Managed services solutions offer transportation management system (TMS) software and third-party provider expertise in one package. It’s an attractive combination for shippers that want to outsource the day-to-day management of their freight networks while retaining full control of key decisions.
The formula continues to attract new converts in the shipper community – but the profile of a typical managed services user is changing.
In my recent post The Cloud Moves Higher I explained how we’re seeing more interest from mid-tier to high-end shippers in cloud-based TMS solutions. The managed services space appears to be growing in all segments, including the one occupied by shippers with annual transportation budgets in the $10 million to $50 million range.
Up until fairly recently, demand for managed services solutions was driven primarily by large shippers with annual transportation budgets in the $100 million-plus bracket. These players are still major users, but there is a significant uptick in interest from shippers with more modest freight transportation budgets.
Various reasons explain the change, but there’s a common denominator that is driving shippers regardless of their size to the managed services fold: the industry-wide shortage of talent.
There have been many studies of the scarcity of talent faced by the supply chain management profession. Consider, for example, a recent online survey of 400 executives from US companies published by management consulting firm Deloitte.[i] Only 45% of supply chain and 40% of procurement executives were extremely or very confident that their supply chain organizations have the competencies they need today. Leadership and professional competencies such as problem solving “will become more important to their supply chains during the next five years, creating a talent gap that could have serious implications for companies and their customers,” reports Deloitte.
One response to the problem is the wider adoption of managed services models, because the logistics talent that shippers need – whether they be low- or high-volume players – is supplied by the third-party services provider.
Providers are responding with more offerings geared to the smaller-size market, particularly with respect to features such as price points and the flexibility of managed services teams.
Shippers with annual transportation budgets in the $10 million – $50 million size range are less likely to require the same level of global logistics management coverage as large shippers, and the modal mix tends to be less complex than in the large-size segment. Their IT needs can be less sophisticated in comparison with global shippers, although the smaller shipper is maturing in this sense. Also, these shippers often need specific types of consultancy to help them in areas such as automation, aligning with their carrier bases, and improving supply chain visibility.
Looking ahead, there is huge potential for developing managed services solutions that help smaller shippers manage their existing networks and to grow their businesses. Harnessing analytics capabilities to identify new cost-savings opportunities and leveraging best-in-practice management processes to maximize efficiencies are just two examples that we are looking at.
The demand for talent will continue to be a key driver in the managed services market. Securing access to critically important supply chain skills is a key competitive differentiator today, and is likely to become even more important in future years.
[i] 2015 Supply Chain Survey, Deloitte, May 2015