Who’s Using TMS, Why and How? Notes from the 2016 TMS Benchmark Study

Respected analyst outfit Gartner’s recent estimates suggest the global TMS market is currently at or around $1.2 billion.  They project growth in the TMS market by 2020 to reach more than $1.8 billion – a compound annual growth rate of more than 12 percent.  So clearly TMS as a solution is on a strong upward vector.  Yet, TMS has not come close to achieving levels of adoption enjoyed by other supply chain focused enterprise software solutions like ERP systems for example.  This partially explains the robust projected growth of the TMS market.  In its 2016 Global Transportation Management Benchmark Study, American Shipper reveals a great deal of data about who is using TMS, who should be using TMS and why.  Let’s look at the relevant data about the current state of the TMS market culled from the 162 responses from qualified global logistics practitioners who participated in the American Shipper survey from May 2 to June 27, 2016.

 According to the American Shipper survey, “respondents that said they use a TMS were twice as likely as non-TMS users to be managing $100 million or more in freight, and 33 percent more likely to be managing between $10 million and $100 million. This speaks to the perception that TMSs are primarily for big shippers managing large volumes. Half of those who don’t use a TMS manage less than $10 million in freight.”

It is not news that the largest shippers by volume are the biggest segment of TMS users having used logistics IT solutions for decades.  After all, only the largest companies were able to afford them once upon a time.  However, 66% of those managing between $10 million and $100 million have yet to take this important step toward full supply chain visibility and control.   Moreover, the report noted, “A major proportion of TMS users do see a reduction in their freight costs, some quite large. A quarter of respondents that knew the cost reductions from their TMS said it was 10 percent or more… About a third said their reductions were in the 5-10 percent range, a typical target for most shippers deploying a new TMS.”  With two out of three surveyed TMS users capturing sizable savings (between 5% and 10% or more) on their transportation spend, it seems likely that the business case for all but the smallest shippers by volume would benefit from such solutions to automate their transportation logistics activities.

Retailers are among those industries most interested in TMS solutions as they work toward linking transportation management with inventory management. The impact of eCommerce and omni-channel fulfillment strategies – a crucial part of retailers’ ability to drive competitive advantage – may be part of the reason why retailers are implementing TMS at above average rates.

The report also reveals that, “only 6 percent of shipper respondents are using a home-grown TMS (which) shows how far the TMS software market has come. In other words, shippers see TMS as a product best developed by software providers or 3PLs.”  Overall, 44 percent of respondents said they opted for cloud-based TMS implementations compared to less than a third of companies using an on-premise system.  The advent of cloud-based TMS solutions may be partially responsible for making TMS more accessible to those shippers in the mid and lower tiers by volume.

Are you a mid to large volume shipper that could benefit from between 5 and 20% savings on freight?  Are you among the majority of people comfortable with cloud-delivered software solutions?  Are you a retailer or in another industry seeking to link inventory management to transportation management?  Why haven’t you yet embraced cloud-based TMS solutions?

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