I have recently completed a market study and supplier selection guide on the Transportation Management Systems (TMS) market. 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. 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.
In the research that I have done, the TMS market has been growing at a significant rate over the last decade, although a dip is expected for 2020 due to the coronavirus pandemic. One of the most important trends in the market has been the continued emergence and proliferation of SaaS and cloud TMS solutions. Suppliers that have fully made the transition and no longer or only reluctantly sell in the software license model, are growing much faster than their competitors.
When looking at the cloud TMS market, the growth cannot be denied. Cloud solutions are driving TMS revenues where software license deals are rapidly disappearing. These solutions are seeing significant growth in the Tier 2 and Tier 3 markets. Historically, if a company did not have over $20 million in freight spend, purchasing a TMS was out of the question. The emergence of cloud TMS solutions has reduced that number significantly. Now, essentially companies of all sizes can afford a TMS.
Cloud TMS and COVID-19
In the course of my research I spoke with executives at many TMS companies. In these conversations, one thing became clear: COVID-19 has sped up the process for shippers moving to a cloud TMS. This was clear in a conversation with Derek Gittoes, Vice President, SCM Product Strategy at Oracle. According to Mr. Gittoes, “the COVID-19 pandemic accelerated many of the disruptions that were already underway, such as the growth of ecommerce and realignment of global sourcing strategies and has laid bare the weaknesses of many organization’s supply chain capabilities. Cloud based solutions have been crucial in enabling organizations to respond quickly and effectively to the dramatic changes brought on by the crisis.”
One of the biggest pivots during the COVID-19 pandemic has been the need to work remotely. For many of us, this was not such a big change. However, in certain industries, it was a seismic shift in the overall structure of these companies. For these companies, a cloud TMS enabled a rapid shift in work locations. Jay Delaney, Senior Director, Product Management, Transportation at TMW Systems (Trimble Transportation) said “the biggest change for TMS, especially during the COVID-19 pandemic, has been how and where TMS software operates. The remote workforce is not going anywhere – it is going to be around forever. Companies are learning that they can and will operate differently now; there is either no one at terminals or at the most, there is a skeleton crew. Trucking companies are learning that they don’t need everyone in the office. As a result, hosted services are growing quite a bit and companies are starting to ask questions around ‘how do we make our operations more usable for remote workers?’ Cloud deployments are making this change easier.”
Mr. Delaney continued to say that “we are seeing a very large uptick in the number of existing customers asking us to host their TMS for them. It provides much better security, better access for remote workers, and also lowers the amount of time and effort for their internal IT staff so they can devote more time to working on other critical IT issues.”
Chris Jones, Executive Vice President, Marketing and Services at Descartes, echoed this sentiment. According to Mr. Jones, “customers were able to transition to work from home over a weekend from office environment without really missing a beat, serving customers. This included customers serving food where volumes shot up.”
Mr. Jones continued “cloud creates a lot more flexibility in serving customers, growing revenue. Kathi Laughman from Crane Logistics told us that Aljex’s cloud architecture was “ahead of its time”. It allowed them to think more creatively about customers and business. They can win a project and ramp up more quickly, but don’t need to invest in office/network infrastructure. If a project ends, they can ramp down.”
SaaS and cloud TMS are becoming the industry norm, and this does not just apply to smaller companies that are targeting Tier 2 and Tier 3 customers. A robust cloud solution offers the same features and functionality as an on-premise solution but can be deployed quicker and generally more cost-efficiently. Companies need to build a cloud offering into their near-term growth plan to remain competitive in a crowded market.
This is especially true during the coronavirus pandemic where more employees are working remotely. This includes job functions that have historically been performed on premise; a cloud solution enables rapid updates to be pushed out to all employees without the need for time-consuming up-grades and configurations.
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