Transportation management software providers have been in a race in the last few years to build out their software and capture more business. ERP players have also been building or buying TM. A profusion of new modules, emerging players, new niches and acquisition fever is reaching a fevered pitch. And we are certainly not at the heights yet.
Still there are several nagging questions at the forefront of my mind. They are: This is complicated stuff — many steps in the process, lots of data, a great many transactions back and forth, large numbers of bidders, partners and providers to integrate to. Does a user have to manage all of that to find carriers? And as more modules arrive — making TM a suite — the other question is: Are users going to use all that?
The Challenge of Adoption
The tech field knows that adoption is a challenge. Software can be complex and it requires business change. This creates many dilemmas for tech firms. If they want their revenue to mostly come from the technology, then amassing a big implementation team is not in sync with their goals. Their approach is to sell as much, as fast as they can. But where does this leave the customers who need to adopt and learn at their own pace? In fact, poor adoption has been one of the scandals in the industry for the last several decades.
In fairness, in ‘olden times’ many software firms were concerned about low adoption rates. They wanted solid customer references, annual revenue for support, and to be able to return to customers to sell more products at some future date. But their day-to-day involvement with customers diminished over time. I was shocked while working with one software firm to learn that they had about 5K customers, which represented about 1/3 of their customers, with whom they’d had no contact for several years. Maybe the customers were happy with the software and it worked perfectly, but I think not. The model of sell fast and move on is just so compelling for some. As history has shown, though, those customers turn out to be prime hunting ground for competitors.
Though ERP gets the bad rap, TM is not exempt from this issue. With over 170 data fields, dozens of input screens, dozens of transactions and integration from multiple sources, using transportation management is no light-weight activity. Although a TM system is not an ERP (the granddaddy of complex implementation projects), using and getting the most out of a TM system is a challenge.
Business Process Support
A few years back we did a research project we hoped would lead to a different mindset among supply chain providers about the need to stick around and provide managed services. We discovered that users wanted more support from tech providers in the form of implementation, ongoing administrative and tech support, and more help with the business side. We recently confirmed this again when we did some research about customers who use logistics services providers — they want support, data management, and help understanding the changing business world.1 However, many of the tech firms we talked to were reluctant to get into services. Yes, tech providers said they did managed services, but their version was hosting tech, not aiding with business management, data management, reporting, and often, outright managing processes.
The TM market, though, is evolving better approaches — from reducing the burden of IT management by using cloud platforms (a form of IT outsourcing) to outright outsourcing all of the freight execution to a freight forwarder. Another variant includes a range of business process outsourcing (BPO) or business process management (BPM) hybrids that have their own branded platform and BPO service.
Examples of these hybrids are strategic sourcing/carrier selection and ongoing monitoring of carrier spend and carrier performance, or a rating engine in combo with freight audit and pay, or a cloud TM with transportation planning and execution services. These hybrids are most interesting since they ensure that the technology is used, the data is accurate, the process executed. They can be offered by the tech company who is morphing into some BPO/BPM or a service company that has built their own branded platform.
These companies often have some menu of services and each customer picks and chooses based on their needs and the provider’s capabilities. We call this co-managed since customers take on some roles and the provider others, interweaving processes, unlike a freight forwarder or 3PL who may outright assume the whole process.
Figure 1: Co-managed Business Process Management
A good example is a company like LeanLogistics. Lean was on the leading edge of TM in the cloud, one of the first SaaS (multi-tenant) players out there (founded in 1999). I met them waaay back in the dot.com days. The grown-up company is not just a TMS provider, but has a robust business process services element which is core to their model. This has allowed them to retain their customers and, of course, gain more revenue per customer over time.
Logility’s Cloud Service and JDA’s Supply Chain Management Services provide managed service and some BPO, too. Unlike LeanLogistics, customers have their own instance of transportation, but need help managing it. This is a huge value (and has contributed to the continued growth for these firms). For the user, it eliminates having to deal with yet another party (a hosting or big consulting firm) to manage the technology, since the solution provider wraps the technology together in one service. On the other end are freight forwarders who have breakout strategies with branded solutions, but make their money from freight moves — not from technology. (We will come back to this issue of ‘who pays’ in the next issue.)
Rating is also part of the complex world of transportation management, so a firm like CargoSphere does help their customers manage their data. Though the goal is to have 100% of the data automated and integrated, some contracts just defy even the best technology’s ability to translate and load the data into systems. Thus a freight forwarder who can’t ‘self-manage’ their data can turn to them for this service.
Cloud as Partner
Cloud, unlike on premise (which is not on premise at all as far as ongoing support goes), is with us all the time. Cloud providers like Descartes, GT Nexus, and One Network are examples of companies whose solutions connect all the trading partners, eliminating work such as onboarding new trading partners and managing compliance updates, so you are always in sync with whatever the Walmarts of the world want as far as data formats and so on are concerned.
Descartes community also exists to assist trading partners in finding each other. Though these TMs are not marketplaces, like load boards, they provide other assistance in the challenges of TM management and adoption.
Cloud firms do more than just host software; they monitor everything. That monitoring, some CTOs have told us, allows them to look at a host of user issues: modules that are not used, user queries and problems, data issues, performance issues; late updates from your trading partners, i.e., an EDI transmission from your supplier or carriers that did not arrive as expected; processing and delivering reports, and so on. Cloud services providers can monitor and assist customers in getting better value from the platform with resultant better transportation execution.
Cloud reduces the burden and the ‘to-do list’ of things firms need to do to deal with technology. What remain are the business, data management, individual reporting, and so on, allowing the users to use the systems rather than having to worry about the technology.
Figure 2: Who Does What
Automate This
Overall, firms have been working to figure out ways to have technology take over roles previously done by service providers. Rate benchmarking and carrier performance is one area. Catapult automates and can help evaluate modes and rates and maintain billions of historic rates for future audit. CargoSphere has found that many of their customers do need help managing their data, though.
Logistics service providers or very large shippers who have command centers with multiple systems and complex problems exceed the ability of one system to support the management of the business.2 There is a lot of integration and environmental set up that just can’t get automated. So there will always be a role for services — traditional consultants.
Freight auditing is another aggressive build-out area. Several TM providers told us they now do freight auditing. The systems can ‘see’ the contract, track a shipment and see if other service issues come up, thus allowing for any (potential) additional charges, then reconcile the invoice and release it for payment. They can also highlight invoices that have issues that need to be addressed by a human. If the ultimate goal is hands-off freight audit and pay, then the offering (Freight Audit and Pay) by a service company is still required.
Of course automation is good news/bad news. If your business was freight audit, this could signal a decline in that service. But again, many users just don’t have the time — or stomach — to get involved with the thousands of freight bills. They prefer to let the service provider use cloud technology to offer the same service — more effectively.
In fact, with all the TM purchasing going on in the market, the freight forwarding service business is still growing. There are new regulations, new ideas to adopt, new players to integrate to, and new business models, so the need for services is increasing. Hopefully, the providers will respond to this need.
In the next article we will tackle a truly thorny issue — who pays for the technology?
References:
Freight Forwarders and Brokers at the Crossroads
The World of Transportation Management
ChainLink’s Transportation library
Tech Target Question/Answer: Does the TMS market have software for managing transportation globally?
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1 Read Forwarders and Brokers at the Crossroads — Return to article text above
2 In a previous article we talked about the goal of TMS to be the single window for all the intricacies of transportation management, but many businesses, especially LSPs, may still choose to keep multiple windows open to manage. Also see The Journey to Visibility. — Return to article text above
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