ARC Advisory Group’s annual market study on the TMS market revealed a surprising fact about how Latin American companies are embracing TMS technology. The study—the Transportation Management Systems Worldwide Outlook—covers many subjects. It includes data on the size of the market and our forecast for the growth of the market across various segments, including regions.
First, realize that ARC’s definition of TMS is a bit broader than other definitions. Here it is: “A transportation management system helps companies efficiently, cost effectively, and reliably move freight from origin to destination. TMS encompasses solutions for moving freight in all modes and also includes intermodal movements. The TMS processes include freight transported inbound or outbound, domestically or internationally, and using transportation assets the company owns or are owned by an outside service provider. The freight managed by a TMS ranges in size from parcels to bulk commodities.”
The study forecasts that the TMS market as a whole will grow at a double digit rate. But we expect the Latin American market (encompassing both Central and South America) to grow at more than twice that rate–significantly faster than any other region. However, that revenue growth in Latin America is coming from a much smaller base than that of North America or Europe. You can learn more about the exact growth numbers and the report at the RESEARCH section of ARC’s homepage.
As I talked to TMS suppliers to prepare this report, I heard that not only had sales surged in this region, but that there is enough in the pipeline to ensure strong sales for the next year or two. Not surprisingly, TMS suppliers reported that very large North American and European companies want to add new regional TMS instances for Latin America. In other words, some Western multinationals started by deploying TMS in North America, than deployed an instance of TMS in Europe, and are now deploying in Latin America and Asia.
So what surprised me about the results? First, I also heard that Latin American firms, which are becoming more globally competitive, are also beginning to buy TMS. Second, suppliers said that they do not have to discount prices for TMS for Latin American firms as they do in Asia.
The market expansion is being driven by a relatively small number of suppliers that offer truly global solutions. TMS, unlike many other enterprise applications, has been more difficult to “globalize.” A global TMS needs to do more than support multiple languages and currencies. It needs to support all modes of transportation and not just be focused on truckload and less than truckload shipments. Within a mode, the global TMS should support a more expansive definition of vehicle types. For example, Latin American fleets provide much greater diversity in the sizes and capacities of the trucks than you see in North America. Finally, a global TMS should support regional specific forms of functionality. In several nations, pallet network distribution is common. North America, however, is too large to support this form of transportation network.
While I was surprised to see the sudden surge of sales of TMS in Latin America, perhaps I should not have been. Some corporations find it difficult to hire qualified employees in this region. There is far more emphasis on training for employees that are hired. A TMS, particularly a TMS deployed centrally, not only reduces freight spend, it automates processes and reduces the need for labor. These are worthy goals today, anywhere in the world.
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