The logistics service provider (LSP) market landscape is undergoing a titanic shift. The traditional boundaries between brokers, carriers and 3PLs are blurring, particularly in the small- to mid-sized LSP market. Many of these companies are experiencing a blending of the time-honored functions that once separated these distinct service providers. Many of the larger companies, due to their size and complexity, still keep to the traditional functional spectrum.
The move toward hybridization in our evolving industry is becoming more and more apparent. For instance, some carriers are asked to manage all freight, TL and LTL. Often they can’t handle the order and employ an in-house brokerage unit to cover it. Increasingly, brokerage companies are handling LTL shipments, multi-stop truckloads and other complicated orders in addition to simple loads. Asset-based carriers were often dogmatic in separating themselves from their 3PL arm, but that’s often not the case anymore. These are just a few examples of a potential sea change developing in our industry, which begs a compelling question: “Do these companies have the requisite technology to support their new multi-faceted role?”
The blending of services and the integration between different operations can be viewed as an advantage for the LSP. It not only creates additional revenue streams, it also satisfies customers with more comprehensive service offerings as a one-stop shop. Dramatic change such as this is not surprising. It occurs on a regular basis in all industries. The big question is whether TMS technology is keeping up with the metamorphosis.
Today, most TMSs are built on platforms that are 10-15 years old. The central design of these systems was developed at a time when logistics problems were very different than today. These systems were originally designed to handle shippers or LSPs performing a single function – as that was how their businesses were set up. The previous generation of products focused on the shipper because there were no 3PLs at the time. In fact, designing a TMS to fundamentally address the issues of a 3PL (in addition to those of a shipper) was a key driver of the second generation of TMSs. The shift to hybridization, managing brokerage along with 3PL functions and fleets along with common carriers, creates a compelling need for a contemporary TMS designed to accommodate these new types of operations. Functionally it must be able to address any mix of services these organizations choose to offer, today and in the future.
Many software providers have responded to this needed shift in TMS design by layering new systems onto their older, original platforms to perform new functions. This layering usually impacts ease of use, installation speed, onboarding of new customers and adds to integration complexity. More fundamentally, since TMSs address real-time execution, multiple systems and data bases do not permit these older systems to access current and dynamic data as they run their algorithms and execute their moves.
Historically, all software ages, often to a point where the fundamental data model and design becomes outdated. The evolution of technology, design, and functional needs led to the creation of the first, second, and now the third generation of TMS solutions. Older TMS software was designed to handle the world the way it was, not the way it is now or will be in the future.
The new generation TMSs, encompass today’s needs, and are designed to be flexible enough to scale to tomorrow’s challenges. “Tomorrow” only puts older systems further behind with no chance to catch up, let alone innovate.
Requirements for a TMS in “The Blended LSP Age”
Ideally, a TMS should be built on a single platform with one application, one database, and one user-interface. This creates an optimal flow of information using common data when creating and executing shipments, while also providing a consistent user experience. The algorithm should also be integrated into the system rather than existing on an outside layer. This is the only way it can manage everything from simple routing through the most complicated shipment execution. Whereas in the past a broker might not need the planning power of an algorithm, in a hybrid world there’s a mix of simple and complex orders. You need a system with decision support that can manage answers to the full breadth of planning questions that usually occur.
The Age of Empowerment
We are also seeing an important trend toward empowerment in the LSP world. Ideally, no matter where you sit in the supply chain, it’s good to have a TMS that allows you to onboard new customers, carriers and trading partners on your own schedule without having to hire a consulting firm or have the TMS company provide this at additional cost.
Additional self-service opportunities arise from a system that has pre-established integration mapping as part of its core platform. This enables the LSP to integrate to outside solutions, easily and quickly. It also empowers them with a solution that pulls all systems together, without added expense and delays.
Today’s TMSs; Built to Manage Future Needs
These are just some examples of today’s TMS system requirements that are central to managing in a blended logistics world. This is an exciting time of rapid change in our industry. New opportunities are developing every day. These opportunities often create new issues that require new approaches. LSPs who are embracing or contemplating the move to hybrid solutions need to consider these factors as they evaluate their current and future TMS solution.
Mitch Weseley is the TMS Pioneer, Founder & CEO of 3Gtms. With 30 years in the industry, Mitch is widely regarded as the “father of the TMS industry” having created six successful companies in the technology and logistics industry, including Weseley Software and G-Log.