Logistics technology: ARC study calls for TMS market to hit $1.5 billion by 2011

Jeff Berman, Senior Editor -- Logistics Management, 11/14/2007

DEDHAM, Mass.—The market for transportation management systems (TMS) topped $1 billion for the first time in 2006, and it is expected to grow at least seven percent in 2007, according to an annual study conducted by ARC Advisory Group.

The study, entitled Transportation Management Systems Worldwide Outlook, also expects the TMS market to exceed $1.5 billion by 2011, which would represent a compounded annual growth rate of 7.3 percent. These results, according to ARC, actually exceed what the firm has predicted for TMS growth over the past two years.

“We always try to err on the low side of caution with these predictions, said Adrian Gonzalez, Director of the ARC Logistics Executive Council. “But the results have been very positive towards TMS, and there seems to be a strong demand for this market.”

Gonzalez added that for a market as old as TMS, it would stand to reason that it would be more mature by now, but that has not been the case until more recently.

Reasons for the increased interest in TMS, according to the study, include continued demand for global trade management applications, a reinvigorated market for fleet management services, an increase in sales to third-party (3PL) logistics services providers, and strong activity in Europe and in the small and midsize (SMB) business segment.

There are other various reasons more companies are turning to TMS, noted Gonzalez. Chief among them are an increased pace of business, a renewed emphasis on fleet management due to a sharp increase in fuel prices, and being able to better manage time-definite delivery.

The latter, said Gonzalez, is multi-faceted for end-users, because it is comprised of actions items like changing inventory items and orders at a moment’s notice. And TMS prices have also gone down over the last three or four years, noted Gonzalez, which has given shippers more options than they had in the past.

The “greening” of logistics is another area where TMS can come into play, according to the study. And applications like TMS can take on importance for endeavors such as reducing the number of trucks on the road, using more fuel-efficient vehicles, eliminating unnecessary engine idling, and reducing empty backhauls, among others, said ARC.

“Nobody is justifying an investment in TMS for ‘green’ alone,” said Gonzalez. “But it can be used as part of the business justification case. More transportation users are starting to include it in their business case [for TMS], and many CEOs and corporate boards are asking for it to be an objective.”

Other topics covered in ARC’s Transportation Management Systems Worldwide Outlook include: the increased focus on reducing lead times and variability; how companies strive to standardize and globalize processes; the continued growth of the logistics service provider sector; the increase in trade and regulatory/customs compliance; the continued growth in e-commerce and international parcel shipments; and the fact that private fleet owners demand better driver/asset visibility.

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