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TMS Update: Adoption accelerates

As the transportation management systems market continues to evolve in the wake of the pandemic, more shippers are finding new ways to use the technology to meet their customers’ continually evolving expectations—and save time and money in the process.

Focused on creating efficiencies, improving supply chain visibility, managing costs, and providing higher levels of customer service, a growing number of shippers continue to invest in transportation management systems (TMS) every year.

Leading the pack both in terms of overall supply chain management (SCM) and Cloud applications, TMS helps logistics operations solve pain points like increased wait times at loading/unloading locations, freight price volatility, and the push to close final-mile delivery gaps.

As the workhorse of the SCM stable, TMS also helped companies mitigate the supply chain disruptions and transportation uncertainty brought on by the global pandemic. According to a May 2020 survey of 350 shippers conducted by Peerless Research Group (PRG) on behalf of Odyssey Logistics & Technology Corporation, TMS played a critical role in increasing shipping transparency, closing customer communication gaps, and helping shippers maintain remote work capabilities during the pandemic.

Spending an average of $60 million on domestic freight in 2020, the survey respondents said that accessing shipment status information (81%) and transportation cost analysis by lane and mode (70%) were highly important to their shipping operations. Respondents’ top challenges included visibility, track and trace (42%) and communication with customers and carriers (37%).

Nearly two-thirds of respondents (65%) said having Cloud-based access to shipping operations is important, particularly considering the effects of COVID-19 on logistics operations and office support.

“Today, nearly two-thirds of respondents (63%) currently use a TMS, are in the process of implementing TMS, or are evaluating or planning to implement TMS within the next 24 months,” researchers point out in the results, adding that the top two drivers for TMS usage and implementation were cost management (68%) and track and trace (61%) capabilities. “As the pandemic continues, more than half of respondents (56%) said they were very likely or somewhat likely to reassess the integration of a Cloud-based TMS.”

Putting TMS to work

Used by manufacturers, retailers, distributors, logistics providers, and other organizations, TMS helps companies plan freight movements; manage freight rating and shopping across all modes; select the appropriate route and carrier; and manage freight bills and payments.

Looking at the macro trends currently impacting the TMS market, Gartner says that the software sector will continue to grow, with small- and mid-sized shippers driving much of the market.

Most of those new TMS adopters are gravitating toward Cloud-based options, which offer low barriers to entry, require little internal IT support, and are offered on a subscription basis—versus the large, upfront investment that on-premises software requires. Shippers’ affinity for Cloud-based TMS has been strong for several years, with TMS being one of the first SCM applications to make a full push into the Cloud.

Bart De Muynck, vice president and analyst with Gartner, says that the global pandemic and subsequent supply chain disruptions raised shippers’ awareness of their transportation networks. As such, it pushed more companies to invest in TMS in 2020.

By the research firm’s estimates, TMS is on track to be a $2.5 billion market by 2023—up from $1.3 billion in 2017. During that seven-year span, this corner of the SCM market’s compound annual growth rate (CAGR) has remained in the 10% to 11% range.

“The TMS market was already growing, but when the pandemic emerged, logistics, transportation, and supply chain execution suddenly took on an even greater role in the overall supply chain,” says De Muynck. “It’s as if everyone woke up from a coma at once.” Up until that point, he contends that many shippers still looked at transportation like the “tail of the dog,” with much more emphasis being placed on supply chain planning and procurement.

That changed in 2020, when companies that were already using TMS found their operations better positioned to face the challenges that COVID-19 was throwing at them. The same companies were grappling with the impacts of carrier bankruptcies, capacity crunches, rising freight prices, and other obstacles that ebb and flow within the transportation industry—with or without a global pandemic in full force.

Vendors step up

Not to be left out of the conversation, TMS vendors have stepped up to the plate to help their customers manage both immediate and long-term transportation challenges. De Muynck points to Shipwell, Kuebix (recently acquired by Trimble), and AscendTMS as three of the “newer” options that shippers are exploring and implementing. These vendors not only provide traditional TMS capabilities, but they also link shippers and carriers through their digital networks.

The TMS market is also experiencing some consolidation as software providers look to beef up their supply chain software suites. Along with Trimble’s acquisition of Kuebix, Elemica bought Eyefreight and Transporeon purchased ControlPay. “There’s definitely some acquisition activity underway,” says De Muynck, “and more partnerships forming that include TMS providers, parcel companies, and digital freight networks.”

This activity is contributing to even more software capability and the continued growth of the TMS market. “The merger and acquisition is happening at a pretty fast pace right now,” says De Muynck. “In fact, we’ve never seen all of the different pieces of the puzzle come together in this way, and this quickly.”

