Will 2017 Drive a Higher TMS Adoption for Small to Mid-Sized Shippers?
2017 is projected to be a year in which more shippers break out of the mold, embracing newer transportation management systems (TMSs). However, the adoption rates remain perplexing. As explained by Talking Logistics With Adrian Gonzalez, industrywide statistics indicate adoption rates have remained fixed near 33 percent for nearly two decades. Unfortunately, this means predictions for adoption rates in 2017 would be likely to remain in this range. But, it does not consider how the means of using TMSs are changing.
Historical Data on TMS Adoption May Be Lower Than Reported.
In 2008, statistics involving TMS adoption rates ranged from 20 to 30 percent. However, this reflects a percentage of the number of shippers involved in trade at that time. Meanwhile, 2008 was a time when the deployment of cloud-based technologies was in infancy, so some companies may not have understood survey questions and their applicability to existing operations.
Now, consider another factor. The number of shippers declined during the recession and have slowly returned to pre-recession levels, reports Reuters. In fact, the shipping industry saw continued decline in rates and industry health for nearly five years. So, it would be natural for adoption rates of TMS solutions to be impacted by the financial crisis. Furthermore, adoption rates may have been much higher if the recession had not occurred.
Industrywide Adoption Rates Reflect Averages.
Seeing a 33-adoption rate seems problematic. But, that is a measure of adoption across numerous companies of different sizes. For smaller shippers, adoption rates remain near 10 percent, reports Bridget McCrea of Logistics Management magazine. Meanwhile, 25 percent of mid-sized shippers and 50 percent of larger organizations have embraced the TMS revolution. So, why do the adoption rates remain stagnant?
The answer lies in how TMS systems are delivered.
Initial Investment and Deployment Costs Have Decreased Dramatically.
Over the past few years, the adoption rates have started to increase. Among small and mid-sized shippers, overall adoption rates have increased 15 percent. Vendors report 20-percent growth following TMS adoption. Yet, the information has not been gathered into one resource, and even when combined, averaging the statistics together indicates a minimal rise in adoption rates.
On the other hand, cloud-based systems are pushing adoption rates forward as they require little investment and capital for deployment. Billed as a “pay-as-you-go phone plan,” more companies have noticed the possible benefits through cloud-based TMS adoption. Meanwhile, the driver shortage and increasing pressure from consumers is forcing companies to think about cutting wages or reducing inefficiencies wherever possible. Paired with the political upheaval of 2016, the only solution will be reducing inefficiencies.
What About the “Amazon Effect?”
Amazon has made great strides in eliminating inefficiencies and creating superior transport systems. The online giant has managed to escape its virtual prison in exchange for brick-and-mortar pickup locations, grocery stores and much more. Meanwhile, Amazon’s pricing continues to drive the average costs of shipping down around the globe, and even modern shippers have trouble keeping up with Amazon’s dedication to the fastest delivery windows possible. So, what does it mean for TMS adoption?
Amazon is like the vendor you never knew you had. They are operating in the background and feeding enough information to your customers to keep you looking for the next, best way to improve operations. This is the “Amazon Effect.”
Since the rise of Amazon, more companies have entered the online shopping space, and omnichannel shopping options mean customers can order anything, anywhere. But, is the price of each item still lower than Amazon? It may be, and for shippers, this means that keeping product costs competitive will demand cuts to overhead costs wherever possible. Thus, implementing a TMS becomes the natural solution.
Amazon has also catalyzed more shippers to think about outsourcing their operations to Amazon directly. Think of eBay and other online venues that allow you to sell goods remotely. In some cases, purchasing a TMS may not even seem like a necessity. But, if you hope to continue operating as Amazon grows, you will not be able to avoid the TMS trend forever. Speaking of becoming a seller on Amazon, have you thought about what that means for the number of shippers doing business?
They total number of shippers has decreased due to Amazon’s ability to take in whole companies and generate profits. With fewer shippers overall, 33-percent adoption rates mean that more shippers are using TMS now than there were in 2008.
There will always be people who want to keep technology out of business, believing automation will cause problems in the supply chain, explains Inna Kuznetsova of Inbound Logistics. However, the TMS revolution is taking hold in all corners of the industry, and shippers need to start thinking about how they will respond to growing demand for cheaper products and zero-cost shipping. Yes, that’s free shipping! Customers want it, and if you cannot give it to them, they will go somewhere else. It is in your best interest to implement a TMS now, and 2017 is the year to do it.