Managed Transportation Service Providers Compete on their Tech Stack

I’ve completed a market study and I am nearing the completion of a supplier selection guide on the managed transportation service (MTS) industry. I’ve had conversations with executives across the industry. One way these logistics service providers (LSP) compete is on the quality of the technology they use to plan and execute loads on behalf of their shipper customers.

When companies want to reduce their transportation costs, while maintaining or even improving customer service, they have two main choices: implement a transportation management system (TMS) or outsource transportation to a managed services firm. The managed transportation services (MTS) –providers have planners in a control tower using a transportation management system and other technologies, who plan and execute loads on behalf of their customers.

A TMS is Core to a Managed Transportation Platform

Managed transportation service providers have two choices: build their own transportation management system or implement a best of breed solution from a software supplier. Among the largest managed transportation service providers that go the off-the-shelf software route, Oracle Transportation Management (OTM) or Blue Yonder’s TMS are the solutions that are implemented. DHL Supply Chain, Kuehne + Nagel, and Penske Logistics use OTM. Ryder Supply Chain Solutions uses Blue Yonder.

Managed Transportation

Oracle Transportation Management is Used by Some of the Largest Managed Transportation Service Providers

Among the big MTS suppliers, the build your own TMS is slightly more common. 4flow, BluJay Solutions, CH Robinson TMC, Odyssey Logistics & Technology, Transplace, and XPO all built their own transportation management systems.

In some cases, the off-the-shelf application becomes heavily modified by the MTS provider and the solution, in effect, becomes almost proprietary. Ryder used a robotic process automation solution from Kofax to increase process speed and reassign labor associated with producing and executing transportation plans. Robotic process automation is software that is used to automate high volume, repeatable tasks. Through the application of process automation Ryder is able to customize process and manage exceptions at a fraction of the time it would take to accomplish through a user interface. RPA’s automate work by performing the same computer keystrokes and opening the same modules humans do. Or in some cases, the robots write data right into the application database.

GlobalTranz, who developed their own TMS, also uses this technology. Using RPA, which they built internally, GlobalTranz has improved its up-to-the-minute information and insights on rates for loads that need to be tendered to the spot market.

For managed trans providers that build their own TMS, there is the opportunity to build out industry specific functionality that does not exist in off-the-shelf solutions. Odyssey Logistics & Technology, which is one of the market leaders in providing managed trans to the chemical industry, can execute loads that comply with the transportation security plans that certain hazardous materials are required to have. Similarly, 4flow has combined transportation network design and optimization to provide robust solutions valued in the automotive industry.

Managed trans providers that built their own TMS do not like the terms ‘off-the-shelf’ and ‘best-of-breed’ to be used interchangeably. Some of the MTS providers that built their own TMS solution argue they are best of breed solutions. The fact that they have been able to sell their transportation management systems to shippers validates that assertion. 4flow, BluJay Solutions, CH Robinson TMC, and Transplace all have a successful business selling and implementing TMS solutions to companies that are not their managed services clients. Further, I’ve talked to TMS clients from all the aforementioned suppliers; they have told me that they got a good payback from these supplier’s solutions.

However, the TMS/MTS distinction can be a little tricky for these suppliers. Some customers get into a hybrid arrangement where they have some planners from their company that are using the TMS solution from the MTS vendor to plan certain modes or lanes. But they also rely on planners from the managed trans provider to do the rest of the freight planning and execution.

Augmenting TMS with Best of Breed Applications and Visibility

While TMS is the core of an MTS platform, the managed transportation providers augment the transportation management system with other best of breed applications and near real-time visibility.

A transportation management system has a module that helps in providing the procurement analytics and workflows used in negotiating long term contracts with carriers. Kenco did not feel this solution was robust enough. They augmented their off-the-shelf TMS with Jaggaer’s transportation procurement solution. The logic behind Jaggaer’s procurement optimization is that rather than bidding on individual lanes, carriers can bid on a basket of lanes. Sometimes a carrier will be able to give a discount on one lane if they get a related lane that fits their network and thus helps them reduce empty miles. Meanwhile DHL has built their own solution – D3 Transportation Optimizer – for transportation network analyses.