Adding advanced technologies to the mix

As transportation management gets more complex, technology vendors are also integrating more advanced options into their platforms to help shippers wrap their arms around these complexities. For example, Bill Brooks, vice president of the North American transportation portfolio at Capgemini, says that more sensors are being used to track shipments, gather data, and then report on freight locations and conditions as goods move through the supply chain.

“Sensors have been around for a while, but they weren’t being used to the extent that they are now in transportation,” says Brooks. Using real-time data, for example, sensors can alert a carrier or shipper when a high-dollar shipment has shifted while in transit or when the temperature drops by a couple of degrees for perishable goods.

Master Magnetics: Using technology to master transportation management

Founded in 1976 in Castle Rock, Colo., Master Magnetics, Inc., manufactures and distributes magnets and magnetic devices for commercial, industrial and consumer use under The Magnet Source brand.

With more than 20 million magnets in stock at any given time, the company ships its goods to customers around the world. It brings in about 120 containers of goods annually from China and ships 300 to 500 truckloads per month to destinations in the United States.

Up until two years ago, Master Magnetics was handling all of that transportation manually. “I would literally log onto each one of the carriers’ site and get quotes from every one of them,” says Tony Rotella, warehouse manager.

The tipping point came when Master Magnetics was consolidating two facilities into one, large fulfillment center. Around that time, Rotella learned about Kuebix TMS from a carrier rep. “He brought the TMS in on a trial basis and let me look at it,” he recalls. “Within a day of using it, I realized that I could never not use a TMS again.”

With a TMS in place, Rotella has automated the transportation bidding process and increased the number if carriers he was working with from five to 14. That move alone has helped Master Magnetics save money. “We were actually paying more money for our shipments than we should have been,” he explains, “because I wasn’t able to get my quotes out to a larger number of carriers within a short time frame.”

With an average 25 shipments going out the door daily, Rotella says that the amount of time he’s saving by not having to make multiple phone calls to carriers has been substantial. He’s also saving time in other areas. “I was spending at least five or six hours every day on routing, bills of lading, quoting, and other transportation management tasks,” he says. “I can get all of that done within an hour now, which frees me up to able to manage the warehouse.”

During the first year the TMS was in place, Rotella estimates that the company saved about $65,000 on shipping costs. “We actually sent more shipments out, spent less money on shipping, and expanded our carrier base,” he says. Today, he advises other shippers to test out their TMS options before buying and to focus on the first page that they see when the application opens.

“The first page that comes up in the TMS will answer all your questions on how user-friendly the application will be for you and your team,” adds Rotella. “If you’re constantly searching for tabs and accessing different screens to get stuff done, in the long run it’s probably not going to save you much time.”

“Sensors are becoming more mainstream and practical,” says Brooks, “as more shippers think beyond the cost of the sensor and realize the value of using them on pretty much everything.”

Brooks also sees the Internet of Things (IoT), machine learning (ML), and artificial intelligence (AI) playing more prominent roles in transportation management right now. In many cases, those advancements are being driven by the introduction of fifth generation technology standards for broadband cellular networks (“5G”).

“Shippers that are investing in TMS in 2021 should be looking for applications that embrace these emerging technologies, and that are real-time focused and 5G-capable,” says Brooks. “These innovations will help them adapt to the ‘new way’ of doing business that we’re all going to be facing over the next couple of years.”

Lead or follow, it’s your choice

Going forward, De Muynck sees TMS playing a key role in true, end-to-end supply chain visibility—a Holy Grail that’s been on most shippers’ wish lists for years, but became an even bigger imperative thanks to the pandemic-related supply chain disruptions of 2020.

“A lot of companies are thinking beyond just using TMS for themselves, and more at how digital networks connect them to carriers, customers, and other shippers,” explains De Muynck. “The pandemic was that wake-up call that said: ‘Hey guys, we need to do things differently.’ The mindset is now changing, albeit slowly.”

To companies that want to get on the inside track with some of these shifts, De Muynck says a good first step is to put the end customer at the center of the conversation. Think about what that customer expects and how those expectations have changed in the last year or so. Then, find the right combination of technology, internal resources, and external partners required to meet or exceed those needs.

“Customers’ needs are changing quickly in the current business environment,” De Muynck concludes, “and the company that doesn’t think it needs to invest in technology is going to fall behind its competition pretty quickly.” 

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About the Author

Bridget McCrea's avatar
Bridget McCrea
Bridget McCrea is an Editor at Large for Modern Materials Handling and a Contributing Editor for Logistics Management based in Clearwater, Fla. She has covered the transportation and supply chain space since 1996 and has covered all aspects of the industry for Modern Materials Handling, Logistics Management and Supply Chain Management Review. She can be reached at [email protected] , or on Twitter @BridgetMcCrea
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