I recently wrapped up my Transportation Management Systems market study which looks at the total size of the market, the forecasted growth through 2024, 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. 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.
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.
COVID-19 and the TMS Outlook
It is evident that the COVID-19 pandemic and the effects from the associated “Great Lockdown” will have a substantial negative impact on the economies of the world in 2020. The degree and duration of the impact on the global TMS market is still undetermined. However, the TMS market is a bit more insulated than other markets and the impact should be to a lesser extent, especially as certain industries, such as CPG and food & beverage in particular, have seen an increased need for TMS applications.
One of the biggest growth areas for TMS over the last few years has been the continued emergence and proliferation of cloud 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. The COVID-19 pandemic is speeding up the shift to cloud.
One of the biggest pivots during the COVID-19 pandemic has been the need to work remotely. In certain industries, this has caused a seismic shift in the overall structure of these companies. This impacts how and where a TMS operates. However, cloud-based solutions have been crucial in enabling organizations to respond quickly and effectively to the dramatic changes brought on by the crisis. It provides better security and access for remote workers, and TMS customers using a cloud solution were able to transition to remote work over the course of a weekend without noticing a disruption. A cloud solution also enables rapid updates to be pushed out to all employees without the need for time-consuming up-grades and configurations.
TMS Outlook Trends
One of the most important trends is around real-time visibility tools. Customers have an expectation of accurate ETAs and improved visibility into where shipments are. Many companies are integrating external data streams to improve ETAs. TMS suppliers need to partner with transportation visibility companies or build their own solution.
Machine learning is another hot trend in the market. Machine learning can play a role in advanced visibility but also has other applications. There are many types of constraints that go into estimating how long a job will take, including the number of miles driven, traffic congestion, and the type of product being delivered. Machine learning can be used to “learn” these constraints rather than having to do time studies and hard code these constraints into the solution.
Finally, digital freight matching is an opportunity for network style TMS providers. Digital freight brokers open up new opportunities for one-off lanes. Small shippers can get access to better rates and new lanes, while increasing their flexibility in procurement schedules. Large shippers can extend their volume by opening up additional capacity especially on less-used lanes. Many of these digital freight matching platforms are pushing their real-time pricing capability. Essentially customers do not need to put out a full bid; instead, they can push out a load to one of their lanes to gage the market. Multiple TMS providers are seeing their customers use digital brokers for this very reason.
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. Based on its significant ROI, the TMS outlook is bright even amid the ongoing COVID-19 pandemic.