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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

3. TMS vendors will go beyond execution
In its 2011 Transportation Management Report, research firm Capgemini Consulting outlined the various components that make up the execution side—as opposed to the planning aspect—of a typical TMS.

Basic execution functions include: order entry and consolidation (registration, validation and management of orders); dispatching (confirmation reports for carriers and/or drivers); order status information (recording information related to the pickup, collection and delivery of shipments); global logistics execution (customs and transport documents); and yard/parcel management.

As evidenced by Capgemini’s report, the execution component of a TMS covers a lot of valuable ground for shippers, but that hasn’t stopped vendors from coming up with new additions that push their systems beyond the basics. “One of the biggest trends we’re seeing right now are TMS that are trying to be more than just execution systems,” says Chris Caplice, executive director at Massachusetts Institute of Technology’s Center for Transportation and Logistics.

“Basically, a TMS gathers the information on a load to be tendered and matches that data to a historical routing guide. Then it communicates to a carrier and manages the ensuing communication process,” says Caplice. “The more advanced TMS is going beyond that and tapping into other information services and utilizing that data to help the shipper make the best possible decisions.”

For example, he says that the TMS can be connected directly into a market data benchmarking service that funnels data back to the system. “The addition of this automated, real-time market monitoring function helps shippers avoid the yearly or biannual carrier bidding process,” says Caplice, “positioning the TMS to serve as more than just an execution feed.”

4. Systems equipped to handle big data
Defined as the datasets whose size is beyond the ability of typical database software tools to capture, store, manage, and analyze, “big data” is big business in today’s corporate environment.

According to McKinsey Global Institute, enterprises globally stored more than 7 exabytes (one exabyte = one quintillion bytes) of new data on disk drives in 2010. That number is expected to grow as companies capture trillions of bytes of information about their customers, suppliers, and operations.

Managing the data isn’t easy, but MIT’s Caplice says TMS vendors are stepping up to the plate and developing systems that make valuable use of the “big data” that is collected and stored.

“TMS is going beyond just being tendering systems,” says Caplice, who points out that transportation as a whole tends to generate rich transactional data. By drilling down into specific regions or focusing on particular market trends, for example, shippers can utilize the “big data” stored in their TMS to make educated business decisions—the placement of new DCs, for instance. “Companies are really only starting to tap into this function, but it’s something that I definitely see continuing to gain momentum in 2012,” says Caplice.

5. More holistic solutions
Intent on becoming one-stop-shops for the shippers that they serve, today’s third party logistics providers (3PLs) view TMS as an important addition to their vertically integrated service offerings.

“We’re seeing a lot more 3PLs trying to come up with TMS systems that their customers can implement,” says Ellen Chen, MOVE practice leader at Capgemini. “Those customers can then save money by consolidating and ‘sharing’ those systems with other shippers or suppliers.” Those shippers that take the 3PL route also gain the benefit of a full-blown TMS without the need for maintenance or management.

Chen says that the trend blends well with a broader push to create holistic transportation systems that are consolidated under one roof, rather than being sold, installed, and managed by multiple vendors. She’s working with a vendor right now that’s developing a “cookie cutter” TMS targeted for the small- to medium-sized enterprise that wants complete functionality without the high purchase and maintenance costs.

“We’re seeing a lot more RFPs being issued by shippers seeking holistic transportation management systems,” says Chen. “They want deeper, broader solutions without the extreme costs, and they see this as a way to meet that goal.”

Bullish on TMS vendor’s ability to achieve a 6.8 percent growth rate over the next few years, ARC’s Banker says yet another trend that’s propelling the industry right now is demand for TMS coming from non-traditional industries.

“It used to be that TMS sales were highly concentrated in consumer goods, food and beverage, retail, and electronics,” says Banker. “Other industries are now taking an interest and realizing that even a modest 5 percent savings—afforded by a solid TMS—is a pretty good return on investment for this type of software.”

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