According to Logistics Management’s Annual Software Users Survey conducted by PRG, 37 percent of companies were using TMS in 2012, up from 32 percent the prior year. Twenty-five percent of respondents say they plan to buy or upgrade-steady from 2011’s numbers-and a net 50 percent were either using or planning to buy a TMS. Clearly TMS adoption is on the rise.
About four years ago I wrote an article for Industry Week, in which I took a look at the reasons for what was, at the time, surprisingly low penetration of TMS systems. Today, I’ll revisit the topic and discuss why a surprising number of shippers have changed their minds regarding using a TMS, and look at how SaaS TMS systems are a large part of the reason why.
In addition to the many, well-documented case studies showing that transportation management systems deliver a strong ROI, there are a number of other factors contributing to the invigorated interest in TMS. However, a few historical biases still remain as impediments to adoption among shippers who may not know enough about how recent advances in TMS solution offerings have changed the experience for shippers of all sizes:
1) IT Priorities – Before the jump in fuel prices over the past few years, logistics was not typically a high priority when it came to IT investment. Until recently, transportation and logistics projects were often shelved in favor of ERP upgrades or CRM implementations.
2) Difficult implementation – A perennial complaint about technology implementations in general, TMS had been characterized as especially “tough to implement”. It wasn’t uncommon to find shippers with a partially implemented TMS. Many grew frustrated with implementation challenges and simply gave up before completing the full deployment.
3) Expensive to Operate and Manage – It used to be relatively costly to operate a traditional TMS, year after year. Pre-SaaS solutions entailed significant hardware and software maintenance costs as well as personnel with arcane skill sets to keep the system working. All of which cost a fair bit of money.
Today, by contrast, companies are finding TMS solutions that:
• Reduce the cost and burden on the shipper’s IT team, who would rather focus on their core ERP system. SaaS TMS systems still require integrations to the shipper’s ERP systems, but a SaaS TMS reduces the burden of hosting, monitoring, and managing the application.
• Don’t require large up-front expenses, and provide value quickly. SaaS systems don’t require big up-front capital expenditures. Additionally, SaaS vendors seem to have figured out how to do implementation projects quicker and for less money than the traditional non-SaaS TMS vendors have. They do this largely by controlling the implementation themselves, rather than by depending on armies of “Big Six” or “Big Four” consultants, as the traditional vendors often did.
• Don’t require companies to add new hardware, software, staff or skill sets. SaaS solutions are hosted in the cloud and don’t require anything more than an internet connection for client users. Moreover, SaaS-based TMS providers reduce the arcane skills a shipper must maintain in order to get value from the system. The SaaS TMS vendor helps provide some of this know-how to the shipper. For example, a SaaS vendor can easily do a checkup to ensure their optimization algorithms are tuned and achieving good results for a shipper.
A few years ago, SaaS vendors were behind the traditional TMS vendors in terms of functionality, and their products were probably more appropriate for mid-sized shippers than for large shippers. That’s not the case today. Strong SaaS vendors have competitive functionality that’s exceptionally accommodating to even the largest shippers. Additionally, they can implement their systems in a reasonable timeframe, and at a lower cost than traditional vendors. Over the next few years we can expect that SaaS TMS vendors will continue to penetrate shippers who’ve resisted implementing a TMS until now due to the objections I’ve described above.