I recently wrapped up my Transportation Management Systems market study which looks at the total size of the market, the forecasted growth through 2023, and the leading suppliers across a number of categories including industry, region, and customer size. The study includes a holistic view of the TMS outlook. A TMS helps companies move freight from origin to destination efficiently, reliably, and cost-effectively. Transportation management systems include 2 types of solutions. Planning and execution is focused on freight moves involving a carrier. The complete process would include procurement, creation of a route guide, planning and optimization, electronic communication with carriers, visibility and exception management, freight audit, and performance management. Many solutions don’t support the end-to-end process described here. For classification purposes, if the solution includes a route guide, planning optimization, and electronic tendering/acceptance execution, it is included in this category.
Fleet Management involves freight moves with transportation assets owned by the company. The complete process would include routing and optimization; visibility and exception management; transportation asset management; and performance management. Many solutions don’t support the end-to-end process described here. For classification purposes, any solution that includes routing plus any of the other modules listed above will be deemed a fleet management solution.
I was recently interviewed by ARC Advisory Group’s Allen Avery to take a deeper look into the TMS outlook for the foreseeable future and identify some of the larger trends in the TMS market. The full interview is below.
TMS Outlook – Trends
One of the biggest questions that comes up is around the key trends that are driving companies to explore transportation management systems. The primary reason companies buy a transportation management system is for freight savings. These freight savings can be attributed to simulation and network design, load consolidation and lower cost mode selections, and multi-stop route optimization. But few companies would buy a TMS if it would lead to declining service levels. A TMS maintains the service levels by understanding the origin to destination lead times and using that as a constraint during the optimization run.
Second, the freight spend required to invest in a TMS solution is lower than ever. Historically, if a company did not have over $20 million in freight spend, purchasing a TMS was out of the question. The emergence of SaaS solutions, and less sophisticated on-premise applications, has reduced that number significantly. Now, essentially companies of all sizes can afford a TMS.
Third, companies are debating whether to bring their transportation management in-house with a TMS or outsource to a managed services provider. The freight savings and service improvements associated with TMS are quite similar to MTS arrangements. The key question here is how much control companies want over the planning and execution processes.
TMS Outlook – Growth Drivers
Another question that comes up a lot looks at the underlying factors that are driving growth in the TMS market. First, TMS has a significant ROI. Planning & execution solutions can significantly reduce freight costs while improving service levels. In our most recent TMS ROI survey, average savings from implementing a TMS in the first year was 8 percent. While we have not done an ROI survey on fleet management solutions, our case studies also show better fleet utilization and service from these solutions.
E-commerce continues to grow at double digit rates, while traditional retail is growing at less than the rate of inflation. Fleet management solutions, when tightly integrated with an ecommerce site, help companies achieve promised delivery dates while minimizing costs. Planning & execution solutions include parcel solutions, which is widely used to support ecommerce.
Finally, SaaS solutions are driving tremendous growth in the market. These solutions require significantly lower upfront costs and is therefore less risky. This is leading to increased growth in sales to smaller shippers and carriers. The majority of TMS providers are making the move to SaaS deployments.
There are also a number of key trends that I recently highlighted in an article about trends to watch in the TMS market. Specifically, companies are keeping a keen eye on visibility tools, especially as it relates to providing more accurate ETAs. Artificial intelligence and machine learning are also becoming a core part of the TMS landscape, as companies try to learn about constraints that impact their transportation activities. And finally, IoT is gaining a lot of traction especially when it comes to manage assets on the move.
The TMS market is poised for growth for a variety of reasons. There are a number of key trends that are driving companies to explore TMS, such as the need to lower freight costs, lower freight spend requirements, and deciding on whether to outsource or bring the operations in-house. There are also a number of market drivers fueling the growth, such as the robust ROI associated with TMS, the expansion of e-commerce and omni-channel operations, and the surge in SaaS solutions. Suppliers will continue to monitor a number of trends that customers are interested in, including visibility solutions, artificial intelligence, and IoT.
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