The terms “optimization” and “software-as-a-service Transportation Management System (TMS)” have not gone together historically. Most SaaS TMS vendors came into existence during the dotcom era. The problem with “legacy” TMS applications at the time was that they were great at optimization, but poor at execution. Saas TMS vendors filled this void, leveraging the Internet and Web technologies to streamline and automate shipment tendering, booking, track and trace, freight audit and payment, and other execution processes.
Of course, a lot has changed since the dotcom bubble burst. Most TMS vendors today offer integrated planning and execution capabilities, but for some reason, many prospective customers still view SaaS vendors as being great at execution, but poor at planning and optimization. This misconception is part of a broader issue that I wrote about earlier this year, where many companies still don’t fully understand the software-as-a-service model, despite everything that’s been written on the topic.
SaaS TMS vendors have been providing planning and optimization capabilities for a few years, but they’ve had to go through a learning curve, reaching the top only in the past 18 months or so (my perspective based on vendor briefings and product demonstrations). A vendor that demonstrates this evolution nicely is MercuryGate. I attended their user conference in September, and a significant portion of the agenda was focused on Mojo, their optimization product. Three years ago, the first time I attended their conference, optimization was a footnote on the agenda.
When MercuryGate first started with optimization, the company used a third-party optimization engine. But the company ultimately discovered that this engine didn’t align well with the optimization requirements of its customers (mostly logistics service providers with freight forwarding and brokerage operations). So MercuryGate developed its own optimization engine from the ground-up that effectively serves as a vehicle optimizer. The engine uses proprietary heuristics specifically tailored to the real-world problems, constraints, and rates that a TMS typically encounters (e.g., weight/cube/quantity capacity of vehicles; pickup/delivery dates and hours of operation; and stop sequences, such as last in-first out (LIFO) and multi-pick/multi-drop). The solution is based on rate minimization; all other factors (when satisfied) are considered equal.
More than 2.5 hours of the conference was dedicated to Mojo. One session was purely educational, where the presenter described for the audience the science behind Mojo in layman’s terms. Talking about optimization is never easy, but the presenter did a good job of explaining how the product works and how it compares to other optimization approaches. He also addressed common myths about the product and optimization techniques in general. But the best part of the session was the live demonstration of several optimization scenarios, including multi-pick/multi-drop, the use of pool facilities, and parcel-to-LTL consolidation. As the saying goes, a picture is worth a thousand words, and actually seeing Mojo in action was impressive. And based on the number and types of questions coming from the audience, it was clear to me that customers are very interested in optimization.
Is MercuryGate, and Mojo specifically, a perfect fit for every company? Of course not, but neither is any other TMS on the market. Like other SaaS vendors, MercuryGate is primarily focused on North America. So, if you’re a company that’s looking to standardize on a single TMS across all business units and geographies, then MercuryGate is not an option. And although the company has several shipper clients, the company’s “sweet spot” is small and midsized logistics service providers, a segment of the market that’s growing very quickly and is underserved by other TMS vendors.
I plan to highlight the optimization capabilities of other SaaS TMS vendors in future postings, but if you’re planning to invest in a transportation management system in the near future (a wise choice, even in this economic environment), then remember that software-as-a-service solutions are not just about execution anymore; their optimization capabilities may pleasantly surprise you.
