Principles of Managed TMS Validated
In October, Aberdeen Group released research on Best Practices in Transportation Management. The company’s research highlighted cost control and near real-time visibility to supply chain events as keys to success in an economic downturn.
Aberdeen Group surveyed 180 companies of various sizes with both global and domestic transportation networks. The ensuing report disclosed practices and results of best-in-class organizations.
In our opinion, the findings validate our TMS capabilities and managed services both in terms of functionality and in terms of larger trends. Specifically, more and more shippers are looking not only for TMS, but also thought leadership and business process outsourcing of non-core activities.
The report defines best-in-class performance using three specific metrics: (1) spend ratio as a percent of transportation costs divided by sales; (2) percent increase/decrease of total year-over-year transportation spend; and (3) percent on-time and complete shipments.
According to the report, best-in-class organizations (or the top 20% of respondents) were performing as follows:
- Spend ratio 2.93%
- Y-0-Y spend change -4.44%
- Complete/On-time 98.6%
From our perspective, the most intriguing metric was the year-over-year savings. If we aggregate savings across clients relative to total spend, it runs much higher than this statistic — much, higher. (Note: TMC customers reading this blog have access to their specific information via our business intelligence suite.)
According to Aberdeen Group, the industry average (the middle 50% of respondents) for these metrics was:
- Spend ratio 11.79%
- Y-O-Y spend change -1.89
- Complete/On-time 95.8%
We were shocked that the report included no mention of a metric associated with sustainability strategies or the measurement of carbon emissions. We believe this has emerged as a standard metric and critical capability for best-in-class organizations.
Further, we could not find a definition for how on time was measured. We assume participants provided on-time percentages as they calculated it. Again, we could not validate this, but we assume there is a high probability that different respondents measured on-time according to their business requirements. This measurement varies greatly across our current client base.
Outsourcing vs. In-Sourcing
In terms of outsourcing versus in-sourcing, Aberdeen Group noted, “We have seen a growing willingness to use hosted services or a SAAS model from a logistics service provider (LSP).” Key statistics include:
- 13-20% of all companies seek to expand outsource services for TMS
- 29-40 percent of all companies currently use outsourced or managed services for components of their transportation management solution
- 28-39% of all companies currently outsource in a SAAS model for TMS
The specific details of what shippers are looking to outsource, or seeking additional support for, align almost perfectly with the TMC | Managed TMS model. According to survey respondents, the most popular capabilities of TMS as a managed service include:
- Best Practice Implementation – 69%
- Shipment Monitoring and Problem Resolution – 48%
- Transportation Planning Assistance – 45%
- Freight Settlement – 41%
- Cross Company Collaboration Coordinator – 34%
- Transportation Execution Assistance – 33%
- Procurement/RFQ Management Assistance – 32%
The study goes on to recommend that shippers should partner with TMS solution providers as a “best in class step to success” in order to augment their current capabilities. The report goes on to say that “40% of best in class companies recognize their solutions will not meet the needs of their business in the future and are hence planning to adopt new functionalities.”
Survey results indicate that firms performing at a best-in class-level shared some key capabilities, such as, “on the-fly decision making” and “near real-time visibility within optimization of execution within their processes.” The report went on to say that advanced technologies supported these processes specifically:
- Advanced supply chain visibility – Best-in-class companies are 2.3 times as likely to measure external groups such as suppliers, carriers, and 3PLs weekly and 2.3 times as likely to use supply chain visibility tools
- Advanced dynamic optimization capabilities – Best-in-class companies are 2.27 times as likely to use software to automate shipment routing instructions and they are 29% more likely to use dynamic shipment optimization software
The report also states that 32% of respondents did not invest in technology because up-front costs were too high. Another 16% felt technology integration was too costly or too time consuming. These statistics captured our attention. We think it will stand out for clients and other Connect community members, as well.
Aberdeen Group also offers recommendations for “best-in-class steps to success,” which focus on implementing visibility and optimization capabilities. Aberdeen Group found that 41-50% of best-in-class respondents attributed benefits to visibility (ability to see cost and shipment status) and about the same percentage have measurably reduced costs through shipment optimization.
We like the fact that the report highlights process in addition to technology. The author does a nice job of highlighting that software is just software—this is a sentiment we think our clients will embrace. Many of you repeatedly tell us about past experiences with failed software launches citing poor business process.
We’ve attempted to summarize some of Aberdeen Group’s key findings. A full copy of the report can be found at www.aberdeen.com. We did not participate in this survey as a sponsor or participate in the results in anyway. The views expressed above do not reflect those of CH. Robinson Worldwide.
Aberdeen’s report represents third-party research funded outside our organization. From my perspective, the findings validate the underlying principles of Managed TMS and lend credibility to our model and the services we have chosen to bring to market.