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Klappich Says:
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 The functional breadth and depth and the application footprints of leading TMS solutions have expanded with significant new functionality being delivered, which further improves the value propositions of these solutions.
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In my day-to-day job, I have the pleasure of talking with large numbers of TMS buyers over the course of a year. I also enjoy the chance to have routine interactions with vendors of TMS applications where I get to peek under the hood of their current products and get a glimpse at new things coming down the road. My client and vendor interactions provide me a unique perspective on the evolving TMS market, which leads to some of the following observations:
Runaway Costs - Escalating fuel costs and more volatile freight environments now affect shippers and Logistics Service Providers (LSPs) of all sizes, and across market segments, and now threaten to decimate logistics budgets. Value clarity and urgency has increased demand for transportation management systems (TMS) and we now find that shippers with as little as $15M freight spend per year are in the market for TMS.
Globalization - While managing domestic transportation remains the primary focus of most TMS initiatives, supply chain globalization is driving additional TMS growth and TMS offerings support of global logistics is of growing importance to buyers. TMS Globalization– both international deployment of TMS, as well as multi-leg, multi-mode international shipment support - is becoming a bigger issue for buyers and leading TMS vendors to invest in adding more global transportation capabilities.
Demand for Suites not Point Solutions - While basic transportation planning and execution have traditionally been the focal points of TMS evaluations, we find buyers more interested in the overall breadth of offered TMS suites, especially in areas like procurement, freight audit and payment, and collaboration. Trading partner portals for collaboration, execution and visibility are of high importance and buyers are increasingly interested in extending the reach of these to include capabilities like freight invoicing and payment through the portals. Buyers want to single source a TMS if at all possible.
Going Electronic - Common across TMS buyers, is the importance placed on moving as close to 100% electronic interaction between shippers and carriers as possible. Large shippers and carriers will continue to use EDI, but small shippers and carriers have, until recently, been unable to afford or have the technical expertise to support EDI, so they are looking for alternatives. The emergence of Software as a Service (SaaS) TMS and improved carrier/partner portals in on-premise TMS are making paper-less interaction a reality for shippers of all sizes.
Growing TMS SaaS Acceptance - There is growing interest in, and acceptance of, web-based (SaaS) transportation solutions by shippers of all sizes, but especially smaller shippers. Where SaaS based applications were more a novelty a few years ago, we find many buyers now have a preference for SaaS TMS. Because of the importance of carrier connectivity to effectively managing transportation, the near – but not complete - out-of-the-box carrier connectivity offered by TMS SaaS vendors is proving a feather in their caps.
TMS Buyer Choice – TMS buyers now have more TMS sourcing options, including traditional on-premise best-of-breed, ERP/TMS, hosted, software-as-a-service, managed service and fully outsourced TMS solutions. Deploying and managing sophisticated on premise TMS can be costly, which historically limited TMS to larger shippers, but with the emergence of new delivery models like SaaS TMS, managed services and ERP TMS offerings, buyers have more alternatives, which is opening the TMS market to smaller (under $25M in annual freight), less complex and less sophisticated shippers.
Breadth and Depth Improve – TMS solutions continue to rapidly evolve and improve. The functional breadth and depth and the application footprints of leading TMS solutions have expanded with significant new functionality being delivered, which further improves the value propositions of these solutions. Areas like freight procurement, freight audit and payment, support for more modes of transport (e.g., parcel, rail, air, private/dedicated fleets), visibility/event management (track and trace), support for LSPs, asset-based planning and execution, and performance management add value from TMS beyond the traditional boundaries of better load planning and freight tendering.
Vendor Fragmentation - The TMS vendor landscape remains fragmented with more than a dozen vendors offering some, reasonable, multi-modal TMS, and more offering point solutions like parcel manifesting or routing and scheduling. Normally, fragmentation would be cause for vendor viability concern, but while the vendor landscape is fragmented, overall market penetration beyond the largest shippers is low (estimated at less than 20% of all shippers) and demand is high, so fragmentation will likely have minimal impact on the TMS market through 2010. The market has seen some movement with larger vendors buying TMS specialists but, so far, these solutions have lived on and, in some cases, thrived in their new homes.
Enter the Suite Vendors - Until recently, enterprise software suite vendors were not strong forces in the TMS market, but this is changing, quickly. While all the suite vendors are not yet a force, they are gaining more and more TMS momentum. Mega-suite vendors have made significant investments in TMS, and while today most of them do not yet have industry leading solutions, their TMSs are becoming viable contenders for users with less complex requirements. Looking at other SCM application categories, like supply chain planning, as the mega-suite vendors started to gain traction, there was corresponding price deflation as basic functionality became near commoditized. TMS is several years away from this, but history suggests that within a few years, the same phenomena could occur in TMS.
Agree or disgree with our expert's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the web site. Upon request, comments will be posted with the respondents name or company withheld.
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