Gartner ranked i2 Technologies and Oracle as leaders in its annual Magic Quadrant for transportation management system (TMS) software, while HighJump dropped off this year's list.
Demand for TMS software might have been expected to wane as the recession drove down shipping costs. But many companies continue to invest in TMS software, fearing shortages and price hikes if the recovery picks up speed. In particular, SaaS TMS is gaining traction because of its lower up-front investment, with SaaS vendors LeanLogistics and Sterling Commerce ranking as important niche players.
"Combining lower demand and excess capacity with reduced fuel costs has temporarily reduced freight costs, which might suggest that TMS is no longer necessary," the report states. "However, the supply chain management [SCM] professionals who Gartner speaks with say that they see these reduced costs as temporary, and many continue to invest in TMS in anticipation of a recovery and a return to higher costs, as well as more capacity constraints."
TMS is still viewed as the key mechanism for reducing total and empty miles, according to the report. It enables better utilization of freight capacity by helping to minimize unnecessary moves, combine loads on more economical modes of transportation, and ensure that the least expensive modes and carriers are routinely chosen by users.
SaaS TMS pulls ahead
There's been a significant shift toward Software as a Service (SaaS) TMS as a preference rather than an option, thanks largely to lower up-front costs -- a clear advantage in a recession, said Dwight Klappich, the report's author and a Gartner vice president of research. SaaS used to appeal mostly to small companies, but now high-volume shippers are choosing it, Klappich said.
SaaS demand is also driven by strong interest in what Klappich calls "community management" -- "pre-onboarding" (integrating) numerous carriers in a single network. When TMS first became popular in the 1990s, carriers were in the driver's seat and users tried to simplify shipping by first securing a handful of reliable carriers, then seeking economies in volume. Now, they want to have as many carriers as possible bidding on loads. "We have excess capacity," Klappich said. "Carriers are desperate for volume. They'll take a load at a loss just to not have a complete loss."
But the SaaS TMS boom comes with caveats, he said. SaaS-only TMSs generally have less global support and functional breadth than on-premises TMSs, many of which now come in SaaS versions. Nevertheless, many customers are waiting to see the strength of the worldwide recovery before investing again in international transportation. Oracle, i2, Manhattan Associates, MercuryGate International, JDA, QAD/Precision Software, RedPrairie, and SAP are seen as having the best support for global deployments, according to the report.
Choosing a TMS software vendor
Oracle and i2 are the sole occupants of the coveted "Leaders" quadrant, as both companies met more of Gartner's criteria for ability to execute and a complete TMS vision. Klappich said Oracle is taking a somewhat unusual approach to community management by gaining it from a partnership with E2open instead of building the carrier network itself.
JDA and Manhattan are the closest challengers. Despite JDA's recent acquisition of i2, Gartner continues to rank the TMSs separately because both will be sold as such "for the foreseeable future," Klappich said. JDA says it will eventually merge the best features of both on i2.
HighJump Software was dropped from this year's rankings because it no longer met the selection criteria. "They weren't selling a lot of what they had," he said, and the company has implied it will de-emphasize TMS in favor of warehouse management systems (WMSs) and direct store delivery (DSD).
Gartner identified several niche and visionary players whose offerings might suit small to medium-sized businesses (SMBs) better than those of the two leaders. It views TMSs that target SMBs as a growth opportunity and names Infor, LeanLogistics, and MercuryGate as having some success in that market.
"They have superior communities, but their functionality's not as strong as some others like Oracle and JDA," Klappich said, referring to optimization engines. "As you go into more complicated environments, the engine becomes more important." On the other hand, the same SMBs that might buy a niche solution often lack volume that requires optimizing, he said.
Still, the low end is ripe for the picking. "We don't see any vendor focused on the needs of the small shipper -- someone under $25 million in annual freight spend," Klappich said. "Infor probably has the best solution," he said, praising its user interface, which requires little training for typical shipping tasks. But he added that Infor does not market its TMS very effectively to SMBs.
Manufacturers that want to realize savings from coordinating their inbound with their outbound freight will need a vendor with powerful planning tools, such as i2, JDA, Manhattan and Oracle, he said.
Klappich predicts that TMS usability and analytics will continue to improve. Oracle has a slight lead in applying analytics to such metrics as carrier performance and is making the tools available "in line" while shipping decisions are made, rather than after the fact. He said i2, JDA, and Transplace also have strong analytics features.
Meanwhile, many vendors are improving usability by hiding unnecessary information and placing frequently used tasks in one place while adding "auto-tendering" that automatically pays invoices falling within a predetermined range.