Transportation management on the move

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 9/27/2005

Last Monday, September 19, Charles Phillips, president of Oracle (650-506-7000) was asked about the company’s plans for supply chain management during Oracle OpenWorld, the software providers annual user conference in San Francisco.

“I think you’ll see acquisitions in the logistics space, especially around transportation management,” Phillips replied.

The next day, Phillips made good on that prediction when Oracle announced plans to acquire G-Log (610-491-3300), a privately held provider of logistics and transportation management systems and one of the leaders in the TMS space.

The deal highlights not only the push into the supply chain execution space by Oracle and other ERP providers, but the increasing importance of transportation management systems to companies trying to control their supply chain costs.

In fact, after years of lagging behind the market for warehouse management systems, TMS is now on the move. In 2005, the market is expected to grow for the second year in a row, from $950 million, up from $910 million in 2004. That’s according to Adrian Gonzalez, director of ARC Advisory Group’s Logistic Executive Council (781-471-1000) and the author of a new study, Transportation Management Systems Worldwide Outlook.

By 2009, Gonzalez expects the market to reach $1.2 billion, a 6.4% cumulative annual growth rate. That’s a figure that rivals the market for warehouse management systems.

What’s driving the growing interest in TMS? “The need for better visibility and control of financial performance is one factor contributing to growth of the market,” says Gonzalez.

Because of the Sarbanes-Oxley Act, Gonzalez says, chief financial officers are becoming better educated about the role and impact of logistics on their financial performance.

Still, he adds, “many companies do not have a clear and accurate understanding of their transportation costs. They’re often bundled with other costs and reported at an aggregate level, preventing companies from allocating transportation costs to specific products, customers or business units.”

Concerns over financial reporting, however, aren’t the only factor. Companies also realize that in today’s market, transportation is no longer an infinite resource.

Unless a company is willing to invest in its own private fleet of trucks, it can’t build capacity like it might build up inventory. “You have to plan transportation like any other constrained resource,” says Gonzalez. Transportation planning is another application provided by TMS systems. “Some shippers are now providing forward visibility into their demand and production forecasts to their carriers and securing capacity in advance.”

Those who do are receiving priority in capacity allocation over shippers that do not, Gonzalez adds.

Finally, Gonzalez says that ERP providers like SAP and Oracle are becoming a larger presence in the TMS market, as they have in the WMS market. With Oracle’s purchase of G-Log, Gonzalez expects that trend to grow. “SAP and Oracle are definitely evolving and becoming more competitive in this market,” Gonzalez says

For more on Gonzalez’s analysis of the TMS market visit: www.arcweb.com/res/tms.