Supply chain transportation and logistics management software -- or TMS -- works to oversee a manufacturer's transportation network, which in an age of globalization can be complex. This area of supply chain management software has seen changes over the years, chief among them the introduction of Software as a Service (SaaS) options.
In the past, transportation systems traditionally were only the purview of big shippers with an annual freight spend of $100 million (or $75 million in a down economy), said Dwight Klappich, VP at Gartner. "Midsize to small shippers have traditionally not used TMS applications. But as systems have evolved, the footprint [has] expanded to cover procurement, freight payment and everything in between."
Today, he said, even small manufacturers can benefit from transportation and logistics management software, "to the point where small shippers can justify a system in less than a year." An added bonus is that the software is less complex to implement than an ERP system.
In addition, logistics and transport management systems help users discover duplicate invoices and unnecessary charges with a freight payment audit, making them "very high payback applications," he said.
Challenges in transportation and logistics management
While transportation and logistics management used to be dominated by best-of-breed, shrink-wrapped products, recently an affordable new option has come into play via SaaS. SaaS helps manufacturers who don't have sufficient capital to pay for expensive licensing fees upfront, said Klappich. Plus, a SaaS implementation can be ready faster than a traditional on-premise installation, which would give companies a head start when the economy picks up, predicted to be in 2010 or 2011.
The global supply chain has also created some growing pains for transportation and logistics management software -- not the least of which is due to the fact that most existing TMS applications are North America-centric.
"We're increasingly seeing demands for transportation outside of North America," said Klappich, "and not all systems can support international deployment." He said that language and currency rules, foreign rules and regulations and unfamiliar maps can all affect transportation management software, though it's an area where even SaaS tools haven't caught up.
Traditional on-premise TMS systems have also felt the impact of the economic slowdown. "This year, demand for freight is down, and rates are down because carriers are begging for customers," said Klappich. "We see a dropoff in the demand for transportation management software and a change in buying patterns. In an economic downturn, the best option for many companies is SaaS."
About the author: Christine Cignoli is a Boston-based freelance writer who covers IT infrastructures and storage technology. She is a regular contributor to SearchManufacturingERP. Contact her through her website.
This was first published in December 2009