MTS Archives

Transportation Strategies for Continued Success

Transportation | By Chris Cunnane • 08/25/2021

When it comes to managing your freight spend, there are a few options to consider. The three traditional methods are the use of a transportation management system (TMS), transportation execution system (TES), and managed transportation services (MTS). Ultimately it comes down to whether shippers want to manage their freight spend in-house or outsource it.

A TMS offers optimization capabilities across multiple modes to improve service levels and reduce freight spend. A TES is generally mode specific and lack optimization capabilities, but for shippers with simpler transportation requirements, that is often all they need. Large shippers with complex needs may turn to MTS providers to plan and execute their loads.

For each of these options, software and service providers need to set a clear path for success. Below are some transportation strategies for success for suppliers of TMS, TES, and MTS.

Look to the Cloud

SaaS solutions are becoming the norm in the industry, and this does not just apply to smaller companies that are targeting Tier 2 and Tier 3 customers. A robust SaaS 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 SaaS 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 continuing to work remotely. This includes job functions that have historically been performed on premise; a SaaS solution enables rapid up-dates to be pushed out to all employees without the need for time-consuming upgrades and configurations.

Invest in Last Mile

The last mile is the most difficult and most expensive part of the supply chain journey. The growth of e-commerce and omni-channel should represent an opportunity for TMS suppliers. Currently, it does for only a few providers of fleet management. There are several reasons for this: Last mile routing is different from cross-country routing. Many retailers will rely heavily on parcel solutions or a transportation execution solution rather than a multimodal TMS, and other retailers will examine crowdsourcing solutions rather than a TMS. Coronavirus has changed the outlook for direct-to-consumer commerce, and a TMS is now a critical component of this strategy. There is still room to compete in last mile, but suppliers need to think creatively to capitalize on this opportunity.

For TES providers, the growth of e-commerce is only going to make the last mile more important. Better ETA and better visibility into when orders will arrive are a requirement.

Improve Real-Time Visibility

Real-time visibility solutions are more important than ever. Electronic data interchange (EDI) solutions have proven deficient in providing robust visibility. New solutions are using telematics and other solutions for improved visibility. TMS suppliers need to partner with transportation visibility companies or build their own solution.

Turn to Machine Learning

The real-time visibility solutions are raising the prospect that machine learning can be used to improve estimated times of arrival (ETAs). But unless a TMS provider has access to network transportation data (public cloud providers do), the visibility provider will be in a better position to use artificial intelligence to provide these enhanced ETAs than the TMS provider.

But machine learning can be used in other innovative ways as well. For example, in last mile routing the time a job takes to complete is dependent not just on the miles that need to be driven but also on the congestion, the type of product being delivered, the type of residence, and whether the value-added services are provided at the destination. Ma-chine learning can be used to “learn” these constraints rather than having to do time studies and hard code these constraints into the solution.

Invest in IoT

IoT and connected trucks and containers are gaining a lot of traction in the market. Sensors in trucks can help provide better visibility and make predicted ETAs more accurate. Additionally, connected trucks can provide information on specific driver’s driving patterns and habits, leading to improved safety as well as visibility.

For MTS providers, the transportation strategies for success are less dependent upon improving technology than improving service levels.

Demonstrate a Higher Degree of Competence

MTS providers need to be able to show a higher level of transportation competence than both the potential client and other MTS providers. Competence can be demonstrated in a few ways.

First, MTS providers can set targets for service improvement or cost savings, and then conduct quarterly business reviews to track progress. Second is to hire, train, and retain the best available talent. And finally, have strong consultative capabilities in terms of network design, strategic procurement, and transportation rate benchmarking.

Address Outsourcing Risks Head On

There are two main risks that need to be addressed. First are technology risks. MTS providers must be willing to allow the customer to own the TMS. If the relationship comes to an end, the MTS supplier must have a method of transferring that TMS, that is configured to meet the shipper’s needs, to their former customer.

Second is the risk of losing transportation expertise. The provider must be willing to operate in a hybrid model where some planning and execution tasks are controlled by the MTS provider and some are owned by the shipper.

