As we enter a New Year strewn with economic clouds, it is easy to overlook the bright spots in the outlook, so here is one that is right on our doorstep: a period of growth and innovation in the transportation management systems (TMS) market.
Leading Gartner analyst, Dwight Klappich, offered this upbeat assessment of the future for TMS in a recent interview with Supply Chain Digest[i].
After a slight dip in 2009, the TMS market rebounded in 2010 and looks set to sustain growth rates of around 10% over the next five years, according to Klappich. His optimism is based on some very encouraging observations about demand for the technology.
First, the user base for TMS suites is expanding. The market is traditionally associated with large shippers that wield annual freight budgets of $100 million plus, but smaller players now want a piece of the action. Small- to mid-sized companies that spend $10 to $25 million on freight annually are adopting these solutions, says Klappich.
Second, the new entrants are attracted by some important advances in the technology. Cloud-based delivery models are making TMS applications more affordable (for more on cloud applications see Grounded in the Cloud). Also, systems are becoming more versatile. As Klappich points out, “with the on-going expansion of TMS scope, smaller shippers can benefit from using a system that starts at transportation sourcing and goes through planning and execution and freight audit and pay. That allows them to get benefits in multiple areas that provide a broader foundation for ROI and ways to pay for the system.”
One reason for the burst of innovative ideas is that although this is a relatively mature market, competition among systems providers is intense, he suggests. To stay ahead of the curve vendors must continue to introduce features and new offerings that enhance the competitiveness of TMS solutions. The ultimate winner of this race is the customer.
Transportation sourcing is an area where users are reaping big benefits. “TMS vendors are adding richer, more flexible sourcing capabilities to support the annual bid process, to make it easier to do if nothing else, but also adding logic to the bid process to drive better results,” he says.
A wider range of modal options is another enhancement that shippers appreciate. These include new features for operators of dedicated fleets and better support for parcel shipments. A key development is improvements in the management of international freight movements; even smaller players are looking for capabilities in this area, Klappich notes (for more on international TMS applications see Talking About Going Global, Five Features That Define a Global TMS, Control Tower for Freight Catches the Global Train).
While the growing number of small-size shippers is, in many ways, the main story, larger enterprises are still making news. Most of the TMS customers in this segment that Klappich is engaging with are new to the market. Either they never had a real TMS solution before, or perhaps used a point system in a single operational area. “This is really their first go-around in terms of a more holistic TMS,” he says.
All in all Klappich’s prognosis points to a buoyant future for TMS, in the medium term at least. “We continue to see TMS vendors adding new capabilities,” he says.
On that note, we wish everyone a prosperous and hopeful 2012.
[i] Supply Chain News: Insights from Gartner's 2011 Transportation Management System (TMS) Magic Quadrant, Supply Chain Digest, November 16, 2011.