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Supply Chain & Logistics Technology: 5 trends driving TMS growth

Top supply chain software analysts break down the drivers that will keep the transportation management systems market on a steady upswing for years to come.

January 01, 2012

Relied on for their innate ability to handle transportation planning, decision making, follow up, and measurement for companies of all sizes and across all industries, transportation management systems (TMS) held their own by posting positive sales growth through the recession and are poised for growth in 2012.

Credit the fact that these systems can shave percentage points off of transportation spending, create efficiencies that were previously out of reach, and come in the attractive SaaS (software as a service) format with helping to keep many TMS vendors in the black during the last three tumultuous years.

image“In 2010, the TMS market grew significantly faster than the rate of inflation, or roughly 6.1 percent, and we’re forecasting an additional 6.8 percent compound annual growth through 2015 for the market,” says Steve Banker, service director for supply chain management at the ARC Advisory Group. “It looks like the market is holding up pretty well.”

Banker singles out planning and execution systems—the end-to-end solutions used by shippers who utilize carriers to move their freight—as the largest and fastest growing segment of the TMS market. In highest demand right now, says Banker, are the networked SaaS solutions that facilitate high quality electronic communication with partners, enable fast on-boarding of new partners, enhance transportation procurement efficiencies, and allow for freight audit and pay improvements.

In this article we’ll look at five key trends that will help cement TMS’ status as a growing supply chain software segment in 2012. According to our analysts, the demand for system upgrades, the growth in intermodal transportation, and a new focus on “big data” requirements are helping to sustain a healthy TMS market.

1. Older systems need facelifts
If there is a single, primary driver for the TMS market right now it’s the fact that many systems are outdated.

Many of the solutions in operation today were installed five to 10 years ago—before tablet computers and mobile technologies had come to the forefront of the business world.

That will pave the way for more TMS upgrades in 2012, says Banker. “The business case for supply chain application upgrades are often difficult to make,” he says, “but with TMS there are so many different ways to save money.” For example, Banker says solid arguments in favor of a TMS upgrade include the money saved when preferred carriers are used on a regular basis or when preferred procurement positions are successfully negotiated and orchestrated.

Other areas where TMS can assist include use of fully loaded vehicles and improved routing and scheduling tactics. To companies that will be upgrading this year Banker says to focus first on outbound transportation (load consolidation, better routing, and so forth) when making the case, “and then move into procurement negotiations and other advanced features that you can’t get from any other [supply chain] application.”

2. Intermodal in growth mode
Manual and aging transportation management systems may cut it when all shippers have to choose between are truckload and less-than-truckload moves. Throw a few more complications into the ring, however, and a company’s ability to efficiently manage freight movement up and down the supply chain becomes extremely difficult.

The growth in intermodal, which involves the use of more than one mode of transport during a specific journey, makes the situation even more complex. “We’re seeing a lot more companies shipping via intermodal,” says Dwight Klappich, research vice president for Gartner, “and many of the systems that those firms were using in the past don’t fit with intermodal movement.”

The brick-and-mortar manufacturer that begins selling directly to consumers online, for example, will likely find its existing supply chain solutions to be inadequate for handling the new line of business. “Add small-package shipping to the lineup and their TMS will no longer fit,” says Klappich.

The shipper that expands globally will face similar challenges when it tries to manage multiple rail, truck, and ocean shipments. “Intermodal can be a complicated process for the firm that hasn’t dealt with it in the past,” says Klappich, who expects the intermodal trend to continue into 2012. “We’re definitely seeing more of it, as well as a need for a more robust TMS to handle the multidimensional shipping approach.”

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