Improve Pricing Flexibility

MTS relationships generate both fixed and variable costs. Fixed costs include the salaries of planners and account managers, the costs of the technology, and rent. Variable costs are based on the number of transactions and transportation moves. Pricing needs to accommodate both kinds of costs but also meet the customer’s needs. Some customers want pricing that accommodates true costs on an ongoing basis and some customers want pricing that is consistent from month to month despite seasonal surges. The ability to turn fixed costs into variable costs can help provide pricing flexibility. One example of this is moving planners from account to another account to accommodate seasonal surges or shipping slowdowns.

Transportation strategies come in all shapes and sizes. For TMS and TES providers, transportation strategies for success revolve around improved technology for optimization, visibility, and data aggregation. For MTS providers, transportation strategies are more geared toward the service element, although technology is still a major differentiator. Whether a company manages its transportation spend in-house or outsources it, these strategies should help suppliers succeed.

Transportation 101: Understanding How to Manage Your Freight Spend

Transportation | By Chris Cunnane • 09/09/2020

The most common application for in-house management is a TMS. A TMS offers optimization capabilities across multiple modes to improve service levels and reduce freight spend. The alternatives to TMS include transportation execution solutions and managed transportation. Transportation execution solutions are mode specific and lack optimization capabilities, but for shippers with simpler transportation requirements, that is often all they need.

Large shippers with complex needs may turn to managed transportation services providers to plan and execute their loads. These MTS providers may use an in-house developed TMS. Or, if they use an off-the-shelf TMS, they may get a volume discount. In some instances, they may not use a TMS at all in managed trans deals, although these providers lack a significant presence in the market.

Transportation Management Systems

ARC’s definition of transportation management systems (TMS) is freight centric; we do not include solutions that help companies move passengers more efficiently and solutions for mail. The TMS market can be segmented into two types of applications:

Planning & Execution: This application focuses on freight moves involving a carrier. The complete process would include procurement, creation of a route guide, planning and optimization, electronic communication with carriers (tendering), visibility and exception management, freight audit, and performance management. For international shipments, it would also include advance shipment notification to government authorities. 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: This application focuses on freight moves involving transportation assets owned by the company. The complete process would include routing and optimization, visibility and exception management (including GPS style solutions), transportation asset management, and performance management. Transportation assets include both power units and container cars. 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.

ARC’s research shows that the planning and execution solution can contribute to significant reductions in freight spend while preserving or even improving service levels. The fleet management segment is growing because of the shift to e-commerce and omni-channel and the need to fully utilize drivers during a time in which it is increasingly difficult to hire and retain drivers.

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. This includes companies with as little as $1 million in freight spend. With lower barriers to entry in the market, smaller Tier 3 and 4 customers that needed to rely on a 3PL for their transportation needs can bring those functions in-house. This change brings a wide variety of new companies into the TMS market. The leading providers of TMS are SAP, Oracle, Blue Yonder, Descartes, and TMW.

Transportation Execution Systems (TES)

Transportation Execution Solutions (TE) allow shippers to connect to multiple carriers and then tender, track, and pay in the system. Visibility solutions allow real-time asset tracking across the entire distribution network. This enables improved estimated arrival times of goods. Visibility solutions are playing a larger role in the market, as real-time tracking of assets becomes more important. Suppliers of visibility solutions continue to bring in additional data streams for better ETAs.

Visibility solutions are becoming more necessary. The need to know where products are, whether they are on the way to the warehouse, store, or customer, is critical to ensure a positive customer experience. The rise of visibility solutions at the container-level is helping to drive the transportation execution market to new heights. While this application is helping to fuel overall market growth, there are a number of other growth factors and trends that are pushing the market forward as well. These growth factors touch upon emerging technologies and general trends.

