Transportation management was a focal point for many companies in 2021—and for all the wrong reasons. Persistent driver shortages, port congestion, capacity constraints and broader supply chain disruptions were just some of the high-level stressors impacting the environment, with most of them in some way related to the global pandemic.
Entering 2022, the “light at the end of the tunnel” had yet to emerge. In fact, as one challenging year came to a close some supply chain experts and executives were warning companies to buckle up for another difficult 12 months ahead.
To offset these challenges, shippers have been aligning more closely with their carriers, third-party logistics providers (3PLs) and other transportation partners. They’ve also dialed in their forecasting as well as planning out their transportation needs further in advance. And, they’ve been investing in the technology that supports all of those functions while also supporting higher levels of supply chain visibility.
From their vantage points, transportation management systems (TMS) providers began enhancing their solutions and adding more visibility capabilities, artificial intelligence (AI) and machine learning (ML) to these platforms. They used the Cloud to provide remote access to their platforms from anywhere, made their systems more widely available to a larger audience of shippers (i.e., smaller firms that might not have purchased an on-premises TMS), and took other steps to help shepherd companies through the transportation maze.
As a result, the TMS market performed better than most supply chain software markets during the pandemic, and particularly during the early lockdowns, according to Chris Cunnane, research director, supply chain management at ARC Advisory Group. The booming e-commerce market also drove up TMS adoption rates.
“The pandemic fueled the rapid growth in e-commerce that has shown no signs of slowing down,” says Cunnane. “This surge was a major factor in the performance of the TMS market.”“The historical return on investment associated with TMS, the continued move to the Cloud, the importance of sustainability and the overall improvement in technology should all help the TMS market grow in the coming years.”.— Chris Cunnane, ARC Advisory Group
Cunnane expects continued market growth for the TMS sector. “The historical return on investment [ROI] associated with TMS, the continued move to the Cloud, the importance of sustainability and the overall improvement in technology,” he says, “should all help the TMS market grow in the coming years.”
As the technology behind TMS has steadily improved over the last few years, vendors have been folding more visibility tools, AI, ML and Internet of Things (IoT) capabilities into their applications.
“The right IoT application can help make sense of data to improve asset performance,” Cunnane explains. For example, sensors that are placed in trucks can help provide better visibility and make predicted ETAs more accurate.
Additionally, Cunnane says connected trucks can provide information on specific driving patterns and habits, leading to improved safety as well as visibility. “Real-time visibility solutions are set to explode,” he adds, “and will be based on integration to truck carriers’ systems.” In turn, he says carriers are tracking the electronic logging devices [ELDs] on their trucks or by using a downloadable mobile app on a driver’s smartphone.
These tools are providing better visibility and improved ETAs while ML is playing a role in other aspects of transportation management, Cunnane points out. “Machine learning can aid shippers in better understanding how to drive efficiencies without sacrificing service levels,” he explains.
For example, shippers can learn which carriers meet on-time service levels and which don’t, which lanes are delayed more often than others, and whether there’s an optimal number of stops before shipments are considered “late.”
All eyes are on sustainable business practices right now as customers demand more evidence of them from the companies that they buy from. Transportation is an area that’s ripe for improvement on this front.
According to the EPA, transportation-related greenhouse gas (GHG) emissions account for nearly 30% of total U.S. GHGs, making transportation the largest contributor of GHG emissions nationwide. Cars, trucks, commercial aircraft, railroads and other sources all contribute to transportation end-use sector emissions, the EPA reports.
As they work to whittle these GHG numbers down and reduce the size of their carbon footprints, shippers can use TMS to help them achieve these sustainability goals. “Sustainability initiatives have been growing by leaps and bounds,” Cunnane says, “with more companies to become carbon neutral through the use of renewable energy, electric vehicles, the elimination of single-use plastics, and more. Companies are looking at TMS to reduce costs while improving sustainability initiatives.”
This is especially true for route optimization, where load consolidation equates to fewer trucks on the road to deliver the same freight, which Cunnane says is important for carbon emissions reductions. “With route optimization, companies can use algorithms to determine the most efficient route for every truck on the road, from cross-country deliveries to the final mile,” he explains.
“By determining the absolute ideal route for each truck, shippers can reduce their fuel costs and their miles significantly,” Cunnane continues. “With backhaul optimization, deadhead miles can also be reduced so that trucks aren’t just carrying ‘air’ to their next destinations.”
Brock Johns, a senior principal analyst on Gartner’s Supply Chain Technology Research Team, is also seeing a bigger emphasis being placed on transportation sustainability and expects the momentum to continue in 2022.
Acknowledging that discussions around transportation and sustainability have been taking place for years now, Johns is now seeing more TMS vendors recognizing the larger role that they can play in supporting these efforts.
“Based on the conversations I’m having with end users and vendors,” says Johns, “this may be the year when we really begin to see more emphasis placed on how TMS can help organizations reach some of their sustainability goals.”
Ultimately, companies that implement TMS are focused on making their transportation operations more efficient while also saving some money along the way. Those moving away from manual systems, spreadsheets and clipboards tend to see a fairly fast ROI once they digitalize the process on a TMS platform.
In the current transportation climate, Bart De Muynck, research VP, transportation technology at Gartner, says most shippers are focused on transportation procurement, a process that not all TMSs handle well. To meet this need, TMS vendors are expanding their transportation management ecosystems to encompass a broader range of capabilities.
Some of the top technologies that companies are turning to include digital freight matching platforms, visibility platforms and complex multi-carrier parcel solutions. These requests are pushing TMS vendors to either develop their own capabilities internally or develop partnerships with companies that are already making those solutions.
“We’ve seen a convergence of various components coming together as TMS vendors expand their partner ecosystems across various different technologies,” says De Muynck, “because that’s what customers are asking for.”
As shippers work through the current complexities of the transportation market and plan ahead for the future, De Muynck expects to see more of them adopting TMS. With most of these solutions now available in the Cloud on a pay-as-you-go basis, the doors have opened up for even the smallest organizations that want to move away from Excel spreadsheets, e-mails and phone calls to plan, execute and optimize incoming and outgoing shipments.
“TMS is no longer just for large companies. We’re now seeing adoption across small, mid-sized and large shippers,” says De Muynck, who has also witnessed more carriers investing in and using TMS over the last 12 months. Many are replacing their aging, on-premises solutions with newer platforms while others are just starting up and implementing their first TMS platforms.
Looking ahead, De Muynck and Johns see more of the same for the transportation sector through much of 2022. Companies will continue to turn to technology to help them manage the pricing fluctuations, capacity issues and other transportation-related uncertainties. As this trend continues, TMS will surely play an important role in helping shippers solve these issues and optimize their freight management activities.
“Companies are going to continue looking for help in being more efficient and more reactive to what’s happening in the marketplace,” says De Muynck, who sees the pandemic-driven shift in focus over to transportation as positive for TMS providers but negative for the shippers themselves.
“It’s a good time to be a transportation technology provider and a not-so-good time to be a shipper,” adds De Muynck. “Companies just didn’t put as much focus on transportation technology as they did on manufacturing, warehouse and supply chain planning. As a result, there’s still a major gap to close in transportation management versus other supply chain functions.”