DHL also argues that having a platform stack that includes tightly integrated WMS and TMS, like they do, allows them to do optimization that crosses from the warehouse to freight transportation. This presents opportunities to add nodes that might lead to better milk runs, or add additional pool points for load consolidation, and thus deliver better solutions.

In recent years, the visibility surrounding in transit moves has gotten much better for truckload and less-than-truckload shipments. Visibility is what turns a managed transportation platform into a control tower. In the US, truckers have been required to use electronic logging devices that verify that they are not exceeding the number of hours they can safely drive. When this data is accessed in near real-time, the result is visibility. Solutions from FourKites, Descartes’ MacroPoint, and other freight tracking solutions, can be used to flow this data into the MTS providers’ TMS.

In some cases, the logistics service providers have press releases reporting they have a technology that has built these interfaces to electronic logging devices, telematics devices, or carrier systems themselves. However, it is difficult to know if they have taken an off-the-shelf freight tracking solution and private labeled it – given it their own solution name – or if they have built their own solution for freight tracking.

CH Robinson TMC argues that there is a difference between transportation visibility and supply chain visibility. Their platform also provides visibility into inventory. TMC can let a customer’s supply chain team know when it appears that too much of a certain product is being stored at a warehouse, how the lack of inventory at one node in a supply chain can be mitigated by pulling that inventory from a different location, or in the event of a natural disaster or pandemic, they can rush inventory into or out of a region before it shuts down. With this kind of visibility, the TMC analysts can become more than transportation analysts, they can become part of a shipper’s supply chain team.

A supply chain control tower should also provide visibility to potential and imminent risks. Odyssey enhanced their platform with a COVID-19 risk map based on Johns Hopkins data. The most robust real-time risk solutions come from RiskMethod, Resilinc, and Resilience360. These solutions provide an end-to-end supply chain risk assessment and monitoring solution. Resilience360 was incubated in DHL’s global Innovation Center, and then spun off.  DHL still owns a stake in the company. DHL has integrated this into their platform and reports that about one third of their MTS customers have elected to pay for this augmented risk visibility.

Advanced Analytics

Finally, a robust MTS platform needs advanced analytics. Some of the MTS providers have public cloud TMS solutions that gives them visibility to billions of dollars’ worth of freight spend that is transacted across their network. This network visibility can be used to provide lane freight cost and service benchmark data. A shipper can be told, “on this lane you are paying above the average rate for this type of shipment, but you are getting above average service levels.” Transplace, BluJay Solutions, and CH Robinson TMC all use their large networks to provide this kind of visibility.

But the large networks also provide the Big Data needed to do advanced analytics.  Several of the providers mentioned making big investments machine learning. Big Data plus machine learning, for example, can improve estimated times of arrivals (ETAs). CH Robinson TMC mentioned that their network data can be augmented with outside data like weather, traffic, and geopolitical events to further improve the ETAs.

DHL is also doing predictive analytics.  They are looking at freight capacity levels and spot market pricing to predict what freight prices in the following week or weeks will be. That price can differ based on the day of week. Knowing this, DHL can help shippers understand what kind of savings they could generate by changing their shipping schedule. Freight price predictions can also be based on seasonality and whether transit times are rising or falling on a lane.  DHL is in the early stages of this work, but they tell me they are getting promising initial results.

GlobalTranz has done something similar. They have created a Cost Prediction Model, which they use to provide intelligence on pricing, market trends and to create more dynamic information sharing between 3PLs, shippers and brokers. A good example of this capability is their COVID-19 Rate Per Mile Heat Map. This live dashboard shows real-time changes in spot and contract markets across the top 20 COVID-19 hot spots in the U.S. They made this available to their shipper customers to help them make sense of the rapidly changing marketplace during the early peaks of the pandemic.

Managed Transportation

The network data in combination with optimization also opens the prospect of doing collaborative transportation and digital freight brokerage. This is something I wrote about in a previous article and won’t cover here.

Conclusion

There is a lot happening on the technology front. The technological advances that have occurred in just the past few years are impressive. My colleague Chris Cunnane is updating ARC’s research on the ROI and service benefits associated with managed trans. It will be interesting to see if the improvements to the tech stack lead to improvements in the ROI generated by these services.

Leave a Reply

Your email address will not be published. Required fields are marked *