The current state of TMS (Transportation Management Systems) reflects the ongoing need for a shipper to control freight spend and reduce delays. As Walmart and Amazon work to increase customer service through low-cost, faster delivery, shippers must take note of the market and embrace its full potential.
Transportation management was primarily a manual process through 2010. Companies did possess systems comparable to the transportation management systems of today 20 years ago, but the systems have changed drastically. The older platforms were developed for in-house use, and they rarely enabled real-time access to carrier data. It wasn’t until the internet truly rose to power with the cloud that the benefits of TMS became clear.
Since 2010, basic processes have empowered faster adoptions rates too. As companies implement geo-sensors on trucks and automatic yard management tools, the ability to track data has grown. More data amounts to more data management and applied appropriately, the use of data can help shippers manage freight rates, product dimensions, and much more notes Tim Fawkes via the Manufacturer.
The capacity crunch of 2018 solidified the demand for a transportation management system. According to Bridget McCrea via Logistics Management, these systems have grown faster over the last year than any time in history as companies look to leverage their wide-reaching benefits for multi-modal transport, execution of freight and overall transportation optimization through continuous performance measurement. In addition, the use of a system is expanding into new industries, including mining and raw material-oriented companies.
The state of TMS is highly dependent on the growth of transportation management, and in fact, the market has risen at a 13% growth rate, notes MarketWatch, following the decreasing prices of connected devices and more device manufacturer-user collaboration. As of the close of 2018, the global state of the transportation management system market had risen to $1.83 billion, and the industry is on track to continue growing at faster rates.
From 2019 through 2025, the market is expected to swell to $4.88 billion, reflecting a compounded annual growth rate (CAGR) of 15.1%. Adoption rates are also increasing as companies turn to third-party vendors to tap into the value of a cloud-based platform. These third-party companies include Cerasis, and the Cerasis Rater TMS, JDA Software, Descartes, Manhattan Associates, Oracle, CargoSmart, and many more.
Higher TMS adoption will also empower companies to save 8% in transportation costs, and according to the “TMS Market Research Study,” published by ARC Advisory Group, reports Logistics Management, transportation management system implementation the majority of users found implementation costs to be less than the savings. In fact, a mere 10% of net savings were absorbed by the TMS, meaning companies were able to save, after implementation and management costs, up to 7.2% of total freight spend. In addition, the average cost of a system is decreasing at a phenomenal pace.
As companies continue to turn to the technology, software developers and vendors are looking to push the boundaries of lower subscription costs. While a system was once considered a solution for companies with a high annual freight spend, even those with relatively lower freight volume (less than $10 million), can tap into its benefits. In fact, the e-commerce revenues garnered from implementation are further expected to increase 51% by the end of 2023, and as more companies develop an e-commerce store before moving into the brick-and-mortar realm, the value and state of TMS will increase even faster.
With the capacity crunch of 2018 still fresh on the mind, it is essential for the transportation management system holdouts to take note and implement a system now. Existing users are actively looking for the next-best option as the state of the TMS market accelerates. Shippers want more optimized freight and better control over freight spend. Now is the calm before the storm, and those that implement and upgrade systems now will be able to stay competitive. Those that forgo embracing the TMS-ready future will face the uncertainty and spoils of decreasing customer service, higher costs, and even the risk of bankruptcy.
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