Transport challenges fuel TMS sales

By Bridget McCrea -- Logistics Management, 10/1/2005

DEDHAM, Mass.—High fuel costs, globalization, reduced order-to-delivery cycle times, demand for better supply chain visibility, and executives' increasing awareness of transportation's importance are all driving significant growth in the transportation management systems (TMS) market, according to a new study from ARC Advisory Group of Dedham, Mass.

"Transportation Management Systems Worldwide Outlook"paints a rosy picture of the future for TMS sales. The report predicts sales will reach $956 million this year and $1.2 billion by 2009, representing a cumulative annual growth rate of 6.4 percent.

Author Adrian Gonzalez, director of ARC's Logistics Executive Council, said that much of the forecasted growth hinges on the fact that CFOs are becoming better educated about the impact of logistics on financial performance—an awakening that's partly driven by the need to comply with the Sarbanes-Oxley Act.

Many companies, though, still lack an accurate picture of their transportation costs, which often are bundled with other costs and reported at an aggregated level, thus preventing those companies from allocating transportation costs to specific products, customers, or business units. A TMS system can help companies solve that problem, Gonzalez suggested.

Pointing to globalization as another key driver of the TMS market, Gonzalez said that as companies continue to source overseas, the need for effective transportation management will only grow. "Transportation is really the glue that holds the supply chain together," said Gonzalez. "The more nodes there are in the supply chain, the more important and complex transportation becomes. That, in turn, drives the need and the demand for TMS."