Transportation management hits the road

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 4/20/2006

Anyone looking for proof that the supply chain technology footprint is expanding need only look at the transportation management systems (TMS) that optimize and execute inbound and outbound logistics.

Between 1998 and 2005, the TMS market has grown from $468 million to $965 million, according to Adrian Gonzalez, director of ARC Advisory Group (781-471-1000).

As the market has grown, TMS systems--and their providers--have gone through an evolution, according to Gonzalez. “Transportation no longer exists in a vacuum,” he says. “A TMS solution now has to be part of a larger logistics process.”

That has resulted in two important changes in the TMS market.

The first is in the scope of functionality of TMS systems today. “The early TMS leaders, like i2 and Manugistics had their roots in supply chain planning,” says Gonzalez. “Their solutions were heavy on optimization and were focused on trucking.”

Today, TMS solutions are much more heavily focused on execution. One reason is that the planning horizons today are often so short that companies don’t have time to optimize a large batch of deliveries over a long period of time. “Order-to-delivery cycles are shrinking,” says Gonzalez. “That means the daily challenge for end-users isn’t to get the perfect plan, but to get as much lights-out execution as possible. We call that streaming or dynamic optimization.”

What’s more, those TMS systems are executing across the entire global supply chain, incorporating air, rail and ocean shipping modes of transportation.

The second important change is that transportation is no longer viewed as a stand-alone activity. It’s now a component of a larger sales, manufacturing and distribution process. As a result, TMS systems are no longer stand-alone solutions. Just as best-of-breed WMS vendors are being acquired by larger players, TMS vendors are also disappearing or getting acquired by vendors with broader solution footprints, says Gonzalez. “Today, to be a pure TMS vendor, you have to be an on-demand software provider who can bring together a community of users and shippers,” Gonzalez says. “The traditional TMS software provider is going away.”