Why TMS customers go more and more with managed services

June 18, 2015 Pieter Kinds

"However, in assessing the low TMS adoption rates, Chris Cunnane, ARC senior analyst, points to the logistics service provider (LSP) sector as a possible answer as to why more shippers aren’t buying their own solutions. In fact, he says that shippers that currently lack TMS should explore the growing sophistication of what their third-party LSP can offer in terms of technology.

“Historically, one of the leading complaints about the LSP market was that their technology was not good enough,” says Cunnane. “As LSPs overcome that barrier, potential TMS customers may increasingly choose the managed services path.”

As an example of the increasing sophistication of LSPs, such organizations are solving problems that cannot be solved by a traditional TMS solution. “The biggest untapped optimization opportunity is collaborating with other shippers on backhauls,” says Cunnane, who adds that solving this problem is only partly about math. “It really requires network visibility, matchmaking, and extensive hand holding. The best examples of collaborative multi-shipper back haul solutions have been provided by LSPs.”

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Sundip Naik, vice president, supply chain at Capgemini Consulting, is bullish on TMS’ prospects during the year ahead.
Over the last six months, Naik says that the company has seen a “surprisingly high level of interest” in the software, despite the fact that industry adoption levels are hovering in the 35 percent range. In most cases, he says that shippers are interested less in implementing software and more in changing their operating models to accommodate a more complex and global transportation network scenario.

“A lot of shippers are moving towards shared services or completely outsourcing their TMS components to outside sources, such as 3PLs,” says Naik, who adds that the software sector as a whole has become somewhat commoditized in nature.

In addition, Naik says the desire to move financial costs from capital expenditures to operating expenditures for budgeting and tax purposes is helping to drive more interest in cloud-based TMS and managed services. Finally, he says that the increasingly global nature of the average supply chain is pushing shippers to extend TMS capabilities overseas on a standardized basis.

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“About half of the proposals we’re receiving involve the standardization of operating models across the globe,” says Naik.

That global viewpoint presents opportunities for TMS vendors, says Naik, particularly when it comes to finding ways to fill in the “gaps” in current transportation management models. And from a shipper’s standpoint, he says that the focus should be on ensuring end-to-end visibility and business process standardization across all global entities.

“When shippers achieve this, they’re able to truly leverage the scale of their global operations and effectively reduce their transportation costs,” Naik adds.

Excerpts and quotes from the article "2015 state of TMS: Mid-market shippers key to growth published by Bridget McCrea on http://www.logisticsmgmt.com

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