investment group has to agree to invest in the spin out.
So can Walmart and its TMS break the history here? I would guess probably not in the end – I do not believe it will be in the TMS business a decade from now. But there is one caveat here, and that has to do with sustainability.
Is there a synergy available that enables Walmart to work through the software to reduce miles and CO2 more significantly than the vendors can operating on their own?
Perhaps. And is that enough to drive more adoption and keep Walmart interested in this business for a time? Reasonably likely.
Even if this is the case, I believe the TMS business will be spun out of Walmart before too long. But no one has really tried to do anything like this, in terms of scale and clout.
It will be interesting to watch.
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