The transportation execution and visibility systems market has seen significant growth over the last few years due to a variety of factors, including the growth of e-commerce, the strong ROI tied to these solutions, the rise of control towers and visibility requirements, capacity fluctuations, and the expansion of e-commerce. Buyers and suppliers need to have the right tool set in order to make the most of the solutions available. Potential buyers need to do their due diligence about the solution, its strengths, and potential shortcomings. Additionally, buyers need to minimize customizations to speed up the implementation and upgrade cycles. Suppliers need to continue to enhance machine learning and look to the cloud. An emphasis on last mile will also be important as the e-commerce market continues to grow. The leading companies of TES solutions include Descartes, INTTRA (E2open), GT Nexus, Transporeon, Pitney Bowes, and Metapack. The leading visibility companies include FourKites, project-44, and Descartes MacroPoint.

Managed Transportation Services (MTS)

In an MTS arrangement, a shipper contracts with a third party to plan and execute their moves for them. In other words, instead of having internal planners plan and execute moves, those planners are employed by the MTS supplier, but work on the shipper’s behalf. While growth has slowed considerably in the 3PL market as a whole, this segment of the market is one of the fastest growing of all 3PL service lines, although from a much, much smaller base than carriage, brokerage, forwarding, or warehousing services.

Similar to the TMS market, freight spend requirements for engaging in an MTS arrangement have changed. Just a few years ago, the majority of MTS arrangements sold to shippers with freight spend over $100 million. These large customers demanded a customized solution, which is just not the case today. Instead, most MTS providers have standardized on one TMS and do not customize that solution. This results in speedier and lower cost implementations. Lower costs increase the ability to sell MTS to smaller customers, especially those in the $25-100 million and $5–25 million freight spend segments. These two segments are now considerably larger than the freight spend of over $100 million category.

As mentioned above, one difficult decision shippers need to make is whether to bring transportation management in-house or outsource it to an MTS provider. The freight savings and service improvements associated with TMS are quite similar to MTS arrangements. However, many shippers lack network design capabilities or a continuous improvement culture. Many MTS providers have expertise in these two areas, which can help shippers make that decision.

There are a number of key growth drivers for the MTS market including the strong ROI attached to these arrangements, the rapidly improving technology of MTS suppliers, the need for real-time visibility and accurate ETAs, and the fact that the MTS market is massively underpenetrated. Even with this last fact, the amount of freight under management in MTS arrangements is quite high. The leading MTS providers based on freight under management include Transplace, CH Robinson, Ryder Supply Chain Solutions, DHL, and Penske Logistics.

3PLs Engage in Too Much White Labeling

Logistics Outsourcing | By Steve Banker • 07/27/2015

When a shipper decides they need to significantly lower their freight spend while maintaining or improving on time deliveries, there are two main paths forward. They can implement a transportation management system (TMS). Or the shipper outsource transportation planning and execution to a 3PL; This is a managed transportation services (MTS) engagement. A 3PL white label strategy involves buying software solutions – like TMS – from leading providers, but then giving this solution their own branded name, leaving the implication that they developed the solution themselves. A TMS is a critical application if a 3PL wants to provide robust managed transportation services. Here are some examples of 3PLs providing managed transportation services, what they call their technology, and the true supplier of that solution.

3PL	White Label Name	TMS Provider

DB Schenker	SDS Control Tower Services	Some client solutions are based upon Oracle Transportation Management (OTM)
DHL/Exel	Transportation management solutions;	Standardized on Oracle OTM. Exel mentions that they use a leading TMS, but not who it is. DHL does not mention this.
Ewals Cargo Care/e-Logistics Control	Cross Chain Control Center (4C)	ORTEC LoadDesigner and Quintiq to provide transportation management capabilities.
Fedex/Genco	Genco Managed Transportation	They mention they use a leading TMS, but not who. They use MercuryGate’s TMS and Manhattan Transportation Procurement.
Geodis	Geodis Flow Management	Oracle OTM plus Descartes WinRoute if routing is needed.
Menlo Logistics/ Con-way	Menlo Transportation Services	Oracle OTM
OHL	Transportation Management	Mention that they use a “state of the art web-based TMS” but not who it is. It is MercuryGate.
Penske Logistics	Penske Transportation Management	A mix of OTM, JDA TMS, and proprietary solutions
Ryder	Transportation Management	Their primary TMS is JDA TMS
Schneider Logistics	Transportation Management	Oracle OTM

My perspective is that a 3PL can’t possibly internally develop and continue to enhance a TMS solution that will be as robust as the best solutions on the market. There are exceptions. LeanLogistics, Transplace, and C.H. Robinson TMC all provide both managed transportation services and off the shelf TMS, while CLX Logistics both implements the Kewill Transport TMS solution and provides managed services based on that solution. All four of these companies are willing to sell and implement their TMS for customers that would prefer TMS to managed services. In the case of LeanLogistics, Transplace, and TMC, their ability to continue to sell their TMS solutions in a competitive software market is evidence they have developed a mature solution and are continuing to enhance that solution.

A word of warning. The table above is based primarily on the supplier profiles from the last MTS market study that ARC completed at the beginning of last year. We are updating that work again, and will have more updated data on 3PL/TMS relationships when the study is complete. In conclusion, I believe 3PLs are making a marketing mistake when they white label the software solution used to provide managed services. Logistics executives are increasingly knowledgeable about who the leading TMS suppliers are; in fact, they are usually more familiar with TMS than with MTS. In most cases, it will be a comfort to potential customers to know their 3PL is using a robust off the shelf solution that is not going away.

ROI is Driving TMS Growth

Logistics Outsourcing | By Chris Cunnane • 09/03/2014

ARC Advisory Group conducts an annual analysis of the global transportation management systems (TMS) market. The research process includes the analysis of large amounts of information and interviews with executives from numerous TMS software companies. The process concludes with the publication of ARC’s TMS Global Market Research Study, which analyzes the market shares across numerous categories of the leading TMS suppliers. Aside from the market share analysis, the study looks at the trends that are driving and/or inhibiting growth in the TMS market. As simple as it sounds, this year’s study confirms that the ROI achieved from implementing a TMS is the biggest factor in the market’s growth.

When a shipper decides it needs to improve its transportation performance, it typically attempts to achieve this by either buying a transportation management system (TMS) or outsourcing transportation planning and execution to a managed transportation services (MTS) provider.

According to ARC Advisory Group research, among those shippers that successfully achieve significant reductions in freight savings, TMS and MTS perform roughly the same. However, when you look at the proportion of respondents that achieved negative results (increased freight costs) or no improvement in their freight spend; TMS appears to be the less-risky investment. Further, when it comes to net savings (after all fees are paid to the service provider), TMS appears to perform somewhat better. On the other hand, when it comes to service improvements, MTS is the clear winner.

So where do these net savings come from? Primarily, a TMS can save companies money by lowering their freight spend. Based on ARC TMS survey data, respondents indicated freight savings of approximately 6 percent with the use of a TMS application. Of these savings less than 25 percent of the net savings were absorbed by the TMS for the majority of respondents. These freight savings can be attributed to lower cost mode selections, better routing, and better procurement negotiations.

A contributing factor to these savings is the evolution of TMS products themselves. The TMS product set continues to improve with new forms of optimization, mobility enhancements, improved usability, and better analytics. Multitenant solutions continue to offer some distinctive capabilities that many companies find attractive. Aside from the freight savings, TMS products are providing numerous other benefits, including improved customer satisfaction, warehouse efficiencies, new delivery capabilities, inventory reductions, and cash flow improvements.

As the product sets of TMS providers have improved, so has the sophistication of MTS providers. In fact, until recently, one of the leading complaints about MTS providers was that their technology was not good enough. As these providers overcome that barrier, potential TMS customers may increasingly choose the managed services path. TMS and MTS providers will continue to make enhancements and improvements to their offerings. As the core product sets continue to become more sophisticated and offer better tools, shippers will be able to better optimize their routes and lower their freight spend. The end result is an improved ROI for shippers, which will continue to fuel the growth of the TMS market